Release of China's AI chatbot DeepSeek leads to sharp selloff in digital assets
Date
1/30/2025 7:01:23 AM
(MENAFN) The release of China's open-source AI chatbot DeepSeek has caused a significant stir in the crypto market, leading to a sharp selloff in digital assets. DeepSeek, a large language model (LLM), has gained traction due to its efficient resource usage, outperforming rivals like OpenAI’s ChatGPT and Google’s Gemini. The rapid surge in its popularity across global mobile app stores triggered a decline in stocks of major Western tech companies such as Nvidia.
While companies like Nvidia have seen some recovery, cryptocurrencies have been hit hard. Bitcoin has dropped by more than 5 percent, and altcoins have experienced even steeper losses, with some plunging as much as 15 percent. Blockchain-based AI projects, in particular, have suffered significant declines. The overall market capitalization of cryptocurrencies has fallen from USD3.6 trillion to USD3.3 trillion, reflecting the broader downturn in the sector.
Mustafa Batuhan Tufaner, an economist at Beykent University in Istanbul, explained that DeepSeek’s ability to provide a more efficient AI service at a lower cost has raised doubts about the viability of expensive AI projects, contributing to the decline in crypto assets. He emphasized that AI is a driving force in the crypto market, with substantial investments in AI and chips playing a crucial role in crypto mining. Developments in both AI and chip technology can significantly impact the crypto market.
Tufaner also noted that Bitcoin and other cryptocurrencies saw record highs when Donald Trump’s return to the White House sparked optimism about a pro-crypto economic policy. The expectations surrounding this political shift contributed to the bullish sentiment in the crypto market last fall.
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