Market Downturn in January

As January draws to a close, the cryptocurrency market has faced a significant downturn, with Bitcoin (BTC) and other digital assets suffering losses due to a broader sell-off in the technology sector.

Bitcoin’s price fell 3% to $101,400, with earlier lows reaching $97,750. The CoinDesk 20 index, which tracks a weighted average of various cryptocurrencies, recorded a 7% decline, reflecting the overall market’s cooling after reaching record highs earlier this month.

Nasdaq Drops Over 3% Due to AI Concerns

The tech-heavy Nasdaq composite index also faced a downturn, dropping over 3%, influenced by concerns stemming from a Chinese startup, DeepSeek. This company recently announced the development of a competitive artificial intelligence model at a fraction of the cost of existing solutions, raising alarms about potential shifts in US dominance in AI technology.

These developments have sparked fears regarding Big Tech’s spending on AI models and data centers, further exacerbating the sell-off in tech stocks in the United States market. In premarket trading, shares of major cryptocurrency exchanges like Coinbase and MicroStrategy fell about 2% each, while Bitcoin mining companies took even larger hits; Core Scientific saw its shares plummet by 21%, and Terawulf and Iren (formerly Iris Energy) lost 16%.

Bitcoin Traders Face Long Liquidations

The market’s volatility was driven by significant liquidations among traders who had bet against a downturn. Over the past 24 hours, more than $250 million in long liquidations occurred, forcing leveraged traders to sell their Bitcoin holdings to cover losses. This wave of selling coincided with a mixed market reaction to President Donald Trump’s recent executive order on cryptocurrency, which had generated anticipation but ultimately failed to meet all investor expectations.

Many traders expressed disappointment that the executive order did not establish a dedicated stockpile of Bitcoin, implying a more passive approach to holding assets rather than an active strategy of regular purchases. Geoff Kendrick, a Standard Chartered analyst, emphasized that the current market dynamics position digital assets to be particularly vulnerable to sharp sell-offs, regardless of whether the driving force originates from within the crypto space or external markets like tech.

With the uncertainty surrounding the executive order now resolved, the market has shifted its focus to the upcoming Federal Reserve meeting, set to conclude on Wednesday. Market strategist Joel Kruger of LMAX noted that investors are nervously anticipating the Fed’s stance, hoping for a more accommodative approach while fearing that the central bank may not adopt the dovish tone desired by the markets.

Despite the recent price declines, Kruger reassured investors that the overall trend in Bitcoin remains positive, stating, “When we look at the Bitcoin chart, there is nothing bearish about the price action.”