Did JPMorgan cause Bitcoin’s drop?

November so far has been a bumpy month for the S&P 500, Nasdaq, and Dow Jones, though their declines have been much smaller, staying under 5%, compared to BTCUSD, which has fallen by over 20%.

Given Bitcoin’s speculative nature, a drop of this size shouldn’t come as a surprise. After all, the digital market, including the first cryptocurrency, has seen even larger declines in shorter periods. Still, some began looking for external causes behind the sharp sell-off. 

One of the scapegoats was JPMorgan. The bank was accused of intentionally pressuring Strategy stocks by suggesting that its shares might no longer meet the requirements for inclusion in the MSCI index.

There’s just one problem: that statement came out on October 10. So why did everyone “notice” it only last week? It’s also worth mentioning that Strategy’s stock had been falling since July, right after JPMorgan quietly raised margin requirements for MSTR. Thus, the narrative that JPMorgan single-handedly tanked Bitcoin feels forced.

Still, calls to boycott JPMorgan started flooding social media. It’s hard to imagine this having any meaningful impact on the bank. As for Strategy’s future, we’ll see, but it’s worth keeping in mind that Peter Schiff’s blunt warning that “Strategy’s entire business model is a fraud” isn’t exactly helping investor confidence.

So if it wasn’t JPMorgan, what caused Bitcoin to drop?

Pretty much the same factors that weighed on the S&P 500 and Nasdaq. The main trigger was the shift out of risk assets due to fears that at the December 10 FOMC meeting, policymakers might vote to keep rates unchanged, especially after Fed Chair Jerome Powell said it was “not a foregone conclusion” that rates would be cut in December.

The good news is that expectations for a rate cut climbed above 80% after New York Fed President John Williams said the Fed could still lower rates in the near term, given that current policy is “moderately restrictive.” Following that, Bitcoin and the major U.S. indexes rebounded. Now it’s just a question of whether those expectations will actually materialize.

Another factor weighing on sentiment was concern about a potential AI bubble, as investors grew increasingly worried that tech stocks are overvalued and that the billions poured into AI might not pay off as hoped. Things got even more heated when Michael Burry added fuel to the fire, accusing big tech firms of fraudulently overstating their AI-related earnings.

Worsening liquidity didn’t help either. Excess liquidity typically flows into cryptocurrencies, but with the reverse repo balance near zero and repo operations on the rise, the liquidity picture is clearly deteriorating. We’ll see how things evolve on December 1, when the QT program is set to end.