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Bitcoin Plummets as DeepSeek's Rise Sparks $864M Crypto Liquidations

Coin WorldMonday, Jan 27, 2025 5:57 am ET

1min read

Bitcoin Faces Pressure Amid DeepSeek’s Rise and Market Liquidations as Traders Brace for Fed Decisions

Bitcoin has been under pressure in recent days, with the cryptocurrency's price dropping below the $100,000 mark amid a wave of market liquidations and growing concerns about the impact of China's AI model DeepSeek on the broader tech industry.

The rise of DeepSeek, an AI model developed in China, has sent shockwaves through global financial markets, coinciding with significant liquidation in the crypto space. The crypto market experienced a staggering $864 million in liquidations over a 24-hour period, driven largely by investor reactions to the emerging AI competition.

“The hype around DeepSeek and broader volatility in the US AI market has spooked investors, leading to a flight to safety,” stated Alvin Kan, COO at Bitget Wallet.

Crypto markets face turmoil as China’s AI model DeepSeek disrupts the landscape, resulting in $864 million liquidated across exchanges. Learn more.

The emergence of DeepSeek, an AI model developed in China, has rapidly shifted market dynamics, contributing to significant volatility in the cryptocurrency sector. This development has raised concerns about an intensifying global AI arms race, especially as companies compete for dominance in this increasingly important market.

Market Reaction: The Surge in Liquidations

Recent data reveals approximately $864 million in liquidated positions within the crypto market, primarily affecting Bitcoin (BTC) traders. According to CoinGlass, this included around $250 million in long positions. The selling pressure was exacerbated by traders attempting to mitigate risk amid fears of further market declines.

“Some derivatives who put bullish positions on margin got called,” said Justin d’Anethan, head of sales at token launch advisory firm Liquifi. This indicates that traders are not just reacting to immediate selling pressure but are also preparing for continued instability in the near term.

Shift in Monetary Policies Influencing Investor Sentiment

As fluctuations in the crypto market coincide with economic shifts, analysts note that monetary policy decisions are heavily influencing investor behavior. Upcoming meetings of the US Federal Reserve are crucial as the market expects the interest rates to remain between 4.25% and 4.5%

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