Bitcoin dropped below the $80,000 mark on Monday as the cryptocurrency market came under pressure from a broad risk-off mood ahead of the Federal Reserve's policy meeting, compounded by worries stemming from trading activity in the AI sector.

The largest digital asset fell as much as 1.4%, dipping below $79,300, before paring losses during afternoon trading in Asia to hover around the $80,000 level. Smaller tokens including Ethereum, XRP, and Solana declined in tandem.

The slump followed a sharp reversal in fund flows: U.S.-listed spot Bitcoin ETFs saw $772.4 million in outflows on Thursday and Friday, after attracting more than $1 billion in net inflows earlier in the week. The broader market selloff that began last week played out in parallel, with investors starting to question the return prospects of massive AI investments and awaiting this week's earnings reports from tech giants for clues on the industry's outlook.

As a barometer of AI-related trading, South Korea's Kospi fell 0.2%, while chip-related stocks led declines in Japan's Nikkei index. Caroline Mauron, co-founder of Orbit Markets, said, "All risk assets are currently troubled by AI debt issues, but Bitcoin is holding up relatively well. The market's focus right now is the Fed meeting, and after that, the U.S. midterm elections."

Pratik Kala, portfolio manager at Apollo Crypto Fund, noted that for many quantitative funds and algorithmic traders, Bitcoin is still classified as a risk asset, making it highly vulnerable when market sentiment weakens. Kala pointed out that online discussions surrounding AI, including comments from SpaceX and Tesla CEO Elon Musk about a potential industry consolidation next year, have added to market pressure. He added that advances in AI technology have also amplified potential security risks for cryptocurrencies, prompting some investors to become more cautious.