Why SpaceX's Blockbuster IPO May Spell More Trouble for Crypto

The Shift in Investor Focus

SpaceX is preparing for what could be the largest initial public offering in history, with a deal size of around $75 billion and a company valuation near $1.75 trillion. The rocket and satellite firm, which recently merged with Elon Musk's AI startup xAI, has set aside up to 30% of shares — roughly $22.5 billion — specifically for retail investors. This allocation stands out because large IPOs typically favor institutional buyers.

This retail access has accelerated a move out of other high-risk investments. Analysts note that cryptocurrencies and speculative tech plays often compete for the same pool of capital from individual investors seeking big returns.

Bitcoin, the leading cryptocurrency, has been trading near $60,000 to $62,000 recently, down more than 50% from its peak of $126,223 reached in October. The timing of the IPO adds pressure on an asset class that has already seen sharp declines.

Why Crypto Faces Headwinds

Crypto markets surged earlier under a more supportive U.S. policy environment but have since reversed course. Factors include tariff concerns, reduced novelty for investors, and significant outflows from bitcoin exchange-traded funds exceeding $2 billion in May alone.

Spencer Hallarn, global head of OTC trading at GSR, described the dynamic clearly: "Crypto is a funding currency for a lot of this. We've got to find $75 billion for this IPO, and it's got to come from somewhere."

The AI Appeal Over Crypto

SpaceX's prospectus highlights its ambitions beyond rockets, including building AI capabilities for enterprises, Mars missions, and even space-based data centers. Despite current unprofitability, the high valuation bets on rapid future growth in AI.

This narrative positions SpaceX as a high-conviction, forward-looking bet that attracts the same retail traders who previously fueled crypto rallies. With additional AI-focused IPOs from companies like OpenAI and Anthropic expected soon, the competition for risk capital is intensifying.

David Morrison of Trade Nation summed up the sentiment: "It really is out of favor with investors... Excitement over the SpaceX IPO isn't helping either."

Broader Market Implications

The IPO comes as Wall Street and media attention shifts heavily toward AI infrastructure and related technologies. While some money leaving crypto may find its way into equities, direct connections are hard to trace precisely. Sui Chung of CF Benchmarks noted the clear rotation from crypto ETFs into broader equity markets.

Hallarn added that with more IPOs lined up and potential rate increases, "It's really hard to see some significant tailwinds" for crypto in the near term.