By Michael Scott
Bitcoin surrendered the previous week’s gains in a week packed with vital economic decisions by the Federal Reserve and European Central Bank (ECB).
Bitcoin is no exception to the bloodbath engulfing the crypto market to erase gains attained in the past week. Bitcoin leads other digital assets into unforeseen slip from positives fueled by the SEC embracing a pro-crypto regulatory stance and President Trump establishing the crypto working group.
At press time on Jan. 27 (12:32 UTC), Bitcoin slipped 5.5% to exchange hands at $98,600 per CoinGecko data. The decline below the $100,000 milestone coincides with the general decline in the crypto market valued at $3.5 trillion, following an 8.0% pullback in the last 24 hours. Scrutiny into the daily charts shows the crypto trading volume hit $191 billion, as Bitcoin dominance realized 56.1%, trailed by Ethereum at 10.5%.
The market downtrend emerged days before significant global economic developments from the Fed and ECB this week.
Is Macroeconomic Uncertainty Behind BTC Decline?
The slip below $100,000 occurs as traders prioritized defending their positions ahead of the Federal Open Market Committee (FOMC) meeting scheduled for Jan. 28-29. The US rate decision will precede the ECB’s new interest rates slated for Thursday’s release, a day before the US data on the Personal Consumption Expenditure (PCE) index.
The sharp decline in Bitcoin from $105,000 on Sunday to $98,000 is attributed to traders taking profits as traders took profits. Notably, Bitcoin holders actively hedge with $95K strike options in anticipation of the continued downtrend. The market drop mirrors the falling stock futures that have befallen the tech sector following the revelation of China’s DeepSeek breakthrough in a cost-effective AI model challenging the expensive narrative by Sam Altman-led OpenAI.
The bleeding in the digital assets market suggests the failure of Donald Trump’s move on Thursday, Jan.23, to create a crypto policy group to sustain the bullish momentum. The price action implies traders are embracing caution to take profits ahead of the packed economic week, with analysts ruling out central banks turning dovish.
A recent forecast by Trading Economics supports the ECB and Fed in maintaining interest rates as they eye the 2% inflation target. Meanwhile, this mandates investors to exercise caution and be averse to the risk assets.
The trading ecosystem outlook is complicated by economists’ anticipated hike in the month-on-month PCE index to 0.2%. This outcome is set to convince the Fed to keep rates steady or potentially hike, as some economists recently alluded to.
Is the Fed Considering a Rate Hike?
The price movement experienced shows the investors’ response aligns with the immediate policy concerns. This outweighs the pro-crypto attribute harbored by the longer-term regulatory developments. Notably, the markets have little reward for President Trump’s order to create a crypto policy group to advise and drive the industry development agenda in six months.
The possibility of an interest rate hike in 2025 surfaced during the World Economic Forum (WEF) in which BlackRock chief executive Larry Fink presented to the panel on Friday, Jan. 24. The asset management veteran indicated that the outcome is likely, citing the resilience attained by the US bond market.
The BlackRock chief holds a comparable view to the Bank of America, which cited the record job numbers released in January. The bank indicated in its report that the Fed leaned towards raising the rates and not cutting.
Market Pressure Spillover from AI
Beyond the concerns about interest rates, Bitcoin is bearing the brunt force of an overvalued AI sector that adds to the existing market pressures. China-based AI firm DeepSeek unveiled a model that dwarfs OpenAI’s capabilities at substantially less computational and investment resources.
The AI-sector concerns are spilling over to Bitcoin since DeepSeek confirmed its capability to develop superior AI models using $6 million and fewer GPUs than rivals. This challenges the existing narrative where sector leader OpenAI seeks trillions to fund its ongoing initiatives.