The cryptocurrency market has seen nearly $1 billion in 24-hour liquidations amid a wider risk assets drawdown caused by a newly launched Chinese artificial intelligence (AI) model that, DeepSeek.
But DeepSeek not only matches ChatGPT’s capabilities —it does so at a fraction of the cost, and with less-advanced Graphics Processing Units (GPUs).
DeepSeek has dethroned ChatGPT and other major applications in the U.S. on Apple’s App Store and saw tech stocks lose billions in market capitalization as it led investors to question the massive valuations of AI-related stocks, given their significant operating costs.
On top of that, DeepSeek is an open-source model that allows free commercial and academic use. It’s reportedly so light that local instances of it can be run on users’ smartphones
Deepseek R1 7b running locally on your ANDROID!! HERE WE GOOO!!
(spedup, PocketPal AI app) pic.twitter.com/xE95e3tV3S— ADE (@rripbozo) January 24, 2025
The flight to safety saw the price of Bitcoin (BTC) plunge more than 5% to $99,500 while the total cryptocurrency market capitalization plunged by more than $290 billion before it started to recover. Other major cryptocurrencies saw significant declines between 3.3% in the case of BNB and 11.3% in Avalanche’s case.
DeepSeek Hurts AI Tokens’ Prospects
AI tokens were the worst affected in the market, with SoSoValue’s AI token index seeing an 11% decline over the last 24 hours, compared to 6.6% for PayFi tokens, 9.3% for memecoins, and 4.5% for real-world asset tokens.
Some individual AI tokens saw losses between 50% and 70% over the launch of DeepSeek as despite having seen billions in funding over time, they haven’t seen a product launch as successful as that of DeepSeek.
On top of that, investors are likely to reconsider the evaluations of AI tokens and even of equities exposed to the sector, given that a relative newcomer managed to reach the performance of OpenAI’s advanced models.
As a result, investors are likely to diversify away from AI token-related bets and into other assets in search of safe havens. The market drawdown saw the yield on 10-year Treasurys plunge around 10 basis points as investors bid on the safer assets.
Disclaimer
This article is provided for information only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
