Bitcoin’s value fell under $100,000 for the first time since Donald Trump assumed the presidency on January 20. The decline, observed on January 27, comes amid heightened competition in the artificial intelligence (AI) sector and shifts in global monetary policies.
The leading cryptocurrency by market capitalization reached a low of $98,046, reflecting broader market unease.
A major factor contributing to the sell-off is the swift ascent of DeepSeek, a Chinese AI app that surpassed ChatGPT in popularity on the U.S. Apple App Store. Within just a week of its launch, DeepSeek claimed the top position, creating ripples across financial markets.
“The surge in DeepSeek’s popularity, combined with volatility in the U.S. AI market, has driven investors toward safer assets,” noted Alvin Kan, COO of Bitget Wallet.
Kan also highlighted concerns about the Federal Reserve’s impending meeting. “With no signs of an imminent rate cut, market participants are factoring in a more hawkish stance, further amplifying caution,” he added.
AI Competition Fuels Market Volatility
DeepSeek’s meteoric rise, reportedly achieved with a modest $6 million development cost, has stoked fears of a growing AI arms race. The app’s success has sent shockwaves through global markets, exacerbating existing concerns.
Nvidia, a major player in the AI sector, experienced a 3.12% drop in its stock value as of January 24. Once valued at $3.49 trillion due to its AI dominance, the company’s shares reflected broader investor anxiety.
Crypto Losses Mount
The crypto market also suffered significant losses, with an estimated $864 million in liquidated positions. Bitcoin alone accounted for $250 million of the wiped-out long positions, according to data from CoinGlass.
“Investors who took overly bullish positions on margin faced liquidations,” explained Justin d’Anethan, head of sales at Liquifi, a token launch advisory firm.
He added that traders seem to be positioning themselves for further turbulence. “Without major market catalysts ahead of the Federal Reserve meeting, prices are likely to stay range-bound in the short term,” d’Anethan said.
Fed Decision Looms
The Federal Reserve is set to announce its first interest rate decision under President Trump on January 28-29. Analysts widely expect rates to remain steady in the range of 4.25%-4.5%, based on the CME FedWatch tool.
Despite the prevailing bearish sentiment, analysts at Matrixport expressed optimism. They cited the ongoing Lunar New Year celebrations in Asia, which they referred to as the “most statistically favorable 20-day period for Bitcoin.”
As the market digests these developments, all eyes remain on the Federal Reserve and its upcoming policy signals, which could set the tone for Bitcoin and broader financial markets in the weeks ahead.
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