As January wraps up, the cryptocurrency market is feeling the heat. Bitcoin (BTC) has taken a hit, dropping 3% to $101,400, with lows hitting $97,750. The CoinDesk 20 index, which tracks various cryptocurrencies, saw a 7% decline, signaling a cooling market after a bullish start to the month.
Nasdaq Takes a Hit
The tech-heavy Nasdaq composite index also faced turbulence, plummeting over 3%. The decline stems from concerns over DeepSeek, a Chinese startup that recently unveiled a competitive artificial intelligence model. This model comes at a fraction of the cost of existing solutions, raising alarms about a potential shift in AI dominance away from the U.S.
These developments have worried investors about Big Tech’s spending on AI and data centers. As a result, tech stocks have faced a significant sell-off in the U.S. market. Major cryptocurrency exchanges like Coinbase and MicroStrategy saw their shares dip about 2% in premarket trading. Bitcoin mining companies were hit even harder; Core Scientific’s shares plummeted by 21%, while Terawulf and Iren (formerly Iris Energy) lost 16%.
Bitcoin Traders Feel the Pressure
The strong correlation between the crypto market and tech sector continues. Standard Chartered analyst Geoff Kendrick noted that Bitcoin currently tracks the Nasdaq more closely than traditional safe-haven assets like gold.
Adding to the chaos, traders who had bet against a downturn faced massive liquidations. In just 24 hours, over $250 million in long positions were liquidated, forcing leveraged traders to sell off their Bitcoin to cover losses. This wave of selling came amid mixed reactions to President Donald Trump’s recent executive order on cryptocurrency. While there was initial excitement, the order did not meet all expectations, disappointing many traders.
Kendrick pointed out that the current market dynamics leave digital assets vulnerable to sharp sell-offs, whether the pressure comes from within the crypto sphere or external forces like tech.
With the uncertainty of the executive order behind them, the market’s gaze has turned to the upcoming Federal Reserve meeting, set to conclude on Wednesday. Market strategist Joel Kruger of LMAX shared that investors are nervously awaiting the Fed’s tone. They hope for a more accommodating stance but fear the central bank may not deliver.
Despite recent price drops, Kruger remains optimistic about Bitcoin’s future. He stated, “When we look at the Bitcoin chart, there is nothing bearish about the price action.”
