Just one month ago, according to CME’s FedWatch tool, the probability of the Federal government cutting rates was 93.7%. Now the probability of the cut now has dipped to 44.9%, a dramatic drop in a short period of time. When investors realize they are all collectively wrong about the Fed’s direction, they all self-correct at the same time.

Rate cuts usually boost both stocks and alternative assets like gold and digital assets making borrowing cheaper and cash less expensive. Both when that turns out to be incorrect, the opposite happens and sometime, like in 2025, in brutal reversal.

At the same time, there is talk about an AI Bubble.

According to CBS news analysts, “There’s a recognition that if they (companies) spend all this money on data centers, it will weigh on their earnings.” The numbers tell a stark story. Microsoft and Google collectively announce over $250B in combined AI infrastructure spending 2024-2025, yet their revenue streams remain largely unquantified in earnings calls.

More troubling, enterprise software companies riding the AI wave show disconnect between promises and performance. Palantir trades at 180x trailing earnings while customer acquisition costs have doubled year over year. The echo of dot com is unmistakable.

A recent McKinsey report found that only 23% of companies using Generative AI report measurable productivity gains, yet those same companies are increasing their AI spend. Everyone has been talking about the value that AI brings to businesses, but AI has been hard to measure and hardly any company is talking about their results.

Even the FANG (Facebook, Amazon, Nvidia, Google) companies are having issues. Nvidia announced positive revenue growth, but their stock price went down. It really shows that in these volatile times, even great execution cannot overcome the inertia in the market. Note: the circular revenue didn’t help either. According to the Register, Nvidia was going to invest $100M in OpenAI, and OpenAI in turn was going to buy $100M in Nvidia chips, so it appeared like Nvidia was bankrolling its own revenue.

Finally the US Dollar has surged in the last three months to highs. This actually makes the purchase of gold, bitcoin and other assets more expensive to international buyers. So breaking gold’s traditional safe haven means investors didn’t run to buy gold and other precious metals. Gold lost its defensive spot with a high dollar, and didn’t provide a place for investors to hide.

Bitcoin’s Death Spiral or Growing Pains?

Currently, Bitcoin is moving with stocks, not as a hedge. This reality tanks the narrative that Bitcoin is digital gold. According to The Block, institutional investors took out $900M from Bitcoin ETFs. When the market needed Bitcoin to move independently, it instead moved lockstep with tech stocks. In fact, Gold, stocks and long term bonds are all outperforming Bitcoin.

Yet the history of Bitcoin is all about resilience, and its history is filled with sharp declines and spectacular recoveries. Although this time is a bit different, with institutional investors, pension funds, corporations and ETFs all betting on bitcoin, and these factors create a foundation that didn’t exist in the past. It provides a floor and a legitimacy, that wasn’t there before.

Demand for downside protection around $80,000 to $85,000 has soared. The question isn’t will Bitcoin survive but rather, how it will emerge from the crucible it is now in.

The Broader Market Message for Bitcoin Investors

The 2025 crash reveals a fundamental shift in how markets operate. The broader market message is signaling the end of easy money and instead a focus on real value. Investors are now not looking at speculation but on fundamentals. Those fundamentals are the same for AI companies, Bitcoin traders, and the entire industry.

The fact that we may be in an AI Bubble doesn’t phase some people. Robert Metcalfe said that “bubbles are an innovation tool. They cause innovation to occur that might not otherwise have happened.” According to Sarbjeet Johal, “bubbles are self-healing mechanisms of the system working as designed.”

But we do now have an interconnectedness problem. Institutional investment now has triggered new correlations between cryptocurrency and traditional tech stocks. When Nasdaq falls in its worst week since April 2025, Bitcoin doesn’t act as a hedge and now amplifies the decline.

In 2013, bitcoin rose significantly, tech stocks remained flat, and gold crashed. And then in 2018, crypto sold off while tech stocks rose. In 2025, for the first time, everything from gold to bitcoin to AI stocks corrected on the same day. That’s the hallmark of a liquidity driven market.

The result is a market where traditional diversification fails.

What to Watch: The Next 90 Days Will Tell The Story For Bitcoin

In the next 90 days, the immediate catalyst is the Federal Reserve’s December 18th meeting. If the Feds cut rates, we could see a relief rally in risk assets by year end. But watch the Fed’s 2026 guidance. Any signal of prolonged higher rates might trigger another selloff.

For Bitcoin, monitor three levels: $85,000 represents institutional support where major ETF inflows occurred. A break below $75,000 may signal another issue, and above $95,000 would confirm the bull market remains intact. These levels will be tested over the next 4-6 weeks.

AI stocks are on a different timeline. Q4 earnings season will be the tell tale sign. Companies must show strong ROI from AI investments. Watch for Nvidia’s guidance on datacenter demand and the FANG’s AI revenue disclosure. If either disappoints, there may be another sector wide correction.

Will Bitcoin Hit $0?

It is very unlikely that Bitcoin will hit zero but this crash signals something more profound. And that is that Bitcoin has now transformed from revolutionary outsider to established player.

The real question now isn’t survival but identity.

What becomes of a digital asset that was designed to be uncorrelated when it now moves lockstep with Nasdaq?

This identity crisis isn’t temporary. Bitcoin’s next decade comes down to a simple choice: does it stay a macro-sensitive institutional asset or does it rediscover its independence.

The institutional path means Bitcoin trades like a high beta tech which is driven by Fed policy and fund positioning. The decentralized path requires different catalysts: more self custody, stronger L2 adoption, rising onchain stablecoin flows and sustainable mining economics.

The current generation of Bitcoin holders bought into the narrative of “digital gold”. The next generation will determine whether Bitcoin can reclaim its revolutionary purpose or accept its fate as just another asset in a diversified portfolio.

We’ve just ended the post-2020 “everything rally”. Now, it’s a return to the fundamentals.

In markets, as in life, the most interesting transformations happen when everything seems to be falling apart at once. What emerges from the chaos may not bear resemblance to what came before for Bitcoin, and that might not be entirely bad.