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"AI Crypto Crash: DeepSeek's Rise Shakes US Tech, Bitcoin Drops Ahead of FOMC"

Coin WorldMonday, Jan 27, 2025 1:37 am ET

1min read

The cryptocurrency market witnessed a significant downturn on January 27, with the AI sector experiencing a notable decline in market capitalization. According to data from CoinGecko, the AI sector's market capitalization dropped by 10.4% in the last 24 hours, with certain AI altcoins experiencing even steeper declines. For instance, RENDER dropped 10.4% to $6.28, while VIRTUAL saw losses of 18.3% to $2.05. Additionally, GRIFFAIN fell 25.7% to $0.3094, and ARC reported a decrease of 27.1% to $0.2631.

The downturn in AI-related cryptocurrencies is attributed to the launch of two large models, DeepSeek-V3 and DeepSeek-R1, by the Chinese startup DeepSeek. These models are positioned as direct competitors to major players like OpenAI, offering superior performance at significantly lower costs. Market analysts express concerns over the potential impact of these developments, leading to drops in US stock index futures during early Asian trading sessions.

The broader crypto market also experienced a downturn on January 27, with Bitcoin (BTC) and top altcoins tumbling ahead of the upcoming FOMC meeting. Bitcoin (BTC) price dropped to the $101K level, whereas Ethereum (ETH), XRP, and Solana (SOL) cracked 4%-8%. Meanwhile, US stocks also took a hit amid the rise of Chinese AI startup DeepSeek.

The rise of DeepSeek appears to have sent shockwaves across the US large-cap tech sector, with recent reports revealing that the Chinese AI startup is already outperforming leading American AI companies like OpenAI and Meta. The Nasdaq 100 futures are also down significantly since the market opened, all happening as DeepSeek takes the number one spot on the App Store.

Despite the broader cryptocurrency market volatility, renowned crypto analyst Ash Crypto stated, "Altseason is finally coming," and "utility tokens are about to explode." Digital asset strategist at VanEck, Gabor Gurbacs, spotlighted the DeepSeek rise chronicle on X, saying, "Now that everyone knows that AI doesn't need that $500 Billion investment, the US should just buy Bitcoin with it

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