- The market rout was linked to a new Chinese AI rival.
- Fed policy is also spooking investors.
- Arthur Hayes sees Bitcoin falling to as low as $70,000.
Bitcoin slipped below $100,000 on Monday as the crypto market lost 8% of its value, falling to $3.5 trillion.
Solana led the price slump for large-cap cryptocurrencies, sliding 12%, while XRP fell below $3.
Ether, the second-biggest cryptocurrency, is barely holding onto the $3,000 price mark after falling 7% in the last 24 hours.
The Monday slump tracked a massive plunge in US technology stocks in premarket trading. Bitcoin and crypto tend to correlate to riskier bets like US technology stocks.
Futures tracking the Nasdaq-100 and S&P 500 US market indices are down 4.3% and 2.4%, respectively.
Chipmaker Nvidia, the AI industry’s golden goose, has seen its stock price slide almost 10% in pre-market trading. AMD and Microsoft are down 5%.
Market analysts cite the popularity of DeepSeek, a Chinese artificial intelligence startup, as one driver of the market rout. DeepSeek rolled out an AI assistant that operates at a discount to US-based AI leader OpenAI and its ChatGPT product.
DeepSeek’s AI assistant R1 has even surpassed OpenAI’s ChatGPT as the most downloaded app on the app store.
DeepSeek’s rollout has exacerbated a general derisking trend among investors going into the Federal Reserve’s next Federal Open Market Committee meeting this week.
The Fed signalled a much tamer rate-cutting course in December, which has upended the market. This week’s FOMC meeting is not expected to yield a rate cut announcement and market observers are betting there won’t be any until the middle of the year.
Higher interest rates negatively impact risk-on assets including stocks and cryptocurrencies.
Last week, Morgan Stanley Wealth Management urged clients to diversify their portfolios and reduce exposure to US stocks.
Several AI tokens including Near Protocol, Render, and Virtuals Protocol recorded double-digit price losses in the last 24 hours.
The sector’s market value is down 13% on Monday, falling to $36 million, data from CoinGecko shows.
For Bitcoin, Monday’s slump is in keeping with the asset’s volatile run this month.
BitMEX founder Arthur Hayes said he expects a massive price correction for Bitcoin, which could plunge to as low as $70,000 but predicts a rebound to $250,000 by the end of the year.
He’s not the only one predicting that Bitcoin will double in price this year.
Last week, analysts at UK bank Standard Chartered recommended that investors buy the dip and predicted Bitcoin and Ethereum will reach $200,000 and $10,000 respectively, this year.
Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. Got a tip? Please contact him at osato@dlnews.com.
