Bitcoin optimism returns, In light of yesterday’s events in the financial markets, the price predictions for Bitcoin have turned a little more bullish. The overall picture is still unclear, but it was definitely negative yesterday. As the hours went by, everything appeared to return to normal.
Fear of yesterday
Traditional financial markets, especially American ones, lost heavily yesterday. A possible AI bubble burst is the issue. The previous two years have seen a speculative bubble in AI stocks. Before mid-January 2025, Nvidia, the sector’s primary stock, rose from $12 at the end of 2022 to a record $153.
The company’s semiconductor demand was expected to grow rapidly as AI-based solutions expanded. Bitcoin optimism returns, However, a new Chinese AI, DeepSeek, said it had produced fantastic results with far less hardware than planned, lowering Nvidia’s sales projections.
The stock fell 1% in one day below $120. The Nasdaq 100 lost 3% in one session, but the S&P500 stopped at -1.5%. Thus, DeepSeek news circulated worry that the AI bubble would burst, but this fear seems to have subsided throughout the day.
Impact on Bitcoin
After dropping from $105,000 to $98,000 in a few hours, Bitcoin’s price stopped falling. Recall that 98,000$ was the price in mid-January, and the inaugural Bitcoin price was two months earlier. Yesterday, the dollar index rose from 107.4 to 107.7 points before falling below 107.1. This drop helped Bitcoin (BTC) rebound, stopping the drop. Bitcoin rose beyond $100,000 in the following hours, erasing much of the losses from the AI bubble collapse concern.
The AI bubble burst may not have ended yet, but it looks more like a mini-bubble than a massive speculative bubble. Today and tomorrow will likely provide more certainty, but the S&P500 index’s resiliency suggests that a massive speculative bubble is unlikely to collapse. In other words, the AI bubble seems to be focused on the AI sector and more like a brief mini-bubble than a big speculative bubble.
Forecasts on Bitcoin
At some point yesterday, pessimistic predictions about Bitcoin and other cryptocurrencies, in particular, began to circulate. Some even floated the idea of a bear market. Even though its reappearance is still possible, the anxiety has diminished, and optimistic predictions have taken over. Still, one piece of information makes it hard to envision a near-term revival of the bull run.
Not only has the dollar index recovered and is once again hovering around 108 points, but experts are predicting that it may even go higher. Because of this, the price of Bitcoin is unable to rebound. Unlike yesterday, when the price decreased, Bitcoin reached $103,000 today. Actually, a new return below $100,000 is possible, given the potential for further short-term increases in the dollar index.
Medium-term Bitcoin price forecasts
In the medium term, things look different than in the short term, which solely concerns speculators. One point gives Bitcoin investors hope. The US 10-year government bond yield (US10Y) fell from 4.8% mid-month to 4.5%. With a massive capital flight from AI equities, it rose 0.02 percentage points yesterday.
From December 9 to January 14, it rose from 4.1% to 4.8%, so starting mid-month, it looks to have reversed the trend. Due to their lower yield, US bonds have become less appealing; therefore, capital has left them for almost two weeks. This capital could pour into risk-on assets, raising the US stock index S&P500 from 5,800 points to above 6,100 before yesterday’s decline to 6,000.
FAQs
How did Bitcoin recover after the initial dip?
Bitcoin rebounded above $100,000 as fears subsided and the dollar index declined slightly, helping to stabilize its price after initial market panic.
What is the medium-term outlook for Bitcoin's price?
With US bond yields decreasing and potential capital shifting to risk-on assets, Bitcoin could see positive medium-term price momentum despite short-term volatility.
How is the AI bubble affecting the crypto market?
The AI bubble’s impact is limited mainly to the AI sector, but initial panic influenced Bitcoin prices. Analysts believe this is a “mini-bubble” rather than a major market collapse.
What is hindering Bitcoin's short-term recovery?
The strengthening dollar index near 108 points is keeping Bitcoin below its previous highs, with experts suggesting a potential return below $100,000 in the near term.
