Bitcoin (BTC) is down 1.3% this week to $102,765,
recovering from $97,696 on Monday—its lowest level since 16 January. The
initial drop was triggered by Donald Trump’s tariff threat against Colombia,
after its authorities refused to allow deportation flights from the U.S. to
land in Bogotá. Colombia quickly complied, but the geopolitical tension rattled
both stocks and cryptocurrencies.
Another unexpected shock came from China’s
DeepSeek R1, a generative AI chatbot reportedly built for just $6 million—a
fraction of the $540 million cost of OpenAI’s earliest ChatGPT model. The news
sent shockwaves through the tech industry, especially as Trump had just
announced his $500 billion mega AI initiative, Project Stargate. Analysts argue
that, in terms of raw cost efficiency, China's AI appears 9,000% more effective
than U.S. alternatives, despite existing restrictions on high-performance chip
exports. Trump called DeepSeek "a wake-up call", while Sam Altman reassured
investors that future OpenAI models would be significantly more advanced.
The implications of this breakthrough led to a
5.2% drop in the Nasdaq 100—the steepest single-day decline since August
2024—when the Bank of Japan raised interest rates. The crypto market followed
suit, but investors are now reassessing the situation. While DeepSeek poses
challenges for chipmakers, it could reduce AI development costs, benefiting
generative AI firms in the long run.
Standard Chartered has urged investors to buy
the dip, maintaining its $200,000 BTC price target for 2025. Institutional
investors seem to agree, as spot Bitcoin ETFs (IBIT, FBTC, GBTC) saw $1.8
billion in net inflows last week, most of it on Thursday, when Trump publicly
called on the Federal Reserve to cut interest rates.
The Fed’s policy decision on Wednesday will be
a crucial moment for markets. Meanwhile,
Chinese New Year celebrations began on 29 January, historically a bullish
period for Bitcoin. BTC remains within its long-term bullish structure,
with a price target of $150,000-$200,000 by mid-2025. The
coming weeks will determine whether Bitcoin extends its current formation or
enters a correction before resuming its uptrend.