What Is DeepSeek And Why Did Crypto Crash?

In fact, the company claims to have built its “R1” model for less than $6.0 million. Yet, it allegedly beats OpenAI in terms of performance.

The announcement sent shockwaves through the US stock market today with high-flying names like Nvidia, Broadcom, Microsoft, Arm Holdings – all in the red.

Stocks crashed today thanks To Chinese AI, Source: X

Even Bitcoin slipped back under the $100,000 level this morning. But wait, what does the world’s largest cryptocurrency have to do with DeepSeek? Let’s explore.

Source: Brave New Coin Bitcoin Liquid Index (BLX)

Bitcoin may not have a direct link to DeepSeek or its AI offerings – but the hit to its price today is indirectly linked to the Chinese startup, nonetheless.

That’s because the crypto asset is yet to fully realize its potential as a store of value and trade more like gold. Instead, it’s seen as a speculative asset still and likened more to the high-growth tech stocks.

If anything, the correlation between Bitcoin and the tech-heavy Nasdaq has actually strengthened since late December.

Therefore, as DeepSeek announced a new AI model that it said was significantly cheaper yet just as powerful as ones from the more established names like OpenAI, Google, and Anthropic – investors started questioning if billions that US hyperscalers have committed to building artificial intelligence infrastructure makes sense in the first place.

After all, DeepSeek is clearly telling the market that it doesn’t really take deep pockets to build powerful AI models. You don’t really need the high-end, super expensive Nvidia GPUs to run them.

The outcome? A sharp sell-off in AI stocks that saw the Nasdaq Composite close about 7.0% down on Monday – and with it went the BTC that’s struggling to reclaim the $100,000 level at writing.

Source: TradingView

Bitcoin may have sunk with the tech stocks following DeepSeek’s announcement, but it’s reasonable to think of it as an opportunity to double down on your exposure to the crypto asset.

For starters, Bitcoin held a key support at $96,400 today, indicating bulls are still in control – according to Standard Chartered analyst Geoffrey Kendrick.

Kendrick expects BTC to resume its upward trajectory following the hiccup and hit the $200,000 level by the end of this year as “the structural story remains very, very positive.”

As the US turns more accommodative in terms of crypto regulation, the Congress passes bills in favour of the industry at large, and institutional money continues to flow in, the price of Bitcoin, he’s convinced, will hit new milestones in 2025.

Plus, Stacy Rasgon from Bernstein has already tagged the DeepSeek-driven decline in AI stocks as “overblown”. He fully expects those equities to recover moving forward – and BTC will likely follow suit when they do.

It could even recover much faster than AI stocks considering the inherent volatility and the many catalysts on its tail.

Source: X.com

In summary, today’s decline in Bitcoin’s price due to the launch of DeepSeek’s new AI model may be a strategic buying opportunity for investors. 

The world’s largest cryptocurrency by market cap is known for its resilience and solid potential to rebound following a period of downside. Buying it on the dip, therefore, could prove to be a lucrative decision.

Additionally, BTC could strengthen its reputation as a store of value and see increased institutional adoption as President Trump delivers on his promise of a crypto-friendly government.

Put together, these may be sufficient reasons to remain long on Bitcoin and wait for another potentially strong year for cryptocurrencies to unfold.