Bitcoin (BTC) has experienced a notable downturn, shedding 5.88% in the past 24 hours. After reaching a high of $109,588 on January 20, the cryptocurrency has struggled in recent days, driven largely by broader market conditions. Although this drop has fueled some concerns, the selling pressure appears to be more influenced by external factors, such as U.S. stock market dynamics and looming economic events, rather than an intrinsic weakness in Bitcoin itself.

Bitcoin Faces Broader Market Influence

The decline in Bitcoin’s price aligns with a broader negative sentiment surrounding U.S. equities, particularly following China’s DeepSeek LLM model, which is reportedly causing significant disruption in the U.S. stock market. At the time of writing, Nasdaq 100 futures were down 2.9%, and a massive $1 trillion loss in the U.S. equity market was expected at market open.

This sharp drop in traditional markets has triggered a wave of risk-off sentiment, spreading to the cryptocurrency market as well. Investors are cautious, especially with the upcoming Federal Open Market Committee (FOMC) meeting scheduled later this week, which could further influence market dynamics.

Technical Levels for Bitcoin

Bitcoin has been trading within a range for the past two months, between $92k and $106k. The mid-range level of $99k has served as a critical support and resistance zone. The recent price action has brought Bitcoin down to this mid-range support, raising concerns about the potential for a deeper correction.

If Bitcoin fails to hold this level, a drop below $99k could trigger a further decline towards the lower end of its trading range, with $92k as a potential target. The lack of significant trading volume in the market could further exacerbate volatility, but this may change when the New York trading session opens, so traders should remain vigilant.

Bearish Sentiment Grows

Several technical indicators point to a bearish outlook for Bitcoin in the short term. The Moving Average Convergence Divergence (MACD) on the daily chart has formed a bearish crossover, suggesting that bullish momentum is fading. In contrast, the Accumulation/Distribution (A/D) indicator is showing higher lows, signaling that the selling pressure may be more a reaction to broader market sentiment than an issue with Bitcoin’s own strength.

While the A/D indicator indicates that the selling pressure is not as severe as it might appear, the market has become more risk-averse, with many traders positioning themselves for further downside. Data from Coinalyze reveals that the funding rate has fallen into negative territory, which is typical of increased short-selling activity. Open interest has also seen an uptick, further confirming the bearish sentiment in the derivatives market.

What’s Next for Bitcoin?

Despite the current bearish outlook, it is important to note that the recent decline in Bitcoin’s price is largely influenced by external factors, such as the U.S. stock market’s performance and broader economic uncertainty. As the market approaches the FOMC meeting, more volatility can be expected. Investors will likely remain on edge until more clarity emerges about the U.S. Federal Reserve’s actions and their impact on the broader financial landscape.

For Bitcoin, the key levels to watch are the mid-range support at $99k and the potential for a drop to $92k if that support is lost. Traders should be cautious in the short term and closely monitor market developments, especially in traditional markets, as they continue to influence Bitcoin’s price action.

As of now, the short-term outlook for Bitcoin is bearish, but much will depend on how the broader market reacts to the upcoming events, especially the FOMC meeting. Should Bitcoin find support at key levels and market sentiment stabilize, a recovery could be on the horizon. However, for now, caution is advised.