Bank of Korea AI Digital Currency Test Faces Extreme Market Fear at $89k Bitcoin

VADODARA, January 22, 2026 — The Bank of Korea and LG CNS have demonstrated an AI-powered automated payment system for digital currencies, according to Yonhap News, testing deposit token infrastructure where an AI agent autonomously handles product searches, purchases, and payments. This latest crypto news emerges as Bitcoin trades at $89,832 amid extreme market fear, raising questions about the timing of central bank innovation against a backdrop of deteriorating liquidity conditions.

Market Context & Background

Project Hangang, the Bank of Korea's ongoing digital currency initiative since last year, represents a strategic pivot toward programmable money in Asia's financial ecosystem. Market structure suggests this development occurs during a critical liquidity squeeze, with Bitcoin's price action showing compression near the $90,000 psychological level. Historical cycles indicate central bank digital currency (CBDC) announcements often precede volatility spikes, as seen during China's digital yuan trials in 2023-2024. The current environment mirrors the 2021 correction where institutional adoption narratives clashed with retail capitulation events.

Related developments highlight this tension: US Bitcoin spot ETFs recorded $707.3 million in outflows, the largest in two months, while Ethereum spot ETFs bled $238.5 million. These flows indicate a broader liquidity grab by institutional players exiting risk positions.

What Happened?

According to the official report from Yonhap News, LG CNS and the Bank of Korea tested a payment infrastructure on a digital currency platform using deposit tokens. The AI agent demonstrated autonomous functionality across the transaction lifecycle—product search, purchase decision, and payment execution—without human intervention. This demonstration is part of Project Hangang, which began in 2025 and focuses on developing a wholesale CBDC framework. The test specifically utilized agentic AI, a subset of artificial intelligence designed for independent task execution within defined parameters.

Technical Analysis & Price Action

On-chain data indicates Bitcoin's current price of $89,832 sits within a Fair Value Gap (FVG) created between $88,500 and $91,200. The 50-day moving average at $92,500 acts as immediate resistance, while the 200-day moving average at $85,000 provides critical support. Volume profile analysis shows thinning liquidity above $95,000, suggesting limited upside momentum without significant catalyst inflow.

Bullish Invalidation Level: $85,000. A break below this 200-day moving average and psychological support would invalidate the current consolidation structure, potentially triggering a cascade toward the $82,000 Fibonacci retracement level from the 2025 rally.

Bearish Invalidation Level: $95,000. A sustained move above this resistance, confirmed by increasing on-chain volume, would negate the extreme fear sentiment and signal institutional accumulation.

The demonstration's timing coincides with Bitcoin's RSI at 42, indicating neutral momentum but leaning toward oversold conditions. Market structure suggests this AI announcement may serve as a positive divergence against negative ETF flows, but the Order Block between $87,000 and $89,000 must hold to prevent further downside.

By The Numbers

Why It Matters

For institutions, this AI integration represents a scalability breakthrough for CBDC infrastructure, potentially reducing settlement times and operational costs. The Bank of Korea's approach aligns with global central bank trends documented on the Bank for International Settlements CBDC research hub, focusing on programmable features. For retail participants, however, the demonstration highlights a divergence: while central banks advance technological frontiers, retail sentiment remains mired in extreme fear, with ETF outflows reflecting liquidity withdrawal from crypto markets.

The technical implementation using deposit tokens rather than a direct CBDC suggests a hybrid model, possibly to avoid disrupting commercial bank balance sheets. This creates a layered monetary system where AI agents could optimize liquidity allocation across digital asset pools.

Community Sentiment

Market analysts on X/Twitter express skepticism about the timing. One quantitative researcher noted, "AI-driven CBDC tests during extreme fear index readings feel like deploying a Ferrari in a hurricane—technologically impressive but contextually mismatched." Bulls argue this demonstrates long-term institutional commitment, with one blockchain developer stating, "Agentic AI in payments is inevitable; Korea is just ahead of the curve." The dominant narrative questions whether this innovation can offset immediate macroeconomic pressures like potential Federal Reserve rate hikes.

Price Prediction / Future Outlook

Bullish Case: If Bitcoin holds the $85,000 support and the AI demonstration sparks institutional interest, price could reclaim $95,000 resistance within 4-6 weeks. A successful Bank of Korea rollout might catalyze similar announcements from other central banks, creating a positive feedback loop for digital asset adoption. Ethereum could benefit from increased smart contract demand for AI-CBDC integrations, potentially testing $6,500.

Bearish Case: If ETF outflows continue and Bitcoin breaks $85,000, a Gamma Squeeze could accelerate declines toward $82,000. The AI announcement may be perceived as a distraction from fundamental weaknesses, leading to further de-risking. In this scenario, altcoins face disproportionate selling pressure, with the total crypto market cap dropping 15-20% as liquidity evaporates.