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The price of Bitcoin (BTC) has fallen below $98,000, falling from $105,000 to $97,750 today, marking a surprising drop of -6.8%. The rapid sell-off coincides with increased volatility across both brick and mortar markets, with multiple factors contributing to BTC’s downward spiral.
Why did Bitcoin fall today?
#1 Deepseek’s surprising impact on technology markets
The primary driver behind broader risk sentiment appears to be the emergence of Deepseek, a Chinese artificial intelligence (AI) platform whose rise and cost effectiveness has rattled US tech giants. Famous market commentary outlet Message Kobesi to publish Via X:
“NASDAQ 100 Futures are now down -330 points since market open just hours ago as Deepseek gets #1 spot on App Store. This is how Deepseek has become a huge threat to us Big Tech. The stock market doesn’t lie.”
Deepseek reportedly competes with ChatGpt after being developed at a fraction of the cost, using less advanced hardware. Benchmark tests suggest that Deepseek outperforms ChatGPT in categories like AIME, MATH-500, and GPQA, reigniting concerns that the dominance of AI companies in the US could be in jeopardy.
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Kobeissi’s message added: “Openai… was valued at around $157 billion in October 2024… It has about 22 times the number of employees than Deepseek. This is why the markets have been boosted.”
Traders fear that if investors withdraw capital from hyper-AI stocks, a fundamental sell-off on the technology could ensue. This has major implications for the Bitcoin and Crypto market as well due to its correlation. “Crypto runs on the front foot as markets are closed and is an asset class with a higher risk profile,” male via X.
However, he sees a silver lining for Bitcoin and crypto once the AI stock boom calms down: “If Deepseek is the knife that can (momentarily) burst the AI stock bubble, then this could actually be bullish for crypto, as liquidity rolls in.” AI stocks have sucked A lot of speculative capital that would have previously flowed into BTC/Crypto.”
#2 Pre-FOMC Defending
Another contributor to the current decline is the popular pre-FOMC market dump. Historically, investors recalibrate their portfolios ahead of the Federal Open Market Committee meetings, scheduled for January 28-29, 2025. For such announcements.
“Pre-FOMC blocking (this is very normal, especially in an environment where we are very rate/USD/liquidity sensitive),” Deutscher commented.
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Deutscher also speculated on whether Federal Reserve Chairman Jerome Powell might adopt a softer stance, given the recent transition to the US presidency: “So… if stocks are already in panic mode, will Jerome Powell really come out of the hawks? Right as Trump entered.” Just posted? IDK…my prediction is that pre-FOMC selling marks a local bottom.”
#3 No new price catalyst after Trump’s executive order
Market participants are also citing a perceived void of new bullish news following the first crypto executive order last week by President Donald Trump. Although it initially drove crypto optimism, the absence of a new catalyst left traders wanting more. Deutscher referred to this as “the lack of a ‘north star’ in the short term after Trump’s inauguration.”
#4 Long boxes exacerbate this move
According to Coinglass DataA wave of long liquidations amplifies the downward price movement. 313,683 traders were liquidated in the last 24 hours. Crypto references totaled $853.92 million, with $795.5 million in the long run.
The largest single liquidation order on HTX occurred for BTC-USDT at $98.46 million. In the Bitcoin market alone, long positions worth $250 million were liquidated. The surge in swords amplified BTC’s fall, leading more traders to relax. Analysts view this forced liquidation as both a cause and a symptom of increased volatility.
At press time, BTC was trading at $98,983.
Featured image created with dall.e, chart from tadingview.com
