Bitcoin and Crypto Market Are Crashing Not Only Because of DeepSeek

Following the release of DeepSeek R1 this weekend, the crypto market experienced a sharp decline, with prices dropping around 13% across AI-related tokens.

DeepSeek R1 was finally released this weekend, and the crypto market reacted with a sharp decline, as prices dropped around 13% across AI-related tokens. Bitcoin fell to an 11-day low, now trading below $100k, while Near Protocol and ICP saw losses of 11% and 18%, respectively.

As reported, DeepSeek is an AI model that can perform tasks similar to ChatGPT for just 1/1000th of the cost. The model's cost-effectiveness has sparked fears regarding the valuation of established AI firms and their associated cryptocurrencies.

Investors are concerned that DeepSeek’s low-cost model could undermine the market positions of companies like Nvidia and OpenAI, which traditionally require massive funding to operate their AI systems.

However, according to Miles Deutscher, a crypto analyst with over 600k followers on X, not only DeepSeek news affected the crypto market crashing today.

In a recent tweet, Deutscher shared his analysis, highlighting three main factors contributing to the current market dip.

First, as mentioned already, fears of a tech sell-off following DeepSeek’s launch are causing concern, with US market futures indicating a negative opening. As crypto markets are more volatile and operate 24/7, they are reacting ahead of traditional markets.

Second, Deutscher points to typical pre-FOMC meeting de-risking by investors. This behavior is especially strong in the current environment, where markets are very sensitive to interest rates, U.S. dollar movements and overall liquidity conditions.

Lastly, the market appears to be suffering from a lack of short-term directional clarity following Trump’s inauguration. This political development, combined with the other factors, has created a perfect storm for market volatility.

That said, many analysts still estimate that the bull run has another leg up before we enter a new bear market. This means that the current crash could be just a temporary thing and good days for crypto traders are still ahead of us in 2025.