Bitcoin and the broader crypto market face a steep decline, largely driven by the rise of China’s artificial intelligence startup, DeepSeek. On Monday, Bitcoin (BTC) dropped below $100,000 for the first time since Donald Trump’s inauguration. This downturn coincides with a broader sell-off in the stock market, where the NASDAQ fell over 3%.
DeepSeek has quickly gained traction, overtaking OpenAI’s ChatGPT as the highest-rated free app on the Apple App Store in both the US and China. Just a week after releasing its open-source language model, R1, on January 20, DeepSeek captured the attention of users and investors alike.
The buzz around DeepSeek intensified when Alexandr Wang, CEO of ScaleAI, praised the AI model’s effectiveness compared to its competitors. He noted that DeepSeek’s development cost was remarkably low, at just $5.8 million, a fraction of what US companies like OpenAI have spent—OpenAI has raised about $17.9 billion for its models. This stark contrast raises eyebrows and has sparked concerns among investors.
DeepSeek also claims to utilize fewer chips to create faster, more efficient AI models. However, this assertion has been met with skepticism. Notable figures, including Wang and Tesla CEO Elon Musk, have raised doubts about the feasibility of DeepSeek’s claims. In a recent CNBC interview, Wang suggested that DeepSeek has access to 50,000 H100 Nvidia chips, which he believes is not openly discussed due to US export controls.
The fallout from DeepSeek’s rise has been significant. US tech stocks plummeted, with Nvidia losing over $600 billion in market capitalization within 24 hours. The S&P 500 also suffered, erasing more than $1 trillion from its market value. With the correlation between the stock market and cryptocurrencies growing stronger, Bitcoin and other digital currencies followed suit, experiencing a sharp downturn.
If the traditional stock market fails to bounce back, Bitcoin’s price may struggle to recover. This ongoing decline could hinder the anticipated crypto bull run in 2025. However, there remains a glimmer of hope. If DeepSeek’s actual costs and chip usage are higher than claimed, the market could stabilize.
In the meantime, the excitement surrounding DeepSeek has led to a surge in meme coins named after the AI bot, reflecting the dynamic nature of today’s crypto landscape. As this story unfolds, investors will be watching closely.
