Bitcoin (BTC) experienced a significant drop, falling below the $99,000 mark early Monday. This decline comes as traders took profits ahead of the first U.S. Federal Open Market Committee (FOMC) meeting of the year, scheduled for January 28-29. Additionally, developments in the tech sector, particularly from China-based AI company DeepSeek, have further influenced market sentiment.
Market participants anticipate that the FOMC meeting will provide little indication of an impending rate cut, which historically affects Bitcoin prices and investor preferences. As Ben El-Baz, managing director of HashKey Global noted, “U.S. economic data suggests that there may be less need for a federal interest rate cut in the near term.” While concerns regarding trade wars and tariffs persist, bullish sentiment remains robust, bolstered by the ongoing acquisition of cryptocurrency by notable players such as MicroStrategy and Trump’s World Liberty Financial.
The price of BTC plummeted nearly 6% from a Sunday high surpassing $105,000, with the steepest decline observed as Asian markets opened on Monday. This downturn occurred despite a major catalyst on Friday when U.S. President Donald Trump announced the establishment of a crypto policy group aimed at advising and advancing the nation’s cryptocurrency industry within the next six months.
Crypto market capitalization took a hit, falling by 8%, while the broader CoinDesk 20 (CD20) index declined by over 8.14%. The drop mirrored trends observed in U.S. stock indices, with futures for the S&P 500 and Nasdaq 100 both down as much as 2.15% on Monday in anticipation of the market opening.
Much of the market’s concern is tied to the perceived overvaluation of U.S. tech companies. DeepSeek’s latest AI model, which reportedly outperforms models like OpenAI’s while requiring significantly less investment and fewer resources, raises questions about the sustainability of high valuations in the tech sector. According to a report by CoinDesk, DeepSeek’s AI model was developed on a budget of just $6 million, challenging the narrative that extensive computational resources are necessary for AI innovation.
As OpenAI seeks trillions in funding for large-scale AI systems and participates in the U.S. Stargate project (which has attracted $500 billion in investments), DeepSeek’s reported efficacy and lower costs stand to potentially undermine the competitive advantage of U.S. tech firms and contribute to overall market uncertainty, impacting Bitcoin in the immediate future.
In response to the market trends, traders have increasingly purchased $95,000 strike options for Bitcoin to hedge against potential downside losses. According to reports from Singapore-based QCP Capital, there has been a notable uptick in interest for January $95,000 strikes as the market sought downside protection following BTC’s loss of momentum during the previous U.S. trading session.
“With no major catalysts preceding next week’s FOMC meeting, the market is likely to remain range-bound until there is more clarity on how the recent weak Consumer Price Index (CPI) reading has influenced the Fed’s forthcoming policy decisions,” QCP added in their latest commentary.
