In just one week, a Chinese AI company called Deepseek has caused consternation in the US stock market, as investors start to question the supposed lead of the big US AI companies such as ChatGPT. The resulting fallout has knocked Bitcoin (BTC) down under $100,000 on Monday.
Emergence of new AI competitor throws markets into a spin
The AI race has just taken a massive turn as Chinese company Deepseek enters the scene. Deepseek has sent the leading US AI companies into a spin, shaking up the game as it reportedly out-performs the likes of ChatGTP, and with less time spent on development, less money, and less employees.
With the U.S. stock market opening later today, a sell-off could gather pace, with investors fearing that their AI stocks might now be overpriced. Of course, with Bitcoin and crypto tied to the traditional stock market, they are certainly going to feel the pinch as well.
Given that the crypto market trades at all times, Bitcoin already fell to $97,750 in early trading on Monday, before recovering to $99,000. That said, if the stock market does continue to react badly, a further fall in the Bitcoin price could take place.
More downward price action to come?
Source: TradingView
The 4-hour chart for $BTC shows that the price dropped quite dramatically out of the triangle, when it looked more likely that the price would rise. That said, any kind of sudden shock to the stock market is always going to affect the $BTC price.
A measured move out of the triangle could still take the price further down to just below $95,000. There is more support below this, but the ascending trendline at around $91,000 would probably be almost the last level of support.
A bigger retracement about to take place?
Source: TradingView
Zooming out into the weekly time frame the picture becomes much clearer. While the price is still holding above the descending trendline, it looks like the breakout has certainly been stopped in its tracks. The price has come down to retest this trendline during today’s sell-off, and it could start to recover from here.
However, if one draws in the Fibonacci levels from the lowest wick down that pierced through the bottom of the bull flag, up to the all-time high, it can be seen that the retracements haven’t even gone down as far as the 0.382 yet. A standard retracement would take the price all the way down to the 0.618 fibonacci which would be a retest of the top of the bull flag, and potentially of the top of the last bull market at $69,000.
That’s not to say that this will happen, but it must be a possibility. The Stochastic RSI at the bottom of the chart is now showing that the indicator lines are continuing to fall. At one point last week it looked as though they would find support at the mid 50.00 level and cross back up again. That said, it now looks more likely that they continue to fall to the bottom of the chart.
If this is the eventual result, it will probably mean more downward and sideways price action until these indicators hit the bottom and cross back up. It will then remain to be seen at which level the price will bounce again, and if the bull market will continue.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
