Key Points:
The volatility and uncertainty in the large tech industry, combined with concerns over Federal Reserve policy, are putting pressure on risk assets, driving the correlation between Bitcoin and the Nasdaq to a multi-month high.
As U.S. fiscal pressures rise and Trump pushes a tariff-centered stimulus agenda, crypto traders expect liquidity to improve ahead.
The tech-heavy Nasdaq index fell 4% during Thursday's trading session, despite strong earnings and guidance from chipmaker Nvidia. Investors are worried about the surge in spending in the artificial intelligence sector, and Bitcoin followed suit, dipping below $86,000 for the first time since April.
Despite concerns about high market valuations, billionaire investor Ray Dalio stated that there is no clear trigger that would lead to an imminent market crash. Ray Dalio told CNBC, "The picture is quite clear; we are in the range of a bubble," and suggested that investors diversify into scarce assets like gold.
Ray Dalio added that his biggest concern is higher wealth taxes rather than tighter monetary policy. However, contrary to Ray Dalio's views, market sentiment shifted after the U.S. released a stronger-than-expected September jobs report, leading traders to question whether the Federal Reserve would further ease monetary policy.
Non-farm payrolls increased by 119,000 in September, reversing the decline from the previous month. According to the minutes from the October meeting released on Wednesday, most Federal Open Market Committee (FOMC) participants noted that "further lowering the policy rate could increase the risk of entrenched high inflation." On Thursday, traders reduced the probability of two rate cuts before January 2026, reflecting renewed cautious sentiment among stock and Bitcoin investors.
Based on the implied pricing in the government bond market, investors currently see a 20% chance that the FOMC will set rates at 3.50% on January 28, down from 55% a month ago. Although the minutes indicated that many Fed policymakers do not support an immediate rate cut, they revealed little about how close the divisive decision in October actually was.
Even with strong corporate earnings (including a positive surprise from Walmart), traders remain concerned that the economy may weaken as AI developers like OpenAI continue to spend heavily. D.A. Davidson's head of technology research, Gil Luria, told CNBC, "The concern is that companies are heavily borrowing to build data centers."
Gil Luria stated that data centers are "essentially speculative investments that may face a reckoning in two to three years," adding that Nvidia's performance is not a reliable measure of whether the AI economy is truly maturing. The Nasdaq index, which is tech-heavy, has now fallen 7.8% since reaching an all-time high on October 29, erasing gains from the previous 10 weeks. As a result, investors are retreating from risk markets.
As uncertainty rises, Bitcoin's price movements continue to mirror trends in the tech sector. The correlation between the two asset classes has risen to a six-month high of 80%, indicating a decreased focus on Bitcoin's advantages in decentralized and predictable monetary policy.
Bitcoin traders below $90,000 may not necessarily turn bearish; given the broader macro environment remains unstable, they are likely to wait for clearer entry points. If Ray Dalio's assessment is correct, panic sellers may ultimately regret their exit, as liquidity conditions could improve amid ongoing U.S. fiscal debt issues and President Trump's push for "tariff dividend" proposals aimed at stimulating the economy.
This article is for general informational purposes only and does not constitute and should not be construed as legal or investment advice. The views, thoughts, and opinions expressed in the text are solely those of the author and do not necessarily reflect or represent the views and positions of Cointelegraph.
Related: The U.S. SEC will hold a roundtable on privacy and financial surveillance in December.
Original: “Bitcoin (BTC) Plummets: Volatility from Big Tech and AI Bubble Fears Spread to Crypto Market”
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