Bitcoin Drops, Recovers as AI App Sparks Competition Fears

Bitcoin (BTC) experienced a brief dip below $98,000 on Jan. 27, but quickly recovered to trade near the psychological level of $100,000. The drop was triggered by the rapid rise of China-based AI app DeepSeek, which sparked fears of rising competition in the AI sector. This led to a flight to safety, resulting in $864 million in liquidations in the cryptocurrency markets within 24 hours.

BitMEX co-founder Arthur Hayes warned his followers of a potential sharp correction in Bitcoin but expressed optimism that the price could recover and end the year at $250,000, assuming the resumption of money printing.

Market participants are eagerly awaiting the outcome of the Federal Open Market Committee meeting on Jan. 28 and 29, where the Fed is expected to pause rate cuts.

Despite Bitcoin's struggle to break out to a new all-time high, MicroStrategy continued its buying spree for the 12th successive week, acquiring 10,107 Bitcoin at an average price of $105,596 between Jan. 21 and Jan. 26.

As the market awaits further developments, the question remains: will Bitcoin stay above $100,000, or will bears pull the price lower? How will the altcoins fare in this dynamic market?

The S&P 500 Index (SPX) gapped down sharply on Jan. 27, indicating that the markets rejected the breakout above 6,100. The 20-day exponential moving average (5,985) is the crucial support to watch out for. If the price rebounds off this support, it will signal that the sentiment remains positive, and traders are buying on dips. The bulls will again try to push the price above 6,100, starting the journey toward the target objective of 6,347. However, if the price closes below the moving averages, it may trap the aggressive bulls, resulting in a drop to the 5,853 to 5,773 support zone.

The US Dollar Index (DXY) has pulled below the 50-day simple moving average (107.58), indicating that the bears are trying