Key Points
- Bitcoin and many altcoins experienced a significant drop, with Bitcoin falling to $97,855.
- Factors contributing to the crash include risk-on sentiment following DeepSeek’s success, anticipation of the Federal Reserve’s interest rate decision, and upcoming earnings reports from major tech companies.
Bitcoin and a majority of altcoins suffered a sharp decline recently, extending a bearish trend that has been ongoing.
Bitcoin (BTC) plummeted to a low of $97,855, marking a roughly 10% decrease from its earlier high this month. Other notable cryptocurrencies, such as Fartcoin, Raydium, Pepe, and Virtuals Protocol, also experienced significant losses, each falling by over 20%.
Trading Below Monthly Highs
Numerous coins are currently trading well below their monthly peaks. For instance, Fartcoin, a well-known meme coin on the Solana (SOL) network, has seen a 63% drop from its monthly high. Raydium, Solana’s largest decentralized exchange, has decreased by 20%, while Pepe has fallen by nearly 40%.
The primary reason for this downturn is investors’ adoption of a risk-on sentiment in the wake of DeepSeek’s triumph. This shift also explains why major stock market indices such as the Dow Jones, Nasdaq 100, and S&P 500 have declined by over 2%.
Impact of DeepSeek’s Success
DeepSeek, a Chinese rival to Anthropic’s Claude, ChatGPT, and xAI, was developed in under four months and at a fraction of the cost. Its success has sparked worries about future demand for high-priced chips from firms like NVIDIA and AMD, as well as broader market valuations.
Additionally, Bitcoin and altcoin prices have fallen as the market prepares for the Federal Reserve’s forthcoming interest rate decision. Economists predict the Fed will maintain a hawkish tone due to high inflation levels. A recent report revealed that the headline Consumer Price Index rose from 2.7% in November to 2.9% in December.
Typically, Bitcoin and other cryptocurrencies react negatively to a hawkish Federal Reserve stance, as it usually leads to higher bond yields.
The downturn is also influenced by the anticipation of earnings reports from major tech companies, including Microsoft, Amazon, Meta Platforms, Apple, and Tesla. Poor financial results from these companies could negatively impact both the stock and crypto markets.
Bitcoin’s Bearish Outlook
The daily chart indicates that Bitcoin’s price has formed a double-top chart pattern at $108,310, with the neckline at $90,000. This pattern is widely considered one of the most bearish in technical analysis.
On a brighter note, Bitcoin remains above the 50-day and 100-day moving averages, suggesting that the overall bullish trend is still in place. Nevertheless, the bearish outlook will continue as long as the price remains below the double-top level of $108,310.
