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Bitcoin Plunges Below $99K Amid AI Hype and FOMC Uncertainty

Coin WorldMonday, Jan 27, 2025 3:58 am ET

1min read

Bitcoin Dives to Under $99K as DeepSeek, FOMC Steal Trump Effect

Bitcoin (BTC) has plummeted to under $99,000, marking a significant correction in the cryptocurrency market. The recent decline comes amidst a flurry of news, including the release of a new large language model by Chinese AI startup DeepSeek and the upcoming Federal Open Market Committee (FOMC) meeting.

The DeepSeek model, called DeepSeek-R1, has outperformed some of the popular models, including OpenAI's o1, on certain benchmarks. This has sparked interest in the AI sector, with investors eyeing potential opportunities. However, the success of DeepSeek may also put pressure on demand for chips and data centers, as the startup spent significantly less on raw computing power compared to its competitors.

Meanwhile, the FOMC meeting is set to take place on January 29, with market participants eagerly awaiting the outcome. The meeting comes amidst ongoing debates regarding interest rates, with Fed Chair Jerome Powell indicating a cautious approach despite pressure for rate cuts from political spheres. The decisions made during the meeting could significantly impact the broader market, including the crypto market.

The recent downturn in Bitcoin's price has been attributed to various factors, including increased selling pressure from long-term holders and a shift in market dynamics. The surge in Bitcoin's Liveliness indicates significant sell-off activities, with a notable rise in Coin Days Destroyed. This suggests that long-term holders are liquidating their assets, exerting additional downward pressure on the price.

The Network Value to Transaction (NVT) Signal also presents a compelling case for Bitcoin's potential undervaluation. Currently at a low, this metric indicates that Bitcoin's price does not align with its transaction activity, suggesting that an uptrend could be in the making should broader market sentiments shift positively.

Investors remain cautiously optimistic, with the lack of substantial negative sentiment indicating that if conditions improve, there could be a resurgence in demand for BTC. However, the upcoming days are critical, as reclaiming the $105,000 threshold could reinstate bullish momentum, while losing the $100,000 support could escalate bearish trends further.

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