Bitcoin experienced a sharp correction on Thursday as volatility from the technology sector and renewed fears of an AI-driven market bubble spilled over into crypto. The sell-off aligned with a steep decline in the tech-heavy Nasdaq Index, which dropped 4 percent intraday despite strong earnings and guidance from Nvidia. Investor concerns over rising artificial intelligence sector spending, corporate debt, and uncertain Federal Reserve policy contributed to the rapid decline across risk assets.
As the Nasdaq pulled back, Bitcoin followed closely, falling below $86,000 for the first time since April. The synchronized downturn highlights the growing correlation between Bitcoin and major U.S. equity markets, especially during macroeconomic stress. Analysts noted that the cryptocurrency mirrored risk sentiment as traders exited positions across both sectors.
Market Commentary and Investor Sentiment
Billionaire investor Ray Dalio told CNBC that although markets appear to be in “bubble territory,” he sees no clear trigger for an imminent crash. Dalio recommended that investors diversify into scarce assets such as gold. He added that his larger concern is the possibility of rising wealth taxes rather than aggressive monetary tightening.
Economic Data and Federal Reserve Policy
Despite Dalio’s comments, risk sentiment shifted after the United States reported stronger-than-expected September job data. Nonfarm payrolls increased by 119,000, reversing the prior month’s decline. The report prompted traders to reconsider expectations that the Federal Reserve would ease monetary policy. According to minutes from the October FOMC meeting, many policymakers warned that additional rate cuts could increase the risk of inflation becoming entrenched.
As a result, traders reduced the probability of two interest rate cuts by January 2026. Implied bond market pricing now shows only a 20 percent chance that the FOMC will push rates to 3.50 percent by January 28, down sharply from 55 percent one month ago. While the FOMC minutes confirm that officials remain cautious, they provided little clarity on how close October’s divided rate decision truly was.
Concerns Over AI Spending and Market Sustainability
Market pressure also intensified as investors questioned the sustainability of soaring AI expenditures. Even with stronger-than-expected corporate earnings, including a notable beat from Walmart, analysts warned that heavy data center investment could be setting up future risks. Gil Luria, head of technology research at D.A. Davidson, told CNBC that companies building large-scale AI infrastructure are taking on “inherently speculative” debt. He added that Nvidia’s strong results do not necessarily reflect the true maturity of AI economics.
Market Performance and Correlation
The Nasdaq Index has now fallen 7.8 percent from its all-time high on October 29, wiping out nearly 10 weeks of gains. With uncertainty growing, many investors stepped away from risk markets entirely.
Bitcoin’s correlation with tech stocks climbed to 80 percent, the highest level in six months. This trend suggests that traders are prioritizing macro conditions over Bitcoin’s intrinsic features, such as decentralization and its predictable monetary structure. Still, Bitcoin traders are not uniformly bearish below $90,000. Market analysts believe many are waiting for more stable entry points as global conditions remain unclear.
Future Economic Outlook
If Ray Dalio’s broader thesis holds, panic selling could prove premature. Liquidity may improve, the United States debt burden continues to grow, and President Donald Trump’s proposed “tariff dividend” strategy may reshape economic expectations going forward.