Sometimes the market gives you exactly what you asked for and then promptly ignores it. Bitcoin (BTC) is down 3% over the past week, which isn't exactly what traders expected after the Federal Reserve delivered another rate cut. The anticipated relief rally? It never showed up.
The Fed Cut Rates, But Also Pumped the Brakes
According to Wintermute's latest market update, the problem wasn't the rate cut itself. It was what came with it. The Fed's projections suggested just one additional rate cut across all of 2026, a notably cautious stance that injected uncertainty into markets rather than confidence.
Markets, for their part, aren't exactly buying the Fed's conservative outlook. Traders continue to price in closer to three cuts next year, maintaining a meaningful gap between what policymakers are signaling and what the market expects to happen.
The Fed also announced $40 billion in Treasury bill purchases, effectively ending quantitative tightening. But even that hasn't been enough to spark momentum for Bitcoin. With the policy decision now in the rearview mirror, the catalyst that traders had positioned around simply evaporated.
The AI Bubble Is Losing Air
Meanwhile, the crowded AI trade that dominated 2024 is entering a period of reassessment. Recent earnings updates from major technology players including Oracle and Broadcom have cooled enthusiasm for the AI-led growth story that had been driving risk assets higher.
This matters for crypto because digital assets have remained closely tied to broader growth sentiment. As AI leadership softens, Bitcoin has lost some of its relative resilience, even though there hasn't been aggressive capital flight yet.
Wintermute noted that an orderly deflation of the AI narrative might actually be constructive over time. But a sharper, more disorderly unwind would create additional pressure on risk assets across the board, and crypto wouldn't be immune.
Japan Adds Another Layer of Complexity
If domestic uncertainty wasn't enough, global markets are also watching the Bank of Japan, which is preparing to raise rates toward 0.75% and unwind portions of its ETF holdings. Such a move would push Japanese rates to their highest level in decades and refocus attention on the yen carry trade.
Bitcoin has shown sensitivity to these dynamics before, including corrections earlier this year when similar concerns surfaced. Wintermute cautioned, however, that recent volatility can't be blamed entirely on Tokyo. U.S. participants are still driving most of the selling pressure.
The flow data tells the story clearly: U.S. activity has turned negative again, while European flows remain neutral to positive. Asia-Pacific markets, meanwhile, are showing limited conviction in either direction.
Where Bitcoin Stands Now
From a technical perspective, Bitcoin spent weeks consolidating between roughly $88,000 and $92,000 before breaking below that range to test the $86,500 area. The move marked a clean loss of range support rather than a chaotic selloff.
Wintermute described the price action as consolidation turning into digestion. Bitcoin continues to trade below all key exponential moving averages, which means sellers remain in control of the near-term direction.
The recent bounce toward $86,500 looks more like a pause than a reversal. Bitcoin remains capped by a descending trendline, and every rally into that resistance level has been met with selling pressure. The RSI indicator sits below neutral, showing no strong buying pressure has emerged yet.
As long as Bitcoin stays under the $95,000 to $100,000 zone, upside potential remains limited. If Bitcoin breaks below $85,000, the next downside target zone sits around $80,000 to $75,000, where previous support levels could come into play.
For now, Bitcoin is stuck in a holding pattern, digesting recent gains while navigating a macro environment that's more complicated than a simple rate cut narrative would suggest.