Chinese AI startup DeepSeek has made waves in global financial markets. In fact, as the narrative gained momentum, Bitcoin and crypto markets saw a bloodbath today (27), with nearly $1 billion in total liquidations.
Founded less than two years ago, DeepSeek has risen to prominence, positioning itself as a competitor to established AI giants such as OpenAI, Meta and Nvidia.
Crypto market in turmoil amid DeepSeek hype
DeepSeek’s revelation coincided with a sharp sell-off in the crypto market. Bitcoin (BTC) fell by over 5% in a few hours, with major altcoins recording even steeper drops of 8–10%. According to data from Coinglass, in the past 24 hours, 316,282 traders were liquidated, with total liquidations reaching $861.48 million at the time of writing.
Total Liquidations. Source: Coinglass
Some attributed the latest market drop 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 reactions stemming from DeepSeek’s rise.
This has nothing to do with the crypto market and everything to do with the US stock market, he explained.
Ash Crypto linked the crypto slump to a reassessment of overvalued tech stocks in light of DeepSeek’s competitive advantage. Similarly, Ran Neuner, founder of Crypto Banter, issued a warning about the potential ripple effects of DeepSeek’s emergence.
He argued that the wealth generated by AI and technology stocks in recent years has been a significant driver of venture investment in crypto markets.
If those stocks take a hit, people will lose fortunes, and that could send all risk markets tumbling as people flee risk, Neuner said.
The crypto analyst described the situation as a potential “black swan.” These observations, among others, highlight how DeepSeek’s rise has destabilized markets.
DeepSeek emerges as a disruptive competitor
With a development cost of less than $10 million, DeepSeek has emerged as a disruptive competitor, sparking debate among experts about its long-term implications. Adam Kobeissi, founder of The Kobeissi Letter, highlighted DeepSeek’s unprecedented growth.
Kobeissi contrasted this with OpenAI’s decade-long journey and billion-dollar funding, delivering a pointed rhetoric on X (formerly Twitter).
OpenAI was founded 10 years ago, has 4,500 employees, and has raised $6.6 billion in capital. DeepSeek was founded less than 2 years ago, has 200 employees, and was developed for less than $10 million. How are these two companies now competitors?, he wrote.
DeepSeek’s disruptive nature led Kobeissi to conclude that no company is safe from AI competition. Tommy Shaughnessy of Delphi Ventures echoed that sentiment, emphasizing DeepSeek’s potential to reshape the AI field.
He noted that the open-source nature of the platform could catalyze innovation at the application layer, which he believes could drive a shift away from reliance on expensive infrastructure like Nvidia GPUs.
DeepSeek ensures an open-source future… forcing all AI labs to accelerate innovation, he said.
It’s worth noting that the AI crypto segment has also suffered following the rise of DeepSeek. Data from CoinGecko shows that the market cap of AI crypto tokens has dropped by nearly 13% to $36.4 billion.
Market Capitalization of AI Crypto Tokens. Source: CoinGecko
The decline likely comes amid speculation about the implications for demand for GPUs, which is often a key driver of AI projects. In that context, Shaughnessy warns that this shift could destabilize markets, especially as investors reassess the valuations of hardware vendors like Nvidia.
DeepSeek shakes up crypto market and challenges monetary policy
In fact, beyond its low development cost, DeepSeek’s appeal also lies in its efficiency. Unlike traditional AI models, which require significant computational resources, DeepSeek is designed to operate with a fraction of the infrastructure. This raises questions about the long-term viability of high-cost vendors like Nvidia and OpenAI.
Kyledoops, a technical analyst at Crypto Banter, linked the market’s reaction to macroeconomic factors, especially the Federal Reserve’s impending interest rate decision. He suggested that the Fed’s stance could either exacerbate or ease market tensions:
BTC is plunging today due to China’s AI DeepSeek triggering market reactions. Could the FOMC meeting become a catalyst for a market move that will leave bears in disbelief?, Kyledoops wrote.
Indeed, despite the immediate market turbulence, some experts see long-term opportunities at the intersection of AI and crypto. Shaughnessy emphasized the potential for intelligent agents and applications to transform industries, driving innovation and value creation at the application layer.
Neuner, while acknowledging the risks, also highlighted the potential for this disruption to force governments to reassess monetary policy.
The article DeepSeek Causes Almost $1 Billion Liquidation in 24 Hours was first seen on BeInCrypto Brasil.
