On January 27, the Bitcoin price fell 6% in reaction to the launch of DeepSeek, a new AI model from China deemed a serious competitor to U.S. firms by investor Marc Andreessen. The market was rattled by the revelation that DeepSeek was developed at a fraction of the cost of American equivalents, leading to significant losses in tech stocks. Major firms in the so-called 'Magnificent Seven', including Nvidia and Apple, also experienced declines. This downturn in tech extended to cryptocurrencies, with Bitcoin and Ether dropping 6% and 7%, respectively. Experts noted that the cryptocurrency market is closely tied to traditional finance, as both act as risk-on assets. With market correlations highlighted by analysts, emotions led to sell-offs in the crypto space. While some believe the impact of DeepSeek could be minimal for crypto in the long term, there are concerns about potential privacy implications, given that the AI is open-source. Following the AI's release, discussions around its capabilities and competitive positioning for crypto trading models ensued, but privacy and geopolitical issues could challenge its acceptance in the U.S.

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