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In just one week, a Chinese AI company called Deepseek has caused consternation in the US stock market, as investors have begun to question the supposed leadership of major US AI companies such as ChatGPT. The resulting decline sent Bitcoin (BTC) below $100,000 on Monday.
The emergence of a new AI competitor is throwing the markets into a whirlwind
The AI race has just taken a major turn when Chinese company Deepseek enters the scene. Deepseek has sent America’s leading AI companies into a tailspinshaking up the game because it’s supposedly better than ChatGTP, with less development time, less money, and fewer employees.
With the US stock market opening later today, the sell-off could accelerate, with investors fearing that their AI shares may now be overvalued. Of course, with Bitcoin and cryptocurrency tied to the traditional stock market, they are bound to feel the discomfort too.
With the crypto market trading at all times, Bitcoin had already fallen to $97,750 in early trading on Monday, before recovering to $99,000. However, if the stock market continues to underperform, Bitcoin’s price could fall further.
Are there more price drop promotions coming?
Source: TradingView
The 4-hour chart for $BTC shows that the price fell quite dramatically outside the triangle, when it looked more likely that the price would rise. However, any sudden shock in the stock market will always affect the price of $BTC.
A measured exit from the triangle could still take the price even further below $95,000. There is more support below this, but the uptrend line around $91,000 would likely be almost the last level of support.
A major pullback coming soon?
Source: TradingView
By reducing the weekly time frame, the picture becomes much clearer. While the price is still holding above the descending trendline, the breakout appears to have been safely stopped in its tracks. The price fell to retest this trend line during today’s selloff and could start to recover from here.
However, if one retraces the Fibonacci levels from the lowest wick down that broke the bottom of the bullish flag, to the all-time high, one can see that the retracements have not even fallen to 0.382 yet. A standard retracement would take the price all the way down to 0.618 Fibonacci, which would be a retest of the top of the bull flag and potentially the top of the last bull market at $69,000.
That doesn’t mean it will happen, but there has to be a possibility. The Stochastic RSI at the bottom of the chart now shows that the indicator lines are continuing to fall. At one point last week, it looked like it would find support at the mid-level of 50.00 and go over again. However, it now looks more likely to continue falling to the bottom of the chart.
If this is the final result, it will likely mean more price movement down and across until these indicators bottom out and move back up. Then it remains to be seen at what level the price will bounce back and whether the bull market will continue.
Disclaimer: This article is for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial or other advice.
