Fed Rate Cut Fizzles Crypto Rally: What Went Wrong?

The Federal Reserve's recent rate cut, typically a catalyst for crypto gains, failed to ignite the market this time. While the U.S. dollar weakened to a seven-week low, bond yields decreased, and silver prices surged to a new record of $64 per ounce, Bitcoin and its counterparts remained largely unaffected. After a fleeting surge above $94,000, Bitcoin quickly reversed course, trading down 3% over 24 hours, with Ether and other altcoins experiencing similar declines. This muted performance occurred against a backdrop of negative sentiment in AI-related stocks, stemming from Oracle's disappointing quarterly earnings, which saw the company's stock plunge 14% and negatively impact major tech firms.

The fallout from Oracle's earnings extended to the cryptocurrency sector, particularly affecting companies with a focus on AI infrastructure. Bitcoin mining stocks, many of which have diversified into AI services, mirrored the broader tech downturn. Companies such as Hut 8, Iren, Cipher, and Riot Platforms all recorded losses in the 5%-6% range. The ripple effect also hit prominent Bitcoin treasury holders and crypto exchanges, with MicroStrategy down 6.4% and Coinbase experiencing a notable dip. Robinhood's decline was exacerbated by a November update indicating a significant drop in crypto trading volumes.

This divergence between traditional market reactions to Fed policy and the cryptocurrency market's performance highlights the complex interplay of factors influencing digital assets. While macroeconomic shifts typically favor risk assets like Bitcoin, specific industry headwinds, such as the downturn in AI stocks and disappointing performance from key crypto-related companies, can override broader trends. Investors are closely watching these developments to understand the evolving landscape for Bitcoin and other cryptocurrencies.