Bitcoin’s price dropped below $100,000 on Monday, marking a significant decline as traders reacted to developments in the AI sector and prepared for the U.S. Federal Open Market Committee (FOMC) meeting later this week.

The leading cryptocurrency fell nearly 6% from its weekend high of $105,000, with the broader crypto market shedding 8% in total market capitalization. The slump comes as investors digest news about China-based DeepSeek’s disruptive AI advancements, which have raised questions about the sustainability of U.S. tech valuations.

DeepSeek AI Sparks Market Concerns

DeepSeek, a China-based AI research firm, unveiled an advanced model that reportedly rivals OpenAI’s systems at a fraction of the cost. Built with just $6 million and significantly fewer computational resources, the model challenges the prevailing narrative that high-cost infrastructure is necessary for AI innovation.

This revelation has shaken investor confidence in U.S. tech companies, many of which are heavily reliant on high valuations tied to AI development. U.S. tech-heavy indices, including Nasdaq 100 futures, fell over 2% in response, a decline mirrored in Bitcoin’s price action.

Key Drivers of Bitcoin’s Decline

Profit-Taking Ahead of FOMC Meeting

Traders cashed out positions ahead of the Federal Reserve’s two-day policy meeting starting January 28. Market participants expect no immediate rate cuts, contributing to reduced appetite for risk assets, including cryptocurrencies.

Macro Concerns from AI Disruption

DeepSeek’s cost-efficient AI model adds pressure on U.S. tech firms, which have received significant investments for AI development. This raises broader concerns about overvaluations in the tech sector and affects overall market sentiment, spilling over into the crypto market.

Liquidation Events

Futures market data shows that traders lost over $873 million in liquidations over the past 24 hours, with $265 million coming from BTC-linked products, according to coinglass.

The largest liquidation order, valued at $98.4 million, occurred on HTX (formerly Huobi).

Altcoin Selloff Intensifies

The market downturn was not limited to Bitcoin, with major altcoins suffering significant losses:

• Solana (SOL) and Dogecoin (DOGE) plunged over 10%.
• Ethereum (ETH), Binance Coin (BNB), and Cardano (ADA) fell by 8-9%.
• Smaller tokens like PEPE and Aptos (APT) saw losses exceeding 15%.

Jupiter’s (JUP) token was a rare bright spot, gaining 3.5% after announcing plans to repurchase tokens using trading platform fees.

With no major bullish catalysts before the FOMC meeting, Bitcoin may remain range-bound in the short term. Traders are monitoring the $95,000 support level and broader macroeconomic indicators for further direction.

DeepSeek’s advancements in AI and their impact on U.S. tech companies remain a critical factor influencing market sentiment. As the global crypto market navigates these challenges, volatility is expected to persist.