Chinese AI startup DeepSeek has sent shockwaves through the global financial sector. As news of the company’s potential spread, Bitcoin and other cryptocurrencies faced a massive downturn, with nearly $1 billion in total liquidations recorded on Monday.
Founded less than two years ago, DeepSeek has quickly positioned itself as a major competitor to AI giants like OpenAI, Meta, and Nvidia.
Bitcoin and Altcoins Plunge
DeepSeek’s emergence coincided with a sharp sell-off in the crypto market. Bitcoin (BTC) lost over 5% within hours, while major altcoins dropped by 8-10%. According to Coinglass, over 316,000 traders were liquidated in the past 24 hours, with total liquidations nearing $905 million.
Analysts suggest that the crypto sell-off was driven by broader market reactions to DeepSeek’s rapid rise. Industry expert Ash Crypto believes the impact is rooted in the stock market, stating:
Ran Neuner, founder of Crypto Banter, warned that a downturn in AI and tech stocks, triggered by DeepSeek’s competitive edge, could lead to a broader market sell-off.
A Disruptive Competitor
DeepSeek’s rise is remarkable given its development cost of under $10 million. Industry analyst Adam Kobeissi compared it to OpenAI, which took a decade and billions in funding to achieve similar standing.
Kobeissi questioned:
Tommy Shaughnessy of Delphi Ventures highlighted DeepSeek’s open-source approach as a potential game-changer for the AI industry, suggesting it could reduce reliance on expensive infrastructure like Nvidia GPUs.
Impact on AI Crypto Tokens
DeepSeek’s ascent has also hit the AI crypto segment. CoinMarketCap data reveals that the market capitalization of AI-related tokens has dropped by nearly 8,68%, now standing at $43 billion. Investors worry that DeepSeek’s efficiency could undermine demand for GPU-heavy AI projects, further destabilizing the market.
The Future of AI and Crypto Markets
Despite short-term losses, experts see potential in AI-crypto convergence. Technical analyst Kyledoops tied market reactions to macroeconomic factors, noting that the Federal Reserve’s upcoming interest rate decision could influence crypto’s next move.
While market jitters persist, some believe DeepSeek’s innovation could drive growth in AI applications, ultimately transforming both industries.