Bitcoin Defies DeepSeek Sell-Off, FOMC Uncertainty

Earlier this week, US stocks took a hit after Chinese AI firm DeepSeek unveiled its open-source LLM, raising concerns over the high market valuation of its American counterparts. As a result, the S&P 500 saw a strong sell-off, with NVIDIA leading the losses, dropping 16% in a single day.

Similarly, in its latest meeting, the Federal Open Market Committee (FOMC) left interest rates unchanged, in line with market expectations. While the hawkish stance was expected to deal another blow to crypto markets, BTC remained relatively unscathed after an initial dip.

At the time of writing, BTC is trading at $105,839, having essentially recouped all its losses from the DeepSeek-induced market crash. In fact, BTC has outperformed the S&P 500 over the past five days, surging 1.53%, compared to the latter’s 1.25% decline.

New BTC ATH In February?

Seasoned crypto trader Pentoshi commented on BTC’s strength, saying that the digital asset has held up well despite the turmoil. The trader added that they see no reason why BTC shouldn’t hit a new ATH soon.

Another Bitcoin enthusiast, Castillo Trading, noted that Bitcoin’s price structure “looks flawless.�They added that both lower- and higher-time frames suggest that BTC will likely go higher.

In a similar vein, crypto trader and entrepreneur Michael van de Poppe said that the market will likely see a new BTC ATH in the ‘coming weeks,�potentially hinting at February as the target month.

Further, crypto trader Roman shared the following chart, commenting that “Stoch & RSI have plenty of room to break $108,000 resistance and head higher.�They added that bullish divergence on BTC is also playing out nicely.

For the uninitiated, both Stochastic Oscillator (Stoch) and Relative-Strength Index (RSI) are momentum indicators that help traders identify whether the underlying asset is oversold or overbought in current market conditions.

While projections for a new BTC ATH may be focused on the short-term, market cycle peaks are expected to occur in the summer of 2025. For instance, a recent report by Bitfinex forecasts that BTC could surge to $200,000 by mid-2025, amid shallow price pullbacks.

Meanwhile DeepSeek predicts that BTC may top out between $500,000 and $600,000 by Q1 2026. At press time, BTC trades at $105,839, up 3.1% in the past 24 hours.

Tech Giants Show Resilience Amid DeepSeek Scare

Major US technology stocks remained surprisingly resilient during the uncertainty within the cryptocurrency space. Companies such as Nvidia, Apple, and Amazon were able to bounce back strongly. Their recovery was a stark contrast to the crypto market’s struggles. The divergence between traditional tech and digital assets was apparent throughout the trading session.

Bitcoin And Ethereum ETFs Face Massive Withdrawals

The turbulence was particularly challenging for cryptocurrency investment products. Spot Bitcoin ETFs, which had thrived with inflows amounting to nearly $2 billion in the week following Donald Trump’s second term launch, sharply reversed. Farside Investors reported that this saw the product see outflows of $457.6 million. Still, this was not better for Ethereum ETFs, which lost $136.2 million.

Yesterday’s rout in the markets caused by the DeepSeek news caused investors to panic, prompting outflows from Bitcoin and Ethereum totalling US$442m and US$99m respectively. pic.twitter.com/7a01ZwUTu1

�James Butterfill (@jbutterfill) January 28, 2025

Head of research at CoinSharesCo James Butterfill broke this story open to reveal insight:

“Yesterday’s rout in the markets caused by the DeepSeek news caused investors to panic, prompting outflows from Bitcoin and Ethereum totalling US$442m and US$99m respectively.�

The cryptocurrency mining business was not immune to the market downturn. Large companies like Riot Platforms, Cleanspark, and MARA Holdings all recorded losses for the second day running. Their troubles reflected the greater instability in the market. According to CoinMarketCap, the global cryptocurrency market lost nearly a percent in value in the last 24 hours.

Total ETP outflows exceeded $534 million during the crypto market’s stunning one-day sell-off, which rattled investor confidence.

Despite the general chaos, XRP was a surprise performer. Even with some drops, the digital product quickly bounced back. XRP ETPs even registered a new purchase of $2.1 million in the face of the market turmoil.

On-chain data supported this contrarian movement when high-net-worth wallets accumulate around 120 million XRP during the downtrend. These strategic investors apparently viewed the market dip as a buying opportunity rather than a reason to exit.

The DeepSeek incident has highlighted the cryptocurrency market’s continued susceptibility to sudden shocks. Different assets and areas showed different levels of strength.

XRP’s growth was very noticeable compared to the overall weakness in the market. Now that things have calmed down, investors and experts are watching to see if these trends are just a short-term issue or signal a more significant shift in market dynamics.

