On Thursday, Bitcoin (BTC) once again dipped below the critical $90,000 threshold, despite what many expected to be a bullish signal from the US Federal Reserve’s (Fed) decision to reduce rates by a quarter point. Analysts at Bull Theory have highlighted several reasons for this unexpected decline.
Bitcoin Sell-Off Amid Market Unease
The analysts pointed out that the rate cut was largely anticipated by traders weeks in advance, with a 95% probability already integrated into the market.
In anticipation of the announcement, many had positioned themselves expecting some form of liquidity support from the Fed, which had led to a surge in Bitcoin prices.
However, once the actual cut and the plan for $40 billion in monthly T-bill purchases were confirmed, many large investors—referred to as “whales”—started to take profits.
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Compounding the market’s uncertainty was Fed Chair Jerome Powell’s press conference following the announcement, where he emphasized ongoing weaknesses in the labor market and continuous inflation worries. Additionally, the Fed’s dot plot projections suggested only one more rate cut might occur in 2026.
The situation worsened with disappointing earnings from Oracle, which released its second-quarter financials after the market closed. The tech giant fell short of its adjusted revenue expectations, and increased capital expenditure forecasts caused its stock to plummet by over 11% in after-hours trading.
This decline negatively influenced US stock futures, sparking fears that the artificial intelligence (AI) boom might be peaking. The widespread concern stemming from Oracle’s results quickly transcended from equities into the cryptocurrency arena.
Ultimately, these three factors combined to trigger a significant sell-off: the rate cut was previously accounted for in the market, liquidity trades had been preemptively executed, and Powell’s statements did not deliver the strong easing signal that some traders had anticipated.
Positive Liquidity Conditions Expected In 2026
Interestingly, the analysts at Bull Theory maintain that the recent decline in the crypto market does not signify a fundamental shift towards bearish conditions but rather an overreaction driven by heightened expectations leading up to the Fed’s announcement.
The Fed has now implemented rate cuts three times at consecutive meetings, and their intentions to purchase $40 billion in T-bills over the next month are aimed at infusing liquidity into the markets.
Moreover, Powell indicated that further rate increases are not expected in the near future, alongside forecasts for robust economic growth next year remaining intact.
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Although job creation may have been overstated, suggesting a softer labor market, this could provide the Fed with more flexibility to ease monetary conditions if necessary in the future.
Current market fluctuations demonstrate that the sell-off was primarily driven by overly optimistic expectations rather than any downturn in fundamental conditions.
Looking ahead, analysts anticipate that next year will be more favorable for Bitcoin and the cryptocurrency market in terms of liquidity, markedly differing from conditions expected for 2025.
As of this writing, Bitcoin has climbed back above $91,100, amid rising volatility. This positions the leading cryptocurrency 26% below its all-time high of $126,000, reached in October of this year.
Featured image from DALL-E, chart from TradingView.com
