Brief Analysis: Why DeepSeek can affect the cryptocurrency market?

Here is the English translation of the text, with the specified terms translated as instructed: The eve of the Lunar New Year saw the AI model DeepSeek deliver a massive shock to the global market. The model is extremely low-cost but can rival the AI products of American companies like OpenAI. This has set off a firestorm, with US tech stocks taking a major hit. The "seven giants" - Apple, NVIDIA, Tesla, Microsoft, Amazon, Meta, and Alphabet (Google) - all saw across-the-board declines, with NVIDIA's stock price dropping nearly 17% at one point. The cryptocurrency market was not spared either, with Bitcoin and Ethereum falling 6% and 7% respectively, while some Altcoins saw double-digit losses, further demonstrating that cryptocurrencies are indeed a risk asset and subject to similar market forces as traditional finance. DeepSeek has shaken the tech stocks, Bitcoin, and the broader Altcoin market... a16z founder Marc Andreessen has called DeepSeek the "Sputnik moment" for the AI field, as it has taken the global market by surprise, given the mainstream narrative that has long positioned the US as the industry leader. The founder of the decentralized exchange SmarDex, Jean Rausis, stated that while seemingly unrelated to DeepSeek, the prices of cryptocurrencies and crypto-related companies like MicroStrategy have declined, and in the broader market sentiment, cryptocurrencies may just be one of the sacrificial lambs. Exodus CEO JP Richardson explained that cryptocurrencies are "risk-on" assets, and any volatility or panic in the stock market, such as the emergence of an unexpected AI model, will lead to declines, as the stock market is correlated with cryptocurrencies and Bitcoin, triggering synchronized price drops. A Wintermute analyst believes that while cryptocurrencies lack short-term narratives, their correlation with the stock market is driving capital flows, and de-risking has already been flagged. In other words, if crypto investors are spooked by the stock market, they may also choose to sell. As digital assets gain broader adoption and acceptance in traditional financial markets, the correlation between Bitcoin and stock prices has been the subject of research. BitMEX's investor report points out that the correlation between cryptocurrencies and stocks is likely to persist for a considerable period. Market data from the Dow Jones shows that the six-month rolling correlation indicator between Bitcoin and the Nasdaq Composite Index reached 0.5 this week, the highest level since March 2, 2023. Fortunately, the recovery of cryptocurrencies has been relatively quick, with Bitcoin rebounding above $100,000 over the past weekend after experiencing short-term volatility. Bitwise's Head of European Research, Andre Dragosch, noted that the fact that the Nasdaq index continues to decline while Bitcoin is trending towards stability is extremely encouraging. Even in the face of broader market volatility, many remain optimistic and believe that cheaper AI models like DeepSeek will bring long-term benefits. DeepSeek has made AI more cost-effective, and its long-term impact on Bitcoin prices is expected to be limited... Experts and market observers quickly noted that DeepSeek is open-source, meaning that other AI developers can adopt some of its advantages to build and improve their own models. Standard Chartered analyst Geoff Kendrick analyzed that "the positioning of the AI market will become clearer, but if lower-cost AI tools (marginally) reduce inflation, then risk assets unrelated to AI, such as Bitcoin, should benefit." As the risk subsides, Bitcoin's momentum appears to be strengthening again. Geoff Kendrick expects Bitcoin to reach its next all-time high in just a few days, likely surpassing its $109,000 record next week, with prices potentially reaching $130,000 between February and March. Wincet executive Paul Howard further analyzed that "DeepSeek will accelerate AI development in the US and abroad, negating AI hegemony, and its actual impact on cryptocurrencies is quite small. The features provided by DeepSeek are rarely something that other LLM trading models cannot provide, and its lower cost will not significantly impact the way institutional participants interact with the cryptocurrency market, as the cryptocurrency market is the risk-amplified end of the stock market." On the other hand, there have been some positive news for Bitcoin and the broader cryptocurrency market on the macroeconomic front recently. According to a report in the Financial Times, if a plan proposed by Czech National Bank Governor Aleš Michl is approved, the Czech central bank may ultimately convert 5% of its €140 billion foreign exchange reserves into Bitcoin. Geoff Kendrick calculated that "at current prices, the Czech central bank would hold 69,000 Bitcoins, more than the known holdings of any country, with El Salvador currently holding the most at 6,049 Bitcoins." Furthermore, the Swiss National Bank also appears to be moving towards embracing Bitcoin, as the Swiss federal government has officially begun reviewing a popular initiative called "Building a Financially Strong and Responsible Switzerland (Bitcoin Initiative)," which aims to enshrine Bitcoin into the Swiss national financial system through a constitutional amendment. While this may take some time, the significance of this move is that Switzerland's foreign exchange reserves are six times larger than the Czech Republic's. The cryptocurrency community predicts that the establishment of Bitcoin reserves by the US will prompt other countries to establish their own Bitcoin reserves, significantly driving up the price of Bitcoin. Although Trump has not yet taken action, his order has indeed cleared the way for the establishment of a "reserve," meaning the US may hold onto the 207,000 Bitcoins it already owns. Meanwhile, the US Securities and Exchange Commission's cancellation of Staff Accounting Bulletin 121 (SAB 121) will also boost institutional demand for digital assets.

Overall, as a powerful artificial intelligence model, the development and application of DeepSeek may have a certain degree of impact on the traditional financial and Altcoin markets, after all, it has recently triggered a "temporary collapse" in the Bitcoin and Altcoin markets, but in the long run it seems unlikely to have a significant impact on prices, so it might be better to see DeepSeek as a gift of AI that is better, cheaper, faster, open and free.