Crypto market in the grip of the bear: why is Bitcoin falling?

In the last 3 days Bitcoin has dropped by 6.8%, temporarily going below the $100,000 threshold, only to recover a few points, but why is it falling?

The crypto community is questioning what the causes were that led to such a rapid and violent market dump.

In this article, we try to examine the situation with clarity, listing the factors that could have played a decisive role in the latest bull and bear speculative sessions.

All the details below.

Bitcoin and crypto still in the red: the bull market of 2025 is delayed

The price of Bitcoin is dangerously falling from the all-time highs recorded on January 20, accompanying a general market bear.

The crypto investors, who were hoping for a big upward phase in the first month of 2025, will have to wait a little longer before the return to the bull market.

For the moment, Bitcoin does not seem inclined to put the pedal to the metal and go for another bull rally.

We can notice a certain ambiguity in the price action of the crypto asset, which has behaved anomalously since the inauguration of Donald Trump.

On the day of the inauguration of the new US President at the White House, Bitcoin initially rose to 109,500 dollars, only to close the day at just 102,200 dollars.

In the following sessions, there was no “follow-up” of the demand typical of the bullish market, while on the contrary, the quotations began to tilt downwards.

The orange cryptocurrency first retraced to 101,500 dollars on Thursday the 23rd, then took the elevator down to 98,000 dollars on Monday the 27th.

Now it seems that the bull are trying to restore balance, but the situation is still in the hands of the bear who govern the short-term time frames.

In the current macroeconomic context, there seems to be a climate of uncertainty and distrust that jeopardizes growth prospects and the stability of financial markets.

Geopolitical tensions, inflation persistent and restrictive monetary policies adopted by various central banks have contributed to creating an unfavorable environment for high-risk assets like cryptocurrencies

Strangely, the market sentiment, according to the data from Alternative.me, is still in the “greedy” phase with a score of 72 out of 100, while the outlook seems very confused.

We will see in the coming days if this tension will lead to a recovery in prices or if there will be a further bear escalation that will put the sector even more in crisis.

Why Bitcoin is falling: the DeepSeek threat

While analysts wonder why Bitcoin is falling, a new hurricane called “DeepSeek” looms over the market and wipes out all speculative assets.

Let’s talk about a new AI model, created just two months ago by a Chinese startup, which has gone viral in a very short time.

Consider that yesterday DeepSeek became the most downloaded mobile app in the United States according to the rankings of Apple’s App Store.

The curious and impactful thing about this new artificial intelligence is that it presents operational costs significantly lower compared to the products of OpenAI, while still being able to perform more or less the same tasks.

In particular, DeepSeek requires 95% less computing power compared to other competitors, needing a much lower number of GPUs.

Its successful debut on the market quickly attracted the attention of investors, who immediately understood how this model could challenge the sovereignty of the United States on a technological level.

In fact, until recently, the dominance of the AI sector was completely with the Americans, with the major companies in the sector present in their own country.

With this latest innovation, it has been realized how even China is working to compete on this front, enough to shake the balance of the western stock exchanges.

It is precisely at this moment that the market crash arrived: initially the USA ones with the tech stock bleeding, then consequently also the crypto ones.

Just to give an idea, the video card giant Nvidia recorded a bear drop of 17% yesterday, losing over half a billion dollars in capitalization.

Bitcoin, as well as the rest of the crypto market, obviously reacted poorly to the dump of the American stock markets, accompanying it with a violent dump.

Trump’s decision to impose tariffs on Mexico and Canada does not favor market growth

Besides DeepSeek, there is another factor that is contributing to creating uncertainty in the markets, causing Bitcoin to decrease in price.

This is the recent decision of President Donald Trump to impose 25% tariffs on imports from Canada and Mexico starting from February 1, 2025. These tariffs are part of a strategy to counter illegal immigration and the trafficking of synthetic drugs into the United States.

In any case, it seems evident how Trump’s move was not well received by the speculative markets, which reacted with a collapse in the quotations.

The introduction of tariffs has indeed further complicated the U.S. macroeconomic landscape, with a potential effect of raising dollar inflation.

This situation risks compromising even the monetary policies of the FED, which might decide to switch to a more restrictive approach to curb inflation.

This results in a smaller cut in interest rates on government bonds, or even an increase in them, with obvious negative consequences on risk-on assets.

Furthermore, the tariffs could have a negative impact on the US economy, increasing prices for consumers and harming businesses that rely on imports.

To all this are added the concerns of Europe, with European car manufacturers fearing an increase in costs since they produce vehicles in Canada and Mexico.

In a context like this, Bitcoin and the crypto do not see the conditions for a rise, and decide to temporarily interrupt the bull run.

Despite this, it is not excluded that we might soon observe new bullish stimuli, which would bring the sector back on the path to price highs. Everything will depend in the coming weeks on the stimuli that Trump will offer to revitalize the economy, the United States’ response to the DeepSeek threat, and why not, a bit of luck.

Source: https://en.cryptonomist.ch/2025/01/29/crypto-market-in-the-grip-of-the-bear-why-is-bitcoin-falling/