By Frances Yue

Wednesday’s rate cut helped boost stocks, but cryptocurrencies like bitcoin mostly missed out

Bitcoin traded 26% away from its record high Thursday, while the Dow Jones Industrial Average and S&P 500 closed at record highs.

Bitcoin was mostly unchanged on Thursday, even as the Federal Reserve on Wednesday cut its policy rate by 25 basis points and signaled that it will begin injecting additional liquidity into short-term funding markets starting Friday.

Many crypto bulls had expected that another Fed rate cut would serve as a tailwind for the digital asset. Unfortunately for them, that didn’t happen.

But while investors wait to see where bitcoin prices might be headed next, there are some interesting conclusions that can be drawn from this week’s muted reaction – conclusions that highlight a recurring debate among investors about what really drives changes in the price of bitcoin.

Unlike equities, bitcoin has no earnings or cash flows to anchor its valuation, which makes macroeconomic liquidity conditions and investor positioning especially important. The largest cryptocurrency (BTCUSD) on Thursday afternoon traded 26% below its record high of $126,272.76, set on Oct. 6.

See: Bitcoin has been sliding. These charts show why – and what might happen next.

Sour sentiment

In theory, an increase in financial-system liquidity should boost bitcoin. However, any impact from the Fed’s latest decision to cut rates and to try to ease recent tightness in short-term funding markets was being overshadowed by the current sour state of crypto sentiment and positioning, according to Michael Friedman, director of U.S. capital markets at crypto asset management company 21Shares.

“Though liquidity impulse has a positive impact on crypto and risk assets, crypto is still digesting its own internal pressures,” Friedman told MarketWatch. “The macro tailwinds are there. They’re just not powerful enough to override the micro headwinds facing the market today.”

The Fed’s plan to start buying $40 billion of Treasury bills per month beginning Friday, which it announced after the end of its policy meeting on Wednesday, was widely seen as a liquidity injection. The move is “directionally supportive” for risk assets including crypto, but the impact is incremental, Friedman said.

Friedman also noted that the rate cut was already largely priced in, meaning investors were expecting it and had positioned their portfolios accordingly.

Others said it may also take time for the Fed’s balance-sheet expansion to affect risk assets more broadly. Changes in the Fed’s balance sheet tend to influence the short end of the Treasury curve and bank reserve levels first, said Joel Kruger, market strategist at LMAX Group, which operates an FX and crypto-trading exchange, in written commentary.

Meanwhile, “full transmission into broader risk assets, including equities and crypto, generally unfolds over one to three months, though the speed and magnitude remain heavily dependent on the accompanying macro backdrop and whether other policy signals remain supportive,” Kruger said.

Because of this, the Fed’s balance-sheet expansion is more likely to boost crypto prices in 2026. But it might not translate into an immediate rally, said Jake Kennis, senior research analyst at crypto analytics platform Nansen.

Unstable footing

The crypto market was already on unstable footing heading into the meeting, which might also have something to do with the lackluster reaction in bitcoin, 21Share’s Friedman said.

“Crypto entered the [Federal Open Market Committee] decision in far worse shape than equities,” Friedman said. The crypto market is still working through the aftermath of its largest liquidation event on record, an October wipeout that erased more than $20 billion in positions and pushed sentiment deeply into bearish territory, he said.

Bitcoin relies on momentum more than stocks do, and recently, momentum has been lacking, Mark Hackett, chief market strategist at Nationwide’s Investment Management Group, said in a phone interview.

Both arguments may explain why bitcoin has underperformed stocks since the Fed’s meeting concluded on Wednesday. U.S. stocks ended mostly higher Thursday afternoon, with the Dow Jones Industrial Average DJIA and the S&P 500 SPX notching record highs. The Nasdaq COMP edged 0.3% lower, according to FactSet data. Bitcoin traded at around $93,047.

-Frances Yue

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12-11-25 1720ET

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