Bitcoin tumbled below $90,000 on Friday as the cryptocurrency couldn't escape the gravity of the broader tech selloff. The world's largest digital asset by market cap fell to around $90,300—down more than 2% in 24 hours—as fears about AI bubble formation and hawkish Federal Reserve signals rippled through risk assets.
The decline marks a significant reversal for Bitcoin, which touched record highs above $100,000 just weeks ago amid optimism about crypto-friendly policies from the incoming Trump administration.
The AI Contagion
Bitcoin's drop coincided almost perfectly with the tech sector selloff triggered by Broadcom's margin concerns and Oracle's AI spending shock. While Bitcoin isn't directly exposed to AI infrastructure spending, its correlation with tech stocks has increased substantially in recent years.
When Nasdaq futures fall, Bitcoin tends to follow—and Friday was no exception. Chipmakers like Nvidia, AMD, and Micron all declined sharply, and crypto-related stocks suffered alongside them.
The Fed Factor
More fundamentally, the Federal Reserve's hawkish tone at its December meeting removed a key pillar of the crypto bull case. Markets had been pricing in four or five rate cuts in 2026; now they expect only two.
Higher interest rates increase the opportunity cost of holding non-yielding assets like Bitcoin. When Treasury bills pay 4-5%, the argument for holding volatile digital assets becomes less compelling for risk-conscious investors.
Chair Powell's comment that the Fed is "well positioned to wait" before cutting again signaled that easy money isn't coming back anytime soon. Crypto, which thrived during the zero-rate era of 2020-2021, faces a more challenging environment.
Technical Levels to Watch
Technical analysts are unusually aligned about key price levels:
- $90,000: The line in the sand; a sustained break below could trigger further selling
- $92,000-$94,000: The "decision zone" where bulls need to defend
- $85,000: Next major support if $90,000 fails
- $100,000: Psychological resistance that needs to be reclaimed for bullish momentum
The Fear & Greed Index has shifted to "Fear" at 29—a notable change from the "Extreme Greed" readings that accompanied Bitcoin's push to all-time highs.
ETF Flows Slow
Spot Bitcoin ETFs, which drove much of the rally earlier this year, have seen moderating inflows. While still positive, the pace of buying has slowed as institutional investors grow more cautious about risk assets.
The ETFs remain net buyers on most days, but the explosive demand that characterized the first half of 2025 has normalized. This matters because ETF flows have become a key price driver in the post-approval era.
The Bull Case Isn't Dead
Despite the pullback, several factors support Bitcoin over the medium term:
Regulatory clarity: The incoming administration is expected to pursue crypto-friendly policies, including clearer regulatory frameworks and potentially a strategic Bitcoin reserve.
Institutional adoption: Major financial institutions continue building crypto infrastructure and offering Bitcoin products to clients.
Halving aftermath: Historically, Bitcoin has rallied in the 12-18 months following halving events. The April 2024 halving's full impact may not yet be priced in.
Supply dynamics: Long-term holders continue accumulating, reducing liquid supply and potentially setting up for future price appreciation.
The Bear Case Strengthens
However, bears have valid concerns:
Correlation risk: Bitcoin's increased correlation with tech stocks means it can't serve as a true diversifier during risk-off periods.
Rate sensitivity: Higher-for-longer rates are fundamentally challenging for non-yielding assets.
Regulatory uncertainty: Despite optimism about the new administration, implementation of crypto-friendly policies could take years.
Valuation: At $90,000+, Bitcoin trades at levels that historically have preceded significant corrections.
What to Do Now
For crypto investors navigating this volatility:
- Size appropriately: Crypto should represent only what you can afford to lose—typically 5% or less of a portfolio
- Dollar-cost average: Rather than timing entries, consider regular purchases that smooth out volatility
- Focus on fundamentals: Short-term price action is noise; long-term adoption trends are signal
- Don't panic sell: Bitcoin has recovered from larger percentage drops multiple times
The Bigger Picture
Bitcoin's drop below $90,000 is a reminder that cryptocurrency remains a volatile, speculative asset class despite years of institutional adoption. The digital asset will likely continue to trade in sympathy with tech stocks and respond to monetary policy signals.
For long-term believers, pullbacks represent accumulation opportunities. For traders, the $90,000 level will be crucial to watch. And for skeptics, the correlation with traditional markets raises legitimate questions about Bitcoin's role as a portfolio diversifier.
