Towards the end of January this year, the cryptocurrency market experienced a notable (yet unexpected) downturn, with Bitcoin and major altcoins suffering significant losses.
This sudden decrease in stock prices was very much aligned with DeepSeek, a Chinese-developed AI model, going public and the reactions that caused across industries.
But, while most of the world has been talking about what DeepSeek, an open-source AI model with very low costs associated with it, is going to mean for AI more generally, another important issue that’s come up is why it’s had such an effect on cryptocurrencies that aren’t directly linked to it.
Why Is DeepSeek Influencing Crypto Stock Prices?
DeepSeek has been hailed as a potential disruptor in the artificial intelligence sector, with its advanced capabilities and cost-effective development having raised some serious concerns among investors about the competitive landscape of AI technology.
Indeed, this led to a broader market sell-off that, unsurprisingly, had a pretty serious influence on cryptocurrencies too.
The apprehension stems from the possibility that DeepSeek could challenge established AI firms, the likes of Nvidia in particular, prompting a reassessment of valuations across tech industries.
Now, cryptocurrencies (that have previously been perceived as high-risk assets) were not immune to this shift in market sentiment, and the results were fairly noticeable. Indeed, the rapid integration of AI into various sectors has made technological advancements a critical factor influencing investor confidence.
Thus, as DeepSeek continues to gain attention, understanding its impact on the crypto market becomes essential for stakeholders aiming to navigate this evolving financial landscape. However, the reason that DeepSeek has had such an influence on crypto stocks is actually not as complicated as some may have previously anticipated – it really just comes down to general shifts in market sentiment.
With this in mind, we spoke to some experts in the field to get their opinions on how and why DeepSeek has had such an influence on cryptocurrencies and stock prices.
Our Experts
- Komninos Chatzipapas: Founder of HeraHaven
- Kate Leaman: Chief Market Analyst at AvaTrade
- Lukman Otunuga: Senior Market Analyst at FXTM
Komninos Chatzipapas: Founder of HeraHaven
“DeepSeek caused a wide sell-off in the tech markets, especially in Nvidia stock. This because DeepSeek reportedly required much less GPU computer to be trained, so the markets second-guessed Nvidia’s position as a seller of GPUs. The crypto market also suffered a (smaller) sell-off due to the overall risk-off environment.
However, I think that if LLMs become much cheaper to train in the long run, this will have a positive impact on the crypto market as it will push down the price of the same GPUs that a lot of cryptocurrencies (like Ethereum) rely on to secure their blockchain networks through mining.”
Kate Leaman, Chief Market Analyst at AvaTrade
“DeepSeek has triggered notable volatility. Its release led to a sharp sell-off in crypto, with Bitcoin dropping by 5-6% and altcoins plunging as much as 15%. As a result, the total crypto market cap. dropped from $3.6 trillion to $3.3 trillion. This reaction was driven by investor concerns over the viability of expensive AI-driven blockchain projects, prompting many to take profits.
Some analysts though argue that DeepSeek’s cost-efficient model could ultimately benefit decentralised AI applications, making blockchain-based AI more sustainable in the long run. Interestingly, cryptocurrencies, which are often considered “risk-on” assets, moved in tandem with tech stocks, suggesting that the decline wasn’t purely about DeepSeek’s technological impact but also broader market sentiment.
The stock market also felt the shockwaves, particularly in the tech sector. Major U.S. companies such as Nvidia, Apple, and Tesla suffered significant losses, with Nvidia’s stock plummeting 16-17%.
At the heart of these reactions is DeepSeek’s cost efficiency and accessibility. By delivering cutting-edge AI capabilities at a fraction of the cost of competitors like OpenAI, DeepSeek introduced a serious challenge to established players. Its open-source nature makes AI more accessible but also raises concerns about cybersecurity risks and the long-term sustainability of traditional, high-cost AI models.
On top of that, broader economic uncertainties, like President Trump’s U.S. tariff policies and interest rate decisions, probably amplified the market’s reaction, making the sell-off greater.”
Lukman Otunuga, Senior Market Analyst at FXTM
“DeepSeek spooked US markets, triggering a wave of risk aversion as investors became fearful over the future of US exceptionalism in A.I.
The crypto space was simply a victim of the risk-off mood as riskier assets were dumped in favour of safe havens. Although the DeepSeek saga was roughly 2-weeks ago, it remains an elephant in the room and something that will hang over big tech companies. Nvidia, the biggest casualty of the market selloff will need to convince investors that DeepSeek is not a threat when it releases earnings later this month. If Nvidia fails to soothe these fears, this could spell trouble for its shares which are down 3% year-to-date.”
