Cryptocurrencies struggled Monday as tech and artificial intelligence (AI) stocks sold off and with the Federal Reserve's January meeting on the docket this week. Bitcoin , the world's largest cryptocurrency and a bellwether for the sector, traded 4% lower since the late afternoon yesterday, hovering around $99,230.
The price of Shiba Inu (CRYPTO: SHIB) traded 6.1% lower as of 12:23 p.m. ET today. Meanwhile, the prices of Solana (CRYPTO: SOL) and Cardano (CRYPTO: ADA) traded 7.1% and 6.8% lower, respectively.
No interest rate cuts expected
Many large AI and tech-related stocks sold off due to the emergence of the Chinese AI chatbot DeepSeek, which supposedly is a similar model to Open AI's ChatGPT at a fraction of the cost. Cryptocurrencies often move in line with the tech-heavy Nasdaq Composite , which had fallen over 3% today, so that could explain some of the decline.
However, cryptocurrencies also seem to be moving lower in anticipation of the Federal Reserve's meeting that will begin tomorrow and conclude on Wednesday. Virtually all traders who bet on 30-day futures on the Federal Funds Rate expect the Fed's rate-setting committee to leave rates unchanged. It was only about six to eight months ago that investors thought the Fed might make as many as six interest rate cuts in 2025.
Those expectations have been tempered by stronger economic data. Cryptocurrencies have only gone up since President Trump won the election, so perhaps investors are starting to come to grips with the new rate outlook.
That said, earlier this year, the majority of traders expected only one rate cut this year, if even that. Now, a slim majority of traders still thinks the Fed will cut rates twice this year.
Fed officials are still looking for the all-clear on inflation. The economy has been anything but predictable over the last few years, and while the Fed's intense rate hikes have significantly slowed the pace of inflation, it's still above the preferred 2% target. Meanwhile, the economy still looks strong, adding over 250,000 jobs in December, while consumer spending has also picked up.
Nothing abnormal
Most altcoins tend to trade like tech stocks, benefiting from falling interest rates and a risk-on environment, so with the Nasdaq getting hammered due to DeepSeek, it's not surprising to see most investors taking a risk-off approach by selling cryptocurrencies.
However, I don't see anything fundamental that would suggest the crypto bull market is running out of steam. Trump has made good on his promises to crypto stakeholders so far, so the backdrop is still favorable.
The sector is volatile and often takes breathers only to rise again the next day. Rate cuts are still an unknown, but the December report on the Consumer Price Index (CPI) showed signs of cooling inflation and helped bring Treasury yields down from elevated levels. The next two big catalysts in my mind are the January jobs report and the CPI reading, which will come out over the next few weeks.
Solana and Cardano have strong technical networks, so I think investors can buy these tokens. But because they will likely be more volatile than Bitcoin -- rising more in crypto bull markets and selling off more in bear markets -- I think smaller, more speculative positions are best at this time. I currently have no interest in Shiba Inu.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
Learn more »
