TLDR
Bitcoin experienced a sharp decline from $105,000 to under $99,000 as traders took profits ahead of the upcoming FOMC meeting and responded to DeepSeek’s AI developments
The market drop coincided with falling U.S. stock futures, particularly in tech sectors, as DeepSeek’s cost-effective AI model challenged OpenAI’s expensive development narrative
Donald Trump’s recent order to create a crypto policy group failed to maintain bullish momentum
Traders are actively hedging with $95,000 strike options, suggesting expectations of continued downward movement
Market analysts expect range-bound trading until the FOMC meeting provides clarity on policy decisions
Bitcoin experienced a sharp decline early Monday, dropping below the $100,000 mark as traders positioned themselves ahead of the Federal Reserve’s first FOMC meeting of 2025. The leading cryptocurrency fell nearly 6% from its Sunday high of over $105,000, with the steepest drop coinciding with the opening of Asian markets.
The price movement came despite Friday’s announcement from U.S. President Donald Trump ordering the creation of a crypto policy group tasked with advising and driving the country’s industry development within six months. The market’s response suggests that immediate monetary policy concerns are outweighing longer-term regulatory developments.
Current market data shows Bitcoin trading at $99,000, marking a notable retreat from recent highs. The broader crypto market has followed suit, with total market capitalization declining by 8%, while the CoinDesk 20 index registered a drop of more than 8.14%.
The cryptocurrency’s price movement appears closely tied to traditional financial markets, particularly U.S. stock indices. Futures trading for both the S&P 500 and Nasdaq 100 showed declines of up to 2.15% on Monday ahead of market opening, highlighting the increasingly interconnected nature of crypto and traditional markets.
Adding to market pressures, developments in the artificial intelligence sector have sparked concerns about tech sector valuations. China-based AI company DeepSeek has revealed a new model that reportedly matches or exceeds OpenAI’s capabilities while requiring substantially less investment and computational resources.
The two-day FOMC meeting, scheduled for January 28-29, has become a focal point for traders. Market participants are not expecting any indications of an interest rate cut, which typically impacts Bitcoin prices as investors adjust their positions in risk assets.
Bitcoin Price on CoinGecko
Ben El-Baz, managing director of HashKey Global, provided insight into the current market conditions, noting that “U.S. economic data shows that there may be less need for a federal interest rate cut in the near term.” He added that while concerns over trade wars and tariffs persist, institutional interest remains strong, citing continued purchases by MicroStrategy and Trump’s World Liberty Financial.
Options market activity suggests traders are preparing for potential further downside. There has been increased interest in $95,000 strike options for Bitcoin, indicating that market participants are actively seeking protection against additional price decreases.
The impact of DeepSeek’s announcements on market sentiment cannot be understated. The company’s ability to develop advanced AI models with just $6 million and fewer GPUs than its competitors has challenged the prevailing narrative about the resources required for AI development. This revelation comes at a time when OpenAI has sought trillions in funding and is part of the U.S. Stargate project, which has attracted $500 billion in investments.
Technical indicators suggest a weakening market structure. Bitcoin is currently trading below the 100-hour Simple moving average, and the MACD indicator shows increasing bearish momentum. Support levels are established around $100,500 and $100,000, with resistance levels noted at $102,200 and $104,000.
The hourly chart reveals a break below a bullish trend line that previously provided support at $104,800. This technical breakdown has contributed to the current consolidation phase, with the price forming a low at $100,700.
Trading desk reports from Singapore-based QCP Capital highlight the market’s cautious stance. “The desk observed growing interest in the Jan $95,000 strikes as the market scrambled for downside protection after BTC lost momentum during yesterday’s U.S. session,” the firm reported.
Recent price action has invalidated several bullish technical patterns, including the break below key moving averages. The market structure suggests that traders are reassessing their positions ahead of the FOMC meeting.
Looking at immediate price levels, Bitcoin faces resistance near $102,200, which corresponds to the 23.6% Fibonacci retracement level of the recent downward move. A more substantial resistance zone exists around $104,000, coinciding with the 50% retracement level.
The crypto market’s reaction to these various factors has resulted in a period of uncertainty, with traders showing preference for hedging strategies over directional bets. The price action in the coming days will likely be heavily influenced by the outcome of the FOMC meeting and any further developments in the AI sector.
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