Bitcoin tumbled sharply on Tuesday, falling more than 6% to slip below $100,000 for the first time since June, as broader risk-off sentiment rippled through financial markets.
Major US stock indexes also dropped, with tech and chip stocks particularly weak, after Goldman Sachs and Morgan Stanley CEOs warned that equities may be due for a pullback.
The cautious mood sent Treasury yields lower, while the US dollar climbed to a four-month high against the euro, adding pressure on risk assets, including cryptocurrencies.
The drop in bitcoin highlights growing investor caution in the face of tightening monetary conditions and market volatility, prompting some traders to reduce exposure to high-risk assets.
The bank CEOs warned at an investment summit in Hong Kong of the prospect of a stock market correction of more than 10% over the next two years.
Shares of Nvidia were down 4%, while an index of semiconductors also fell 4%.
Shares of Palantir Technologies PLTR.O dropped more than 8% despite the data analytics provider reporting strong quarterly results.
The company, which has more than doubled in value this year, forecast fourth-quarter results above market expectations as the rapid adoption of artificial intelligence is boosting demand for its services.
"Big Short" investor Michael Burry, known for his successful bets against the US housing market in 2008, has placed bearish bets on Nvidia and Palantir, according to a regulatory filing on Monday.
The S&P 500 fell more than 1% and the Nasdaq dropped more than 2%. The Nasdaq is still up about 21% for the year so far.
"The market's been moving higher as warranted from an earnings standpoint, but at some point ... it seemed like it was kind of positioning for a risk-off pullback even on the slightest disappointment," said Keith Buchanan, senior portfolio manager at Globalt Investments.
The Dow Jones Industrial Average fell 251.44 points, or 0.53%, to 47,085.24, and the S&P 500 fell 80.42 points, or 1.17%, to 6,771.55, and the Nasdaq Composite fell 486.09 points, or 2.04%, to 23,348.64.
MSCI's gauge of stocks across the globe fell 11.51 points, or 1.14%, to 996.34.
The pan-European STOXX 600 index fell 0.3%.
Optimism about AI deals has been helping stocks. On Monday, stocks gained following Amazon.com's $38 billion cloud services deal with ChatGPT creator OpenAI.
The US dollar was underpinned in part by reduced bets for near-term Federal Reserve easing, with divisions within the Fed raising doubt about the prospect of another rate cut this year.
The Fed lowered rates last week, but Chair Jerome Powell said a December rate cut was not a foregone conclusion. Traders are betting on a 65% chance of a rate cut in December, compared with 94% a week earlier, CME FedWatch showed.
The euro EUR= fell for the fifth straight session and was down 0.3% at $1.148, its weakest since August 1. Against the yen, the dollar was 0.5% lower, though the Japanese currency remained near a recent 8-1/2-month low.
Sterling tumbled after the UK finance minister pointed to "hard choices" in her upcoming budget. Sterling GBP= weakened 0.72% to $1.3044.
US Treasury yields declined amid a broader risk-off tone in financial markets.
Because of the government shutdown, a closely watched monthly jobs report from the Bureau of Labor Statistics will not be available on Friday, as previously scheduled.
The yield on benchmark US 10-year notes US10YT=RR fell 2 basis points to 4.087%, from 4.107% late on Monday.
US crude CLc1 fell 49 cents to settle at $60.56 a barrel, and Brent LCOc1 fell 45 cents to settle at $64.44. A stronger dollar weighed.