Bitcoin Falls Under $99K with DeepSeek and FOMC Overshadowing Trump’s Influence

Bitcoin (BTC) fell below $99,000 on Monday morning as traders took profits in anticipation of the U.S. Federal Open Market Committee (FOMC) meeting later this week, while concerns surrounding DeepSeek’s AI model also weighed on market sentiment in the tech sector.

The FOMC meeting, scheduled for January 28-29, is expected to have a significant impact on risk assets, including bitcoin, as investors assess the likelihood of rate cuts. The lack of expectation for a rate cut has fueled speculation that Bitcoin’s price may remain vulnerable to fluctuations in the coming days. Historically, bitcoin tends to react to FOMC announcements, with risk assets either gaining or losing momentum based on the Fed’s stance.

Ben El-Baz, Managing Director at HashKey Global, stated in an interview with CoinDesk, “The economic data out of the U.S. suggests there’s less pressure for a rate cut at the moment. Despite concerns over trade wars, the market remains cautiously optimistic as crypto-related investments continue to gain traction.”

Bitcoin’s price saw a nearly 6% decline from its Sunday high of over $105,000, following a sharp drop when Asian markets opened on Monday. The decline came despite a key announcement from President Donald Trump, who established a new crypto policy group on Friday, signaling potential future support for the sector. This announcement had initially been viewed as a positive catalyst for the market.

The cryptocurrency market as a whole mirrored the declines in Bitcoin, with the total market cap falling 8%. The CoinDesk 20 Index, a broader crypto benchmark, also dropped more than 8.14%. The downturn followed similar losses in U.S. stock indices, with futures for the S&P 500 and Nasdaq 100 down 2.15% on Monday.

One of the key factors behind this market pullback is the uncertainty surrounding the valuation of major U.S. tech companies. DeepSeek’s recent AI breakthrough has sparked concern in the tech sector, as its new AI model outperforms OpenAI’s while costing a fraction of what OpenAI spent to build its platform. DeepSeek’s model is capable of delivering similar performance with a $6 million budget and far fewer GPUs than its competitors, raising questions about the sustainability of high valuations in U.S. tech firms.

In light of DeepSeek’s cost-effective AI model, which has garnered attention on Hugging Face, an AI-focused platform, there are growing doubts over the future of massive tech spending on AI infrastructure. This has contributed to weakening confidence in U.S. tech firms, affecting broader market sentiment, including bitcoin.

In reaction to the broader market uncertainty, bitcoin traders have started to seek downside protection. A notable rise in demand for $95,000 strike options reflects expectations of further price weakness in the short term. These options are viewed as a hedge against a potential dip, given the uncertain macroeconomic environment and upcoming policy decisions from the Fed.

QCP Capital analysts noted in their weekly report, “We’ve seen growing interest in the $95,000 strike options, as BTC has struggled to maintain upward momentum during the U.S. session. With the FOMC meeting still ahead, we expect market sentiment to remain cautious, and price movements may remain contained until the policy outlook becomes clearer.”

As the market prepares for the FOMC meeting and digests the effects of new tech sector developments, bitcoin’s short-term outlook remains uncertain, with traders bracing for potential volatility ahead.