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Bitcoin Plunges Amid DeepSeek's AI Surge

Coin WorldMonday, Jan 27, 2025 7:56 am ET

1min read

Bitcoin Faces Market Turbulence Amid DeepSeek’s Disruption and Sell-Off Potential

Bitcoin, the world's leading cryptocurrency, has been grappling with market volatility and a potential sell-off, driven by the emergence of Chinese AI startup DeepSeek. The company's rapid rise has sparked concerns about its implications for the tech industry and the broader market.

DeepSeek's ascent has coincided with a significant sell-off in the crypto market, with Bitcoin (BTC) dropping over 5% in a matter of hours. Major altcoins have also experienced steep declines, with some losing up to 10% of their value. According to data from Coinglass, over 316,000 traders were liquidated in the past 24 hours, resulting in total liquidations of nearly $1 billion.

Industry analysts have attributed this market crash to broader reactions stemming from DeepSeek's growing popularity. Veteran trader Ash Crypto suggested that the turbulence observed is a reflection of broader market reactions to DeepSeek's newfound prominence, rather than direct issues within the cryptocurrency market.

“This has nothing to do with the crypto market and everything to do with the US stock market,” he noted, reinforcing the view that traditional tech equity valuations are closely intertwined with crypto performance.

The emergence of DeepSeek, developed at a fraction of the cost of its competitors, raises critical questions regarding the future of AI investment in technology. Adam Kobeissi, founder of The Kobeissi Letter, drew a stark comparison between DeepSeek and OpenAI, emphasizing the former's swift rise amidst a landscape dominated by long-standing players.

Kobeissi remarked, “OpenAI was founded 10 years ago, has 4,500 employees, and has raised $6.6 billion in capital. DeepSeek was founded less than 2 years ago, has 200 employees, and was developed for less than $10 million. How are these two companies now competitors?” highlighting the extraordinary speed with which DeepSeek is evolving.

The shockwaves stemming from DeepSeek's rise have significantly impacted the market for AI-related cryptocurrencies. Current statistics from CoinGecko reveal a staggering 13% decrease in the market capitalization of AI tokens, now standing at approximately $36.4 billion. This downturn underscores investor concerns regarding future demand

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