tl;dr
Chinese AI startup DeepSeek has caused turmoil in global financial markets, coinciding with a sharp decline in Bitcoin and crypto markets. The company's rapid rise has sparked concerns about its potential impact on established AI giants and its disruptive effect on the industry. Experts suggest that...
CRYPTO MARKET IN TURMOIL AMID DEEPSEEK HYPE - DEEPSEEK EMERGES AS A DISRUPTIVE COMPETITOR
Chinese AI startup DeepSeek has caused turmoil in global financial markets, coinciding with a sharp decline in Bitcoin and crypto markets. The company's rapid rise has sparked concerns about its potential impact on established AI giants and its disruptive effect on the industry. Experts suggest that DeepSeek's emergence could lead to significant changes in the AI playing field and potentially destabilize markets. The market's reaction to DeepSeek's rise is linked to broader market reactions and macroeconomic factors. Despite the immediate turbulence, some experts see long-term opportunities in the intersection of AI and crypto, emphasizing the potential for innovation and value creation.
Chinese AI startup DeepSeek has sent shockwaves through global financial markets. As the narrative goes mainstream, Bitcoin and crypto markets recorded a bloodbath on Monday, with nearly $1 billion in total liquidations. Founded less than two years ago, DeepSeek has risen to prominence, positioning itself as a competitor to established AI giants like OpenAI, Meta, and Nvidia.
The unveiling of DeepSeek has coincided with a sharp sell-off in the crypto market. Bitcoin (BTC ) dropped over 5% in a matter of hours, with major altcoins seeing even steeper declines of 8–10%. According to data on Coinglass, in the past 24 hours, 316,282 traders were liquidated, with the total liquidations reaching $861.48 million as of this writing.
Some ascribe the latest market crash to DeepSeek’s growing popularity and its implications for the stock market. Among them was Ash Crypto, an industry veteran who attributed this volatility to broader market reactions stemming from DeepSeek’s ascent.
With a development cost of under $10 million, DeepSeek has emerged as a disruptive competitor, sparking debate among experts about its long-term implications. Adam Kobeissi, founder of The Kobeissi Letter, highlighted DeepSeek’s unprecedented growth. Kobeissi contrasted it with OpenAI’s decade-long journey and multibillion-dollar funding, posing a pointed rhetoric on X (formerly Twitter).
The disruptive nature of DeepSeek has led Kobeissi to conclude that no company is safe from AI competition. Tommy Shaughnessy of Delphi Ventures echoed this sentiment, emphasizing DeepSeek’s potential to reshape the AI playing field.
Of note is that the AI crypto segment also suffered in the aftermath of DeepSeek’s rise. Data on CoinGecko shows the market capitalization of AI crypto tokens is down by almost 13% to $36.4 billion. This slump is likely amid speculation of the implications for GPU demand, which is often a driving fundamental for AI projects.
Indeed, beyond its low development cost, DeepSeek’s appeal also lies in its efficiency. Unlike traditional AI models, which require significant computational resources, DeepSeek is designed to operate with a fraction of the infrastructure. This raises questions about the long-term viability of high-cost providers like Nvidia and OpenAI.
Kyledoops, a technical analyst at Crypto Banter, tied the market reaction to macroeconomic factors, particularly the Federal Reserve’s upcoming decision on interest rates. He suggested that the Fed’s stance could either exacerbate or alleviate market jitters.
Despite the immediate market turbulence, some experts see long-term opportunities in the intersection of AI and crypto. Shaughnessy emphasized the potential for intelligent applications and agents to transform industries, driving innovation and value creation at the application layer. Neuner, while acknowledging the risks, also highlighted the potential for this disruption to force governments to reassess monetary policy.