Bitcoin Price Crashes Below $98,000: Here's Why

bitcoin (btc) price has dipped below $98,000, returning from $105,000 as low as $97,750 today, marking a sudden decline of up to -6.8%. The rapid sell-off coincides with increased volatility in the crypto and traditional markets, with multiple factors contributing to btc's downward spiral.

Why is bitcoin down today?

#1 Surprise impact of Deepseek on technology markets

The main driver behind the broader risk sentiment appears to be the rise of Deepseek, a Chinese artificial intelligence (ai) platform whose rapid rise and profitability has shaken American tech giants. Recognized Market Review Kobeissi's Letter <a target="_blank" href="https://x.com/KobeissiLetter/status/1883683408846704705″ target=”_blank” rel=”nofollow”>aware Via x:

“Nasdaq 100 futures are now down -330 points since the market opened just a few hours ago as Deepseek takes no. #1 on the App Store. That's how you know Deepseek has become a big threat to us large cap tech. The stock market doesn't lie.”

Deepseek reportedly competes with ChatGPT, but was developed at a fraction of the cost, using less advanced hardware. Benchmarks indicate that Deepseek is outperforming chatgpt in categories such as AIME, MATH-500 and GPQA, igniting concerns that the dominance of US-based ai companies could be at risk.

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Kobeissi's letter added: “OpenAi…was valued at ~$157 billion in October 2024…has ~22 times more employees than Deepseek. This is why the markets have been blinded.”

Traders fear that if investors pull capital out of overextended ai stocks, a broader technology sell-off could ensue. This also has significant implications for the bitcoin and crypto market due to their correlation. “crypto is up and running as markets are closed and is a higher risk-beta asset class,” crypto analyst Miles Deutscher <a target="_blank" href="https://x.com/milesdeutscher/status/1883770666996146403″ rel=”nofollow”>noted Via x.

However, he sees a silver lining for bitcoin and crypto once the Stock ai boom subsides: “If Deepseek is the knife that could (momentarily) burst the Stock ai bubble, then this could be bullish for the crypto, as liquidity turns backwards. ai stocks absorbed a lot of speculative capital that would have previously flowed into btc/crypto.”

#2 Des-FOMC Des-Rishing

Another contributor to the current downside is the commonly observed pre-FOMC market selloff. Historically, investors recalibrate their portfolios ahead of the federal Open Market Committee meetings, scheduled for January 28-29, 2025. Although consensus indicates that interest rates may remain unchanged, riskier assets like bitcoin and Cryptocurrencies often face selling pressure in the run-up. to such advertisements.

Deutscher commented: “De-FOmc Des-Rishing (this is very normal, especially in an environment where we are extremely sensitive to tariffs/US dollar/liquidity).”

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Deutscher also speculated on whether Federal Reserve Chairman Jerome Powell might take a softer stance, given the recent transition of the US Presidency: “So… if stocks are already in panic mode, are they Jerome Powell will really come out super hawkish? Just like Trump just entered office? IDK… My prediction is that the pre-FOMC sell-off marks the local bottom.”

#3 Lack of new Catalyst prices after Trump's executive order

Market participants also cite a perceived void of new bullish news following last week's first crypto executive order by President Donald Trump. Although the order initially boosted crypto optimism, the absence of a new catalyst left traders wanting more. Deutscher referred to this as the “lack of 'North Star' in the short term after Trump's inauguration.”

#4 long sell-offs that exacerbate the movement

According to Co-English dataA flurry of long liquidations has extended the price action to the downside. 313,683 traders were liquidated in the last 24 hours. Total crypto liquidations reached $853.92 million, with $795.5 million in longs.

The largest liquidation order occurred on HTX for btc-USDT valued at $98.46 million. In the bitcoin market alone, $250 million in long positions were liquidated. The increase in liquidations amplified btc's decline, prompting more traders to relax positions. Analysts see these forced liquidations as a cause and symptom of increased volatility.

At press time, btc was trading at $98,983.

Featured image created with Dall.E, graphic from tadingview.com