DeepSeek Causes Cryptocurrency Crash

Here is the English translation of the text, with the specified terms preserved and not translated: Although DeepSeek may have "nothing to do" with cryptocurrencies, its sudden appearance has indeed impacted cryptocurrency prices. On January 27, when the stock market reacted to China's open-source and efficient artificial intelligence model, the price of Bitcoin fell by 6%. Investor Marc Andreessen referred to this event as the "Sputnik moment of AI". DeepSeek has caused a stir in the US market, as the developers of the model were able to develop a competitor to US AI companies (such as OpenAI) at a very low cost. The company claims that they used a budget of less than $6 million and used relatively basic hardware from semiconductor manufacturer Nvidia to successfully develop their AI model. Tech stocks have been hit hard. All of the "Big Tech Seven" - Apple, Nvidia, Tesla, Microsoft, Amazon, Meta (formerly Facebook), and Alphabet (Google) - have suffered losses, with Nvidia's stock price plummeting nearly 17% in a single day, setting a Wall Street record. The cheaper and more energy-efficient DeepSeek has even caused energy utility stocks to plummet - these companies had previously relied on the profits generated by more energy-intensive US-based models (such as ChatGPT). The cryptocurrency market has not been spared either; Bitcoin and Ethereum fell by 6% and 7% respectively, while some Altcoins saw double-digit declines. Experienced cryptocurrency traders are already accustomed to double-digit price fluctuations, but this synchronized price decline indicates that cryptocurrencies are indeed high-risk assets, affected by the same market forces as traditional financial markets. DeepSeek has shaken tech stocks, Bitcoin, and the cryptocurrency market. One of the main reasons behind this "Sputnik moment" is that it caught the market off guard. The mainstream narrative about AI had portrayed the US as the industry leader. Just last week, US President Donald Trump announced a $500 billion investment plan to drive the development of AI and cement the US's position as the global leader. Although cryptocurrencies and DeepSeek are "unrelated", cryptocurrency and related company stocks, such as MicroStrategy, have still seen declines. As the founder of the decentralized exchange SMARDEX, Jean Rausis, told MarketWatch. More accurately, cryptocurrencies are just victims of a broader market sentiment. As Exodus cryptocurrency exchange CEO JP Richardson told Fortune, cryptocurrencies are "risk-on" assets, and "when there's volatility or panic in the stock market", such as the sudden appearance of an AI model, "you typically see a correlation between the stock market and cryptocurrency, Bitcoin prices declining." On January 27, cryptocurrency prices generally declined. Source: Coin360, via bitcoinmgzn The cryptocurrency market maker Wintermute stated: "While cryptocurrencies lack short-term narrative drivers, market correlations are driving capital flows, and de-risking signals have been mentioned." In other words, cryptocurrency investors have been spooked and are selling off. The correlation between Bitcoin and stock prices has been widely studied, and as digital assets become more prevalent and accepted in traditional financial markets, this correlation persists. As BitMEX's investor report points out, the correlation between cryptocurrencies and stocks will continue to exist for some time. "The strong correlation between Bitcoin and stocks, especially in the current quarter, remains one of the most reliable market dynamics." In most cases, prices have started to stabilize and rebound, although cryptocurrency mining stocks are still seeing slight losses. While the relatively quick rebound may provide little comfort to those traders who were liquidated of hundreds of millions of dollars in long positions on Monday, some analysts remain optimistic. Bitwise Asset Management's European research head, Andre Dragosch, posted on X platform on January 28 that "Bitcoin stabilizing while the Nasdaq continues to slide is very bullish." Even for the broader market, many remain optimistic that cheaper AI like DeepSeek will bring long-term benefits. DeepSeek means cheaper AI, with minimal impact on Bitcoin prices. Tech experts and market observers have quickly pointed out that DeepSeek is open-source, meaning other AI developers can leverage DeepSeek's advantages and extract parts of it to build and improve their own models. Richardson said, "Everyone should see it as a gift to create better, cheaper, faster, open-source, free AI systems." He added that he will use this technology in his own company. "We have an AI bot that will look at this code. It will go through every line of code and point out all the potential areas for improvement in the code," Richardson said. While Andreessen's "Sputnik moment" implies that history will repeat itself in a Cold War-style AI race, Paul Howard, a director at market liquidity provider Wincet, told Finance Magnates: "DeepSeek will accelerate AI development in the US and abroad, breaking the hegemony of AI." According to Howard, the impact on cryptocurrencies is also negligible. He said that what DeepSeek provides is not much different from other large language model (LLM) trading models, and its lower cost "has almost no impact on how institutional players interact with the crypto market, as the crypto market sits on the high-risk end of the stock market." Just days after the release of DeepSeek, Crypto Twitter began evaluating its performance in the market and cryptocurrency-related analysis. Dash Holdings suggested that the local Grok AI on X platform performed more bullishly and "identified market trend impact factors that DeepSeek did not consider." Cryptocurrency YouTuber KrissPax said that ChatGPT has more up-to-date information, demonstrating ChatGPT's ability to answer questions about events as recent as January 25th. This may be an apples-to-oranges comparison, as DeepSeek is free, while the free version of ChatGPT only has information updated through January 2023. Cryptocurrency Inside jokingly said that if nothing else, DeepSeek at least provided a decent (i.e., high) Bitcoin price prediction. However, privacy and political issues may soon dampen the enthusiasm for DeepSeek. If the controversy over TikTok is a sign of lawmakers' attitude towards Chinese applications, DeepSeek's existence in the US market may not last long. Notorious celebrity investor Kevin O'Leary stated that this application is part of China's "economic war" against the US - China being the US's largest trading partner. He accused various Chinese applications, including DeepSeek, of being "Trojan horse" programs aimed at collecting data from Americans. Italy's privacy regulator has already begun investigating the application's privacy policy to see if it complies with EU regulations. So, while DeepSeek may not exist for long, industry participants seem to believe that during its existence, it will drive the development of AI, providing better and cheaper large language models (LLMs).