Why Bitcoin Down 3% Since The Fed Cut Rates Again?

Bitcoin (CRYPTO: BTC) is down 3% over the past week, dashing expectations that the Federal Reserve’s rate cut the week prior would spark a relief rally.

Fed Eases Policy But Signals Caution

According to Wintermute’s latest market update, the rate cut, which came with projections implying just one rate cut across all of 2026, has resulted in uncertainty rather than upside momentum for Bitcoin.

Markets have largely discounted that guidance, continuing to price closer to three cuts next year. 

The Fed also announced $40 billion in Treasury bill purchases, effectively ending quantitative tightening, though the gap between signaling and market expectations remains wide.

With the policy decision now behind the market, the catalyst that traders had positioned around faded quickly.

AI Trade Deflates And Risk Appetite Cools

Across equities, the crowded AI trade has entered a period of reassessment. 

Recent earnings updates from large technology firms, including Oracle and Broadcom, have tempered confidence in the AI-led growth narrative

That rotation matters for cryptocurrency markets, which have remained sensitive to broader growth sentiment. 

As AI leadership softens, crypto has lost some relative resilience, even though capital has not exited aggressively. 

Wintermute noted that an orderly deflation of the AI narrative may be constructive, but a sharper unwind would pressure risk assets further.

BoJ Risk Adds Global Liquidity Questions

Global markets are also bracing for a potential policy shift from the Bank of Japan, which is preparing to raise rates toward 0.75% and unwind parts of its ETF holdings. 

Such a move would take Japanese rates to their highest level in decades and refocus attention on the yen carry trade.

Bitcoin has shown sensitivity to similar episodes in the past, including corrections earlier this year. 

Wintermute cautioned, however, that recent volatility cannot be attributed solely to Tokyo, with U.S. participants still driving most of the selling pressure.

Flows highlight that split as U.S. activity has turned negative again, while European flows remain neutral to positive and Asia-Pacific markets show limited conviction.

What's Next for Bitcoin?

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Bitcoin Price Action (December 2025) Source: TradingView

Bitcoin spent weeks compressing between roughly $88,000 and $92,000 before briefly breaking below the lower boundary to test the $86,500 area. 

The move marked a clean loss of range support rather than a disorderly selloff.

Wintermute described the action as consolidation turning into digestion.

BTC continues to trade below all key EMAs, which means sellers remain in control.

The recent bounce toward $86,500 is only a pause, not a reversal.

BTC is still capped by a descending trendline, and every rally into it has been sold.

Also, RSI is below neutral, showing no strong buying pressure yet.

As long as BTC stays under $95,000?$100,000, upside is limited.

If Bitcoin breaks below $85,000, the next downside zone sits around $80,000?$75,000.

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