Deepseek Triggers Bitcoin Crash: AI Tokens Plummet

January 27, 2025 - 3 min. read

By Yagyesh Jaiswal

DeepSeek AI

DeepSeek, a new AI model by a Chinese startup, topped the US and China App Store charts, with downloads that have surpassed ChatGPT since its release on January 20, 2025. Such rapid growth made quite a stir in the crypto market, sending Bitcoin to great lows and quite a few AI tokens with it.

DeepSeek Surpasses ChatGPT
DeepSeek Rises to #1 Free App Spot

DeepSeek’s Impact on the Crypto Market

Bitcoin was trading below $100,500, down 4.48% in the last 24 hours. Ethereum also fell below $3,200, down 3.83%. The total value of the crypto market shed around one-third of its value overnight as investors spooked by the performance of DeepSeek and potential implications for the AI sector sell out in panic.

Cryptocurrency Market Experiences Downturn
Bitcoin and Ethereum Face Significant Declines

Reports said that the U.S. stock market also reacted poorly, with large declines in tech stocks such as Nvidia and ARM, down more than 5%. That expectation only added to the evaporation of over $1 trillion from the U.S. stock market in a day, contributing to general market instability.

What is DeepSeek?

DeepSeek is the open-source AI model developed for the analysis of financial data and market trends effectively. Taking head-on, DeepSeek is led by the $6 million-budgeted largest player in this regard: OpenAI. DeepSeek requires very minor GPU resources—far lesser than the competition—to the extent that the model can be run on mobile devices, but due to its efficiency, it runs even faster than the rest while significantly reducing operational costs.

For example, the model was observed to execute complicated math and programming tasks with performances close to, and sometimes better than, those of ChatGPT-4. It is open source; hence, it is free for use, and anybody can modify the code for any commercial activity—all features that have resonated with the developers.

A Shift in AI Dynamics

Industry observers are saying the arrival of DeepSeek heralds a new twist in the AI landscape. This goes against the prevailing orthodoxy in AI development, which tends to involve a massive outlay for bigger and more hardware. Success with DeepSeek has shown that good engineering can deliver what was assumed to require immense resources.

In a statement from Archerman Capital, the firm said DeepSeek is a victory for open-source technology. Such could spur further innovation within the AI space and may be the beginning of a trend towards a more diversified ecosystem of applications.

The Larger Implications

Its relation to the rise of DeepSeek and the decline in the larger crypto market does, however, raise a lot of critical questions about stability and confidence in the market. As AI continues to penetrate more and more sectors, its impact on financial markets will grow.

Such volatility in the cryptocurrency market is believed by some experts to show that there is a need for regulations to handle the impact of disrupting technologies such as AI. That can bring about panic selling, as recently witnessed, worsening downturns because of the rapidity in changing market sentiment.

DeepSeek became a living proof of how AI can shake not just the technological markets but also the financial ones. As it scales, the impact it may have on other actors should be watched very closely at least within the cryptocurrency space. Recent market movements are a grim reminder of how these worlds are intertwined and how each innovation move should be met with balance in regulation.

Yagyesh Jaiswal

Yagyesh is a crypto geek and a blockchain educator. Started his crypto journey in 2018...

Yagyesh Jaiswal