The software industry is facing a brutal reality check. In fact, February 2026 brought the worst market performance since the 2008 financial crisis.
The iShares Expanded Tech-Software Sector ETF (IGV) plunged 15% in just one month. Now, it sits roughly 35% below its peak.
So, what triggered this massive crash? Investors fear new artificial intelligence tools will replace traditional software completely. Plus, this panic is dragging Bitcoin down right alongside tech stocks. Let’s look at the data.
Cybersecurity Stocks Take a Massive Hit
On February 20, AI company Anthropic dropped a bombshell. They launched Claude Code Security, a tool that automatically scans codebases for vulnerabilities.
Previously, companies paid millions for enterprise software to do this job. Now, an AI assistant spots bugs and suggests human-reviewed patches instantly.
Consequently, the market panicked. Over $52.6 billion vanished from cybersecurity stocks in exactly two days.
Specifically, CrowdStrike lost about $20 billion in value, dropping 20%. Meanwhile, Palo Alto Networks sank 8.9%, and Cloudflare tumbled 18.5%. Even IBM shares fell more than 10%. Clearly, investors believe AI might make traditional cybersecurity tools obsolete.
AI Automation Fears Spark Broader Selloff
The bleeding didn’t stop with security companies. On Monday, Citrini Research published a chilling new report.
They modeled a hypothetical scenario for June 2028. In this vision, AI automation drives massive corporate profits but destroys white-collar employment.
As a result, consumer demand weakens and credit stress explodes. Naturally, this structural economic warning spooked Wall Street further.
Following the report, shares across delivery, payments, and general software companies moved sharply lower. Indeed, analysts note that even “AI-immune” software stocks are facing heavy pressure right now.
Why Cryptocurrency Markets Are Dropping Too
You might think crypto operates in its own independent world. However, Bitcoin is currently tracking US software stocks almost perfectly.
According to Grayscale, Bitcoin’s recent price action closely mirrors the tech sector selloff. Furthermore, market expert Jim Bianco points out that Bitcoin often trades just like a high-beta software index.
After all, many investors view crypto as programmable money. So when software stocks struggle, Bitcoin usually feels the exact same pain.
Therefore, if tech equities keep dropping, Bitcoin will likely remain under intense pressure. The correlation between these markets is simply too strong right now.
These market swings aren’t just temporary hiccups. They represent a fundamental shift in how Wall Street values technology.
Right now, high-growth tech stocks and Bitcoin are sinking together. Yet, a massive divergence could happen soon. If people start viewing Bitcoin as a safe haven against AI job losses, things will change. In that scenario, the crypto market might detach from software entirely.
Until then, brace yourself for more volatility. Watch these AI developments closely, because they are steering the wheel for both Wall Street and crypto.