Bitcoin’s price took a nosedive, dropping below $98,000 from a high of $105,000 – a pretty significant fall of about 6.8%! This sudden drop happened alongside some major shakeups in both the crypto and traditional markets. Let’s break down the reasons:
DeepSeek’s Surprise Impact
A big factor seems to be the emergence of DeepSeek, a Chinese AI platform. It’s cheaper and apparently better than ChatGPT, causing a lot of worry among US tech giants. This has led to a sell-off in tech stocks, impacting the overall market sentiment. Since Bitcoin is often linked to the tech sector, it’s feeling the pressure too. One analyst pointed out that while this might hurt Bitcoin in the short term, it could actually be good news later on as money flows back into crypto.
Pre-FOMC Jitters
Another reason for the dip is the usual pre-FOMC de-risking. Before Federal Open Market Committee meetings (happening January 28-29, 2025), investors often get cautious and sell off riskier assets like Bitcoin. Even though interest rates might stay the same, the uncertainty is enough to cause a sell-off. Some analysts think this sell-off might actually mark the bottom.
Waiting for the Next Big Thing
Following President Trump’s first-ever crypto executive order, the market seems to be waiting for the next big piece of good news. The initial optimism has faded, leaving traders a bit uncertain.
Liquidations Made it Worse
To make matters worse, a huge number of traders were liquidated – meaning they were forced to sell their Bitcoin because they couldn’t cover their losses. This added fuel to the fire, causing the price to drop even further. Over $850 million in crypto liquidations happened in just 24 hours, with a significant portion of that being Bitcoin.
In short, a perfect storm of factors – a new AI competitor, pre-meeting jitters, a lack of fresh news, and a wave of liquidations – all contributed to Bitcoin’s recent price crash. Only time will tell how long this downturn lasts.
