What to Know
- Bitcoin slumped to under $100,000 early Monday as traders took profits ahead of the first U.S. FOMC meeting this year.
- Traders expect no indications of a rate cut at the two-day FOMC meeting scheduled for Jan. 28 to Jan. 29.
- Meanwhile, U.S. stock futures fell as traders digested information about the cost and capabilities of China-based DeepSeek, which threatens an otherwise costly narrative spearheaded by OpenAI.
Bitcoin (BTC) slipped to below $99,000 early Monday as traders took profits ahead of the scheduled FOMC meeting, which is set for Jan. 28 to Jan. 29. This dip was influenced by the sentiment around the AI firm DeepSeek, which has been affecting the outlook of the U.S. tech sector.
Traders do not anticipate any signals of a rate cut during this week’s FOMC meeting, typically affecting Bitcoin prices as investors’ preferences towards risk assets fluctuate.
“U.S. economic data shows that there may be less need for a federal interest rate cut in the near term,” Ben El-Baz, managing director of HashKey Global, told CoinDesk in a Telegram message. “Concerns over trade wars and tariffs linger, but a bullish sentiment remains strong as MicroStrategy and Trump’s World Liberty Financial continue purchasing crypto.”
BTC fell nearly 6% from a Sunday high of over $105,000, exacerbated by a notable downtrend as Asian markets kicked off Monday. This steep decline followed the announcement from Donald Trump, who directed the creation of a crypto policy group to influence and advance the nation’s digital currency industry within the next six months.
The broader crypto market cap also shrank by 8%, with the CoinDesk 20 (CD20) index diving more than 8.14%.
The market’s downturn mirrored the fall of U.S. stock indices, where futures pointed to declines of up to 2.15% ahead of Monday’s opening.
Analysts attribute much of the apprehension to a potential overvaluation in American tech firms, noting that DeepSeek’s latest AI model is significantly cheaper to produce, built on open-source technology that’s easily accessible.
As reported by CoinDesk, data from DeepSeek demonstrated its AI model outperforms that of OpenAI. DeepSeek operates on a budget of $6 million, utilizing significantly fewer resources than OpenAI, which recently raised $6.6 billion at a valuation of over $157 billion.
OpenAI has sought vast funding to develop AI systems comprehensively and is part of the U.S. Stargate project, which has secured $500 billion in investments, involving Trump, SoftBank, and Oracle, to establish AI data centers across the nation.
Conversely, DeepSeek’s reported production costs and capabilities challenge the prevailing notion that extensive computational resources are essential for innovation in AI, potentially diminishing U.S. tech firms’ competitive advantages and questioning the sustainability of their inflated market valuations.
Consequently, traders are now focusing on $95,000 strike options for Bitcoin to hedge against anticipated downsides, indicating that bearish expectations remain prevalent.
“The desk observed growing interest in the Jan $95,000 strikes as the market scrambled for downside protection after BTC lost momentum,” traders from QCP Capital in Singapore noted in a recent broadcast. “With no significant catalysts before next week’s FOMC meeting, the market is likely to remain range-bound until clarity emerges on the recent weak CPI reading and its effect on the Fed’s future policy decisions.”
