On January 27, the cryptocurrency market experienced a downward trend, witnessing Bitcoin [BTC] dropping below the $100,000 mark to trade at $98,543. Alongside this, other major altcoins like Ethereum [ETH] and Ripple [XRP] also saw drops of 8% and 10%, respectively.
This bearish movement resulted in significant liquidations exceeding $800 million according to Coinglass, impacting over 316,000 traders.
The decline in prices coincided with various macroeconomic factors that seem to have caused concerns regarding potential price fluctuations.
Influence of the FOMC Interest Rate Meeting
The Federal Open Market Committee (FOMC) is scheduled to conduct its first meeting of the year on January 29. During this meeting, the Federal Reserve will announce its decision on interest rates, which could potentially induce volatility in financial markets.
Data from the CME FedWatch Tool indicated that 99.5% of investors foresaw that interest rates would remain steady at 4.25% to 4.5%, highlighting ongoing concerns about inflation.
Historically, FOMC meetings have played a role in influencing crypto prices, as interest rate determinations can impact investor decisions regarding risk assets. Thus, if there are no changes to the interest rates, it might prompt a market sell-off.
Impact of Declining US Futures Market
Another potential factor behind the crypto market’s decline is the downturn observed in the U.S. stock futures market. At the time of reporting, NASDAQ Futures were down by approximately 2.5%, while S&P 500 futures had dropped by 1.49% according to Google Finance.
This downturn was triggered by the successful launch of Chinese AI startup, DeepSeek, which surpassed ChatGPT to become the top-grossing app on the iOS App Store. Concerns regarding the performance of tech giants like Nvidia were raised due to DeepSeek’s reliance on different, less advanced chips compared to those used by ChatGPT. This discrepancy could potentially impact Nvidia’s AI market share.
Declines in the U.S. stock market often have a ripple effect on cryptocurrency prices. Thus, if the U.S. market opens amidst this negative sentiment, further downward pressure may be exerted on crypto values.
Potential Volatility from Tech Earnings Reports
This week, major tech companies, including Tesla, are expected to release their earnings reports, potentially leading to increased market volatility. In Tesla’s Q3 financial report, it was disclosed that the company held 11,509 BTC. Traders will closely monitor whether Tesla maintains this position or decides to sell, as any divestment could contribute to price declines.
Additionally, earnings reports from other tech giants like Microsoft and Apple are eagerly anticipated. The outcomes of these reports could also have repercussions on cryptocurrency prices.
Despite these concerns, the Fear and Greed index for crypto currently stands at 71, indicating a sentiment of “greed” in the market that might fuel buying pressure and aid in an upward trend.