Bitcoin experienced a significant decline, falling below the $100,000 mark, primarily driven by concerns surrounding a new artificial intelligence model developed by the Chinese firm DeepSeek. This breakthrough has led to a widespread selloff in global markets, impacting not only cryptocurrencies but also various riskier assets. The launch of this AI model has raised fears about its potential to disrupt the tech industry, prompting traders to react swiftly. As a result, Bitcoin’s value dropped by as much as 6.5%, reflecting the broader market turmoil. Other cryptocurrencies were also affected, with XRP experiencing a notable decline of 9% and Solana following suit with similar losses. This downturn marks the largest intraday loss for Bitcoin since December 6, highlighting the significant impact of the emerging AI technology on market sentiment.
The abrupt decline in the cryptocurrency market was triggered by the unveiling of a new AI model from Chinese startup DeepSeek, which is perceived as a significant threat to U.S. tech firms. Concerns over this Chinese AI development have reverberated throughout global markets, leading to a downturn not only in cryptocurrencies but also in stocks, especially within the technology sector.
DeepSeek’s AI model is causing significant disruption in global markets, leading to a selloff in AI-related stocks and a decline in Bitcoin’s value. The model’s affordability and efficiency are challenging established tech giants, creating investor anxiety and prompting a shift towards safer assets. The emergence of DeepSeek’s AI model is having a profound effect on global markets, resulting in a notable downturn in Bitcoin and other cryptocurrencies. Investors are increasingly concerned about this innovative AI model, which is being hailed for its cost-effectiveness and revolutionary potential. The main apprehension revolves around its ability to undermine the supremacy of U.S. technology firms in the AI sector, particularly concerning large language models (LLMs) and other sophisticated AI technologies.
In a recent report, QCP Asia highlighted that “the Chinese LLM presents a potential challenge to U.S. equity markets by undermining American AI dominance through its cost efficiency and innovative open-source technology.” The report further questioned, “How will Trump respond?” This uncertainty regarding the future of AI innovation has fueled a risk-off sentiment that is impacting both stock and cryptocurrency markets.
Is Trump’s executive order affecting the crypto market?
Just days prior to the downturn in the cryptocurrency market, President Donald Trump signed an executive order designed to bolster the cryptocurrency industry. This order established a working group to provide guidance to the White House on crypto policy and outlined a framework for digital assets in the U.S. However, despite the initial optimism surrounding this initiative, many crypto traders believed that the positive impact of the news had already been factored into the market.
Sean McNulty, head of APAC derivatives at FalconX, noted that anything less than a Bitcoin reserve that would immediately begin purchasing BTC would likely disappoint investors. “While the market received 90% of what it wanted from the executive orders, it was clear that much of this was already priced in,” McNulty remarked.
Trump’s position on cryptocurrency has evolved, with the president now committing to making the U.S. the global hub for crypto. This change is largely influenced by the increasing engagement of the crypto industry in U.S. politics. Following his election victory, Trump appointed venture capitalist David Sacks as the AI and crypto czar to advance pro-crypto policies.
Despite the executive orders, the market’s response has been muted. Bitcoin and other cryptocurrencies experienced slight gains right after the announcement but have since faced a notable decline.
Justin d’Anethan, head of sales at Liquifi, observed that following a series of positive developments in crypto regulation and the introduction of new financial products, the market appears to be taking a pause. “After a wave of bullish news—such as pro-crypto regulatory appointments, new ETF filings, and executive orders—the market seems to be catching its breath,” he stated.
As the crypto market grapples with uncertainty, additional factors have influenced market dynamics. In early trading on Monday, Asian stocks saw an uptick, despite renewed concerns about a potential trade war following Trump’s sanctions on Colombia. Concurrently, apprehensions regarding DeepSeek’s AI model disrupting the technology sector have permeated futures markets and extended into digital assets.
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