"DeepSeek's AI Surprise Sinks Bitcoin, Nasdaq Plunges"

China's DeepSeek AI Surprise Pushes Bitcoin Under $98K as Nasdaq Tanks

Jan 27, 2025

3 min read

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The price of Bitcoin dipped below $98,000 Monday after DeepSeek, a Chinese artificial intelligence startup, threw a wrench into Wall Street’s favorite narrative.

Introducing an open-source AI model called DeepSeek R1, the startup’s researchers claim that the model can outmatch OpenAI’s most advanced reasoning systems—at a fraction of the cost.

Using anovel learning method, running queries with DeepSeek R1 is 98% cheaper than OpenAI’s flagship model, and it also purportedly cost much less to train than OpenAI’s GPT models and other rivals. That could put mountains of cash spent on AI development by tech giants under scrutiny, with Microsoft, Meta, and Tesla set to report earnings Wednesday.

The tech-heavy Nasdaq, which coasted on a wave of AI hype to all-time highs last year, plunged 3.5% when U.S. markets opened Monday. Showing a 5% decrease over the past day, Bitcoin’s price had fallen to $99,600, as of this writing.

For some traders, the damage had already been done. As DeepSeek’s AI model threatened to upend a busy week of tech earnings in the U.S., crypto liquidations had topped $966 million over the past day, according to data from CoinGlass.

President Donald Trump’s inauguration took center stage last week, with the crypto market moved by the SEC’s subsequent announcement of a crypto task force and decision to rescind a controversial accounting rule. The president also paved the way for a “digital asset stockpile," establishing a Presidential Working Group via executive order.

“Digital asset prices have been trading on hope,” Standard Chartered’s Global Head of Digital Assets Research Kendrick Geoffrey wrote in a recent note.

He described Trump’s executive order as ultimately a disappointment because it implied a crypto stockpile would be built using seized digital assets, as opposed to directing the government to start “stacking sats” by buying up Bitcoin (the