Bitcoin (BTC) dipped below $99,000 early on Monday as traders took profits ahead of the U.S. Federal Open Market Committee (FOMC) meeting later this week, and sentiment in the U.S. tech sector was shaken by DeepSeek’s latest AI model.
With the FOMC meeting scheduled for Jan. 28 to Jan. 29, traders anticipate no indication of a rate cut, which could impact bitcoin prices as investors weigh their risk exposure. Historically, bitcoin prices tend to react to the FOMC meetings, either moving toward or away from risk assets depending on the Fed’s stance.
“There seems to be less immediate pressure for a rate cut based on U.S. economic data,” said Ben El-Baz, managing director at HashKey Global. “While trade wars and tariffs remain concerns, overall sentiment is still positive with companies like MicroStrategy and Trump’s World Liberty Financial continuing to make crypto purchases.”
Despite the strong bullish sentiment, BTC dropped nearly 6% from a high of over $105,000 on Sunday, falling sharply as Asian markets opened on Monday. This followed a major announcement on Friday when U.S. President Donald Trump established a crypto policy group to advance the country’s position in the industry.
As bitcoin declined, so did the overall crypto market capitalization, which fell by 8%, while the broad-based CoinDesk 20 (CD20) index dropped by more than 8.14%. The decline mirrored losses in U.S. stock indices, which also experienced significant drops, with S&P 500 and Nasdaq 100 futures down as much as 2.15% on Monday.
The bearish sentiment was partly driven by concerns over the overvaluation of U.S. tech companies, especially in light of DeepSeek’s new AI model, which outperforms OpenAI despite being built on a budget of just $6 million. DeepSeek’s efficiency challenges the notion that vast computational resources are necessary for AI innovation, leading some to question the sustainability of high valuations among U.S. tech firms.
Data from DeepSeek, posted on the Hugging Face platform, revealed that its AI model is capable of outperforming OpenAI’s, despite using far fewer Graphics Processing Units (GPUs). OpenAI recently raised $6.6 billion in funding, valued at over $157 billion, while DeepSeek’s model shows that AI innovation can be achieved at a fraction of the cost.
DeepSeek’s cost-efficient approach undermines the narrative that massive spending and extensive computational power are required for breakthroughs in AI, raising doubts about the long-term competitiveness of U.S. tech giants. This shift in sentiment has ripple effects on broader markets, including bitcoin.
Traders have been positioning themselves for potential downside risks, with growing interest in $95,000 strike options for bitcoin. These options reflect expectations of a lower move as the market remains uncertain ahead of the FOMC meeting.
“We noticed a significant rise in demand for the Jan $95,000 strikes as BTC lost momentum during the U.S. session,” said traders from QCP Capital in a recent broadcast. “With no major catalysts before next week’s FOMC meeting, we expect the market to remain range-bound until more clarity emerges on how recent CPI data will influence the Fed’s policy decisions.”
