Bitcoin and cryptocurrency prices have taken a sharp dive, triggered by a broader stock market sell-off fueled by the rising dominance of the China-based artificial intelligence app, DeepSeek.

Bitcoin Price Plummets Below $100,000

The price of bitcoin has fallen below $100,000, a significant drop from its all-time high of nearly $110,000 reached ahead of U.S. President Donald Trump’s inauguration. This decline comes despite earlier bullish predictions, such as those from the CEO of Coinbase, who anticipated bitcoin’s market cap might surpass gold’s $18 trillion valuation.

Bitcoin surged past $70,000 following Donald Trump’s election victory, as investors bet his administration would foster growth in the crypto sector. Last week, Trump reaffirmed his commitment to prioritizing crypto policy by establishing a working group tasked with drafting new regulations and exploring the creation of a national cryptocurrency stockpile.

BlackRock and Sovereign Wealth Funds Eye Bitcoin

As BlackRock CEO Larry Fink discloses discussions with sovereign wealth funds about acquiring bitcoin, prominent crypto trader Arthur Hayes has issued a stark warning about an impending "financial crisis." Hayes, a co-founder of BitMex and current head of the Maelstrom investment fund, expects the crisis to prompt new Federal Reserve stimulus measures.

Despite current market turbulence, Hayes remains optimistic about bitcoin’s long-term trajectory. He anticipates a resumption of Federal Reserve "money printing" that could push bitcoin to $250,000 by year’s end.

AI’s Role in the Crypto Sell-Off

The recent bitcoin and crypto price slump highlights their close correlation with U.S. tech stocks. These assets have benefited from the surge in artificial intelligence since 2022 but now face pressure as DeepSeek’s groundbreaking AI technology threatens U.S. tech giants. DeepSeek’s ability to rival OpenAI’s models with fewer chip requirements has unnerved investors.

Ethereum rival Solana has also suffered, experiencing a 10% drop during the sell-off. Market analyst Adam Kobeissi noted on X:

U.S. Debt and Inflation Add Pressure

This week, the Federal Reserve is expected to keep interest rates unchanged during its first policy meeting since Trump assumed office. However, Trump has made it clear he’d like to see rates cut. “With oil prices declining, I’ll demand immediate rate cuts. The same should happen globally,” Trump told attendees at the World Economic Forum.

The U.S. national debt has surpassed $34 trillion, driven by pandemic-era stimulus measures and massive government spending. Inflation, which peaked at over 10% in 2022, forced the Federal Reserve to enact aggressive rate hikes, raising concerns about escalating debt interest payments and a potential "death spiral."

As markets navigate these uncertainties, bitcoin and crypto prices remain under pressure, with investors closely monitoring both Federal Reserve actions and the disruptive influence of emerging technologies like DeepSeek.

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