Understanding the Recent Crypto Market Dip: Why Bitcoin Dropped Below $90,000 Post-FOMC

On Thursday, Bitcoin (BTC) slipped back below the crucial $90,000 threshold, despite expectations for a positive market response following the U.S. Federal Reserve's (Fed) decision to lower interest rates by a quarter point. Analysts from Bull Theory have identified several key factors that contributed to this surprising downturn.

Key Takeaways

Bitcoin dipped below $90,000 despite a recent Fed interest rate cut due to market anticipation.
Major investors began taking profits after the Fed's announcement, leading to a significant sell-off.
Concerns regarding the labor market and disappointing tech earnings contributed to market unease.
Analysts predict a more favorable liquidity climate for Bitcoin in 2026, indicating potential recovery ahead.

Featured image credit: DALL-E, chart data from TradingView.com

Bitcoin

Bitcoin Faces Selling Pressure Amid Market Concerns

According to the analysts, the rate cut was anticipated by investors well in advance, with a 95% likelihood already integrated into market prices. Prior to the announcement, many traders had adjusted their positions in anticipation of some form of liquidity support from the Fed, which had initially driven Bitcoin prices higher.

However, upon the confirmation of the rate cut and the announcement of a $40 billion monthly purchase plan for Treasury bills, many large investors, known as "whales," began to cash out their profits. Compounding market uncertainty was U.S. Fed Chair Jerome Powell's comments during the press conference following the announcement, where he highlighted ongoing challenges in the labor market and persistent inflation concerns. Additionally, the Fed’s dot plot projections suggested only one more rate cut may occur in 2026.

The situation worsened with underwhelming earnings reports from Oracle, which released its second-quarter financial results after market hours. The tech company fell short of its revenue expectations, leading to a stock drop of over 11% in after-hours trading. This disappointing news affected U.S. stock futures, as fears grew that the artificial intelligence (AI) boom could be reaching its peak. The anxiety stemming from Oracle's results quickly spread to the cryptocurrency sector.

Ultimately, these three interconnected factors led to a significant sell-off: the rate cut was largely predicted, liquidity trades had already been executed, and Powell's comments failed to deliver the robust easing signal that traders had hoped for.

Future Liquidity Conditions Look Promising for 2026

Interestingly, Bull Theory analysts believe that the recent decline in the crypto market does not signal a fundamental shift towards bearish conditions. Instead, it appears to be an overreaction fueled by elevated expectations leading up to the Fed's announcement.

The Fed has now implemented rate cuts at three consecutive meetings, and their plans to purchase $40 billion in Treasury bills over the coming month are intended to boost liquidity in the markets. Furthermore, Powell has suggested that future rate hikes are unlikely, and there are positive projections for robust economic growth next year.

Although job gains may have been overstated, indicating a potentially softer labor market, this could provide the Fed with more room to ease monetary policies if the situation requires it. Current market movements show that the asset sell-off was driven more by unrealistic expectations than by any decline in fundamental economic conditions.

Looking ahead, analysts project that the coming year will be more favorable for Bitcoin and overall cryptocurrency prices regarding liquidity, standing in stark contrast to the anticipated conditions for 2025.

Bitcoin
As of this writing, Bitcoin has rebounded above $91,100 amidst increased volatility, leaving the leading cryptocurrency 26% below its all-time high of $126,000, which was reached in October of this year.