AI Crypto Plunge: NVIDIA's $600B Loss Sparks Bitcoin Rally Fears

AI-focused cryptocurrencies have taken a significant hit as NVIDIA's stock price plummeted to a 12-week low, erasing $600 billion in value in a single day. The decline, which occurred on January 27, was sparked by concerns over a new AI model from the Chinese company DeepSeek, which competes with OpenAI's ChatGPT.

The drop in NVIDIA's valuation has been seen as positive for Bitcoin, according to a recent report from 10x Research. The report suggests that lower spending on AI could help reduce inflation, potentially leading to more favorable monetary policies from the US Federal Reserve. Additionally, the upcoming IPOs of prominent crypto firms, with a total combined valuation of over $73.9 billion, could set the stage for Bitcoin's next big price surge.

However, the $36 trillion US debt ceiling has raised concerns about Bitcoin liquidity, which could potentially lead to a temporary correction to $70,000 before Bitcoin's next market rally. Raoul Pal, founder of Global Macro Investor, predicts that Bitcoin will reach a "local top" above $110,000 in January but expects a temporary dip in liquidity to cause Bitcoin's price to fall below $70,000 by February.

In the cryptocurrency segment, AI-related tokens have been performing poorly. Bittensor (TAO), a long-running AI infrastructure project, has seen its TAO token lose 2% in 24 hours. AI Agents-associated coins have lost 12.1% in 24 hours, while AI memes are down by 10%, with $100 million erased in 24 hours.

The panic on the AI cryptocurrencies market is associated with the recession in AI stocks, which was catalyzed by the announcements of DeepSeek, a ChatGPT analogue that allegedly works 30x more cost-efficient. Yesterday, NVIDIA stocks lost $600 billion in 24 hours, touching their lowest level since early October 2024.

Meanwhile, the crypto market has been in turmoil as $VVV plunged 23% after Coinbase's coin selection criteria announcement. The announcement has raised concerns about the future of smaller cryptocurrencies and their potential impact on the broader market.