DeepSeek Shakes Crypto Markets: $1 Billion Liquidated in 24 Hours

YEREVAN (CoinChapter.com) —  DeepSeek, a Chinese AI startup, has caused a sharp downturn in global cryptocurrency markets. Within 24 hours, total liquidations in the market reached nearly $1 billion, with 316,282 traders affected, according to Coinglass.

The largest cryptocurrency, Bitcoin (BTC), fell over 5%, while major altcoins declined between 8–10%. These developments have raised questions about the broader impact of DeepSeek’s emergence.

The sell-off coincided with rising concerns about the valuation of AI and tech stocks. DeepSeek’s sudden popularity has caused a reevaluation of overvalued assets, leading to ripple effects in cryptocurrency markets.

DeepSeek Challenges AI Giants with Low-Cost Model

Founded less than two years ago, DeepSeek has positioned itself as a competitor to major AI companies like OpenAI and Nvidia. With a development cost of under $10 million, DeepSeek operates at a fraction of the resources required by its rivals. In comparison, OpenAI, founded over a decade ago, has raised $6.6 billion and employs 4,500 people.

This stark difference has prompted industry observers to comment on its potential impact. Adam Kobeissi, founder of The Kobeissi Letter, highlighted this disparity in a post on X:

DeepSeek’s model, which relies on fewer computational resources, has raised concerns for traditional hardware providers like Nvidia, which depend  on demand from AI projects.

AI Tokens Drop as GPU Demand Faces Questions

The AI crypto segment has also been affected. Data from CoinGecko shows that market capitalizations for AI tokens fell nearly 13% to $36.4 billion. Analysts attribute this decline to uncertainty about the long-term demand for GPUs, often used in AI-focused projects.

Tommy Shaughnessy of Delphi Ventures emphasized the implications of DeepSeek’s open-source nature, stating that it could reshape innovation at the application layer while reducing reliance on costly infrastructure.

Shaughnessy commented,

“DeepSeek ensures an open-source future… forcing all AI labs to accelerate innovation.”

Federal Reserve Meeting Adds to Crypto Market Jitters

Broader economic factors also contributed to the crypto market’s sell-off. The upcoming Federal Reserve interest rate decision has added uncertainty to an already volatile market. Kyledoops, a technical analyst at Crypto Banter, linked Bitcoin’s decline to this combination of factors. He wrote,

“BTC is plummeting today due to China’s AI DeepSeek triggering market reactions. Could the FOMC meeting become a catalyst for a market move that leaves the bears in disbelief?”

DeepSeek’s Rise Triggers Market Sell-Off: Bitcoin and Stocks Decline

Some ascribe the latest market crash to DeepSeek’s growing popularity and its implications for the stock market. Among them was Ash Crypto, an industry veteran who attributed the volatility to broader market movements triggered by DeepSeek’s ascent.

“This has nothing to do with the crypto market and everything to do with the U.S. stock market,”

he explained.

DeepSeek, a Chinese AI startup competing with ChatGPT, has quickly gained traction. It recently became the #1 free app on the Apple App Store. Despite its significant rise, DeepSeek was developed for under $10 million, a fraction of the resources spent by its competitors. In comparison, ChatGPT is valued at $157 billion, making DeepSeek’s valuation only 0.2% of that.

Ash Crypto highlighted that the sudden popularity of DeepSeek has prompted a reevaluation of tech stock valuations, leading to sell-offs in the U.S. stock market. This has had ripple effects on the cryptocurrency market.

Ran Neuner Raises Concerns About Risk Markets

The potential implications of DeepSeek’s rise extend beyond traditional markets, according to Ran Neuner, founder of Crypto Banter. Neuner explained that DeepSeek’s efficiency and low-cost development directly challenge major AI players such as OpenAI, Nvidia, and Meta.

“DeepSeek is a breakthrough that makes AI faster and more affordable, but this also raises significant concerns,”

Neuner noted.

He pointed out that much of the recent growth in the U.S. stock market came from AI-related stocks, with companies like Nvidia benefiting from their role in providing hardware for AI development. However, DeepSeek’s model, which requires significantly fewer computational resources, has raised questions about the sustainability of these high valuations.

Neuner warned of a potential domino effect.

“The wealth generated by AI stocks has allowed investors to move higher up the risk curve into crypto. If these stocks take a hit, fortunes could be wiped out, and all risk markets could crash as investors pull out,”

he stated.

This situation, which Neuner described as a possible “black swan” event, has caught many off guard. He added that the magnitude of DeepSeek’s disruption underscores its ability to reshape AI and tech landscapes, potentially destabilizing existing market dynamics.

Above all, while the immediate fallout from DeepSeek’s rise continues to unfold, its long-term impact on both traditional and crypto markets remains under close scrutiny

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