Featured image from Gemini Imagen 3, chart from TradingView

DeepSeek’s Bitcoin Price Prediction

DeepSeek begins by discussing what it calls the “Key Implications of the Crypto Executive Order,�which it believes would change the calculus for both institutional and retail participants. The AI states that “The exploration of a national Bitcoin reserve signals institutional validation of Bitcoin as a strategic asset. If the US government accumulates Bitcoin, it could create a significant supply shock, driving prices higher.�/p>

This comment reflects a view that the market could tighten substantially if large public entities, such as national treasuries, decide to hold Bitcoin in reserve. Furthermore, DeepSeek highlights the possibility that “other nations and institutions could follow suit,�which would add to the upward price pressure if a wave of competitive accumulation were to ensue.

The AI also remarks that by banning CBDCs, the Trump administration would be “effectively positioning Bitcoin and other decentralized cryptocurrencies as the primary alternatives to fiat currencies,�which is a bold departure from the policies adopted or explored by many other jurisdictions that tend to see CBDCs as a means of maintaining control over monetary policy in a digital economy.

DeepSeek believes regulatory clarity is another fundamental driver likely to magnify Bitcoin’s gains. It explicitly points out that the “establishment of a cryptocurrency working group led by David Sacks suggests a pro-innovation regulatory approach�and that such a policy stance is likely to foster a favorable climate for crypto businesses and financial institutions looking for stable guidelines.

The AI argues that this, in turn, could encourage accelerated institutional inflows and broader mainstream acceptance of Bitcoin, especially if companies are assured that the regulatory framework allows them to innovate without fear of sudden legal or compliance obstacles. DeepSeek goes on to address the geopolitical aspects of the executive order by saying, “The US is taking a leadership role in the digital asset space, which could strengthen the dollar’s dominance while simultaneously boosting Bitcoin’s status as a global store of value.�/p>

Delving into the specific timeline, the AI predicts that any news about the realization of thr strategic Bitcoin reserve could trigger a short-lived but potent rally, potentially pushing the price to the $120,000�130,000 bracket as traders, institutions, and the media absorb the implications of a government-led push for a national Bitcoin reserve and enhanced regulatory clarity.

DeepSeek expects that by the second and third quarters of 2025, as conversations around the working group’s findings gain momentum, institutional investors and retail market participants may exhibit what DeepSeek calls “Institutional FOMO,�leading to a jump in Bitcoin’s price to the $200,000�250,000 zone.

The AI model then projects that by the end of 2025, the price might rise further, potentially reaching $300,000�350,000. It points to ongoing speculation about the government’s Bitcoin purchases, or at least the possibility of such purchases, as well as heightened recognition of Bitcoin’s role as a global reserve asset. DeepSeek believes this period would be marked by increased media attention, new financial products enabling Bitcoin exposure, and robust demand from both seasoned and new investors.

The AI’s analysis becomes especially dramatic when it turns to the outlook for 2026, tying the bullish price momentum to three key factors: the aftermath of the 2024 Bitcoin halving, growing interest from major institutions, and direct involvement of the US government. DeepSeek says, “Bitcoin could peak at $500,000-$600,000, as the market enters the euphoria phase,�suggesting that the first quarter of 2026 is the most likely time for such a spike.

DeepSeek stresses that the halving would reduce Bitcoin’s issuance, while strong new demand from large-scale players—possibly guided by the new executive order—could further tighten supply. Yet, DeepSeek warns that after this euphoric peak, the market may correct significantly, potentially falling back to the $250,000�300,000 range by mid to late 2026 as investors realize profits and speculative excesses unwind.

The AI still anticipates a generally positive long-term picture, asserting that “the long-term outlook remains bullish due to Bitcoin’s growing role in the global financial system,�particularly if the regulatory framework introduced during Trump’s administration remains in place and encourages widespread adoption.

At press time, BTC traded at $102,948.

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% As DeepSeek’s AI Advances Raise Concerns

The tech-heavy Nasdaq composite index also faced a downturn, dropping over 3%, influenced by concerns stemming from a Chinese startup, DeepSeek. 

The 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 artificial intelligence (AI) technology. 

This news has sparked fears regarding Big Tech’s spending on artificial intelligence 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. Bitcoin mining companies took even larger hits; Core Scientific saw its shares plummet by 21%, while Terawulf and Iren (formerly Iris Energy) lost 16%. 

The correlation between the cryptocurrency market and the tech sector remains strong, as noted by Standard Chartered analyst Geoff Kendrick, who pointed out that Bitcoin is currently more closely aligned with movements in the Nasdaq than with traditional safe-haven assets like gold.

Long Liquidations Hit Bitcoin Traders

The market’s volatility was further 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 in the lead-up to its release but failed to meet all investor expectations.

Many traders expressed disappointment that the executive order did not establish a dedicated stockpile of Bitcoin, a term that implies a more passive approach to holding assets, rather than an active strategy of regular purchases. 

Kendrick 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�stance, hoping for a more accommodative approach while fearing that the central bank may not adopt the dovish tone the markets desire. 

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.�/p>

Featured image from DALL-E, chart from TradingView.com