Bitcoin Faces $100K Struggle Amid Market Volatility and DeepSeek Threat

Bitcoin (BTC) has started the last week of January on a challenging note, with the price dipping below the crucial $100,000 threshold amid a broader market sell-off. As U.S. stocks endure a downturn, fueled by a fresh wave of uncertainty surrounding Chinese AI startup DeepSeek, Bitcoin faces heightened pressure. This week also sees the U.S. Federal Reserve preparing for a key decision on interest rates, further adding to market jitters.

Here’s a breakdown of the key factors influencing Bitcoin's price action this week.

Bitcoin Drops Below $100K: Bulls Lose Momentum

Bitcoin’s price struggled at the start of the week, falling below the $100,000 mark as a rout in U.S. stocks spilled over into the cryptocurrency market. Traders had hoped for a strong start to January's final week, but instead, the leading cryptocurrency faced significant resistance.

Despite the pullback, many traders, including popular market analyst Credible Crypto, remained optimistic about Bitcoin’s medium-term prospects. He emphasized that the current price movement is simply Bitcoin heading toward the lower end of its range, a common market cycle. "It's healthier for us to take liquidity from the lows of this range while leaving liquidity behind at the highs," Credible Crypto shared in his latest X post.

Another trader, CJ, also predicted a potential bounce around the range lows, forecasting either a “stop-loss hunting” (SFP) scenario or a deeper move toward the untapped demand zone near $90,000.

However, some prominent voices in the market, including Arthur Hayes, former CEO of BitMEX, have warned of more substantial downside potential. Hayes speculated that Bitcoin could see a significant drop to $75,000 before eventually rising to $250,000 by the end of 2025.

Federal Reserve Decision in Focus: Limited Rate Cut Expectations

All eyes are on the U.S. Federal Reserve this week, as the central bank meets to discuss the future of interest rates. With inflation data showing signs of improvement, many analysts believe the Fed will pause its incremental rate cuts that began in mid-2023. According to CME Group’s FedWatch Tool, the chances of a rate cut of just 0.25% on January 29 are extremely low — under 0.5%.

This marks an important decision point for the market, as continued uncertainty over inflation and interest rates could have significant implications for risk assets, including Bitcoin. President Donald Trump has also weighed in on the matter, calling for an immediate reduction in interest rates, citing falling oil prices. His remarks add to the pressure on Federal Reserve Chair Jerome Powell, who is expected to face questions about the Fed's approach.

DeepSeek's Surge Triggers Nervousness in U.S. Stocks

Adding to the market’s unease is the sudden rise of DeepSeek, a Chinese AI startup that is quickly gaining traction as a competitor to OpenAI's ChatGPT. DeepSeek’s unexpected rise sent shockwaves through the markets, causing a sharp drop in U.S. stocks, particularly within the technology sector. Nasdaq futures fell by 2% on January 27, and analysts feared that U.S. tech stocks might lose up to $1 trillion in market value.

With DeepSeek’s advanced AI capabilities and its rapid rise to prominence, many large-cap tech investors are now concerned about their positions. The shift in AI competition is forcing investors to reassess the fundamentals of major tech companies, especially as DeepSeek’s success threatens the dominance of established players.

Bitcoin’s relationship with traditional equities has become notably more intertwined. On January 25, CryptoQuant reported that Bitcoin's correlation with both the Nasd

aq and the S&P 500 reached historically high levels. This has placed Bitcoin under additional scrutiny, as market sentiment shifts in response to external factors like the DeepSeek development.

Bitcoin Derivatives: Bearish Sentiment Growing

Bitcoin’s derivatives markets have been showing signs of caution for some time now, with bearish sentiment taking hold among traders. As CryptoQuant highlighted, there has been a noticeable gap in pricing between Bitcoin spot and perpetual markets on Binance, reflecting a shift in sentiment. Since mid-December, the gap has remained negative, suggesting that derivatives traders are positioning for further downside in the short term.

If the Federal Reserve signals confidence in the economy or inflation data beats expectations, this sentiment could change. A return to positive market sentiment could prompt a reversal in derivatives trading, leading to renewed confidence in Bitcoin’s long-term growth.

Short-Term Holders at Risk of Unrealized Losses

With Bitcoin’s price slipping below $100,000, many short-term holders (STHs) are facing potential unrealized losses. According to CryptoQuant, Bitcoin’s price point at around $96,000 is critical, as it represents the cost basis for short-term holders who have bought in over the last three months. If Bitcoin continues to dip, these holders may be pushed into an uncomfortable position, especially if the price falls below $90,000, where those holding for up to six months will also experience unrealized losses.

“Any major price movement from here will warrant close attention, especially given the importance of these levels as both technical and on-chain support zones,” CryptoQuant concluded, urging traders to remain vigilant as key price levels are tested.

Conclusion: A Crucial Week for Bitcoin

Bitcoin faces a volatile week ahead, with numerous macroeconomic and market factors converging. The U.S. Federal Reserve’s decision on interest rates, combined with the competitive threat from DeepSeek, has created a highly uncertain environment for both traditional markets and crypto assets. Bitcoin's correlation with U.S. equities has intensified, and the price is now testing key support levels that could signal the direction of its next move.

As Bitcoin approaches important thresholds, both traders and long-term investors will be keeping a close eye on the evolving situation. Whether the cryptocurrency can regain its momentum and reclaim the $100,000 mark, or if it will experience further downside, will depend largely on external economic conditions and sentiment within both traditional markets and the crypto space.