The launch of DeepSeek R1, China’s budget-friendly AI model, didn’t just shake up Wall Street’s AI darlings — it sent both Bitcoin and AI-powered cryptocurrencies into a tailspin.
Since 20 January, when DeepSeek unveiled its leaner, cheaper, open-source model, the AI tokens market cap has dropped by more than 7%.
The downturn deepened on 27 January, when a tech-fueled sell-off hit traditional finance and crypto alike.
Top AI tokens — NEAR, ICP, RENDER, and Filecoin — have tumbled 6% to 10%, while VIRTUALS, a major player in the sector, crashed 20%. Only TAO bucked the trend, climbing 15% over the past week.
Meanwhile, Bitcoin slipped below six figures twice, first on DeepSeek’s debut and again during the broader market sell-off.
It’s now back near $102K, but with the 30-day correlation coefficient for BTC and the Nasdaq 100 Index hitting its highest since 2022, it’s clear that crypto is now moving in lockstep with traditional risk assets.
Silver lining?
DeepSeek may have rattled AI cryptos, but it also offers an opportunity for AI tokens that had overshadowed retail attention from memecoins.
DeepSeek’s latest model isn’t just cheaper. Its open-source nature gives AI-crypto projects a new foundation to build on, says Chi Zhang, CEO of AI-blockchain startup ZettaBlock.
DeepSeek will speed up the timeline for quality agentic enterprises, says Nick Garcia, research manager at Messari. That could drive real progress beyond memecoin-shilling bots and overhyped AI narratives.
Gong Xi Fa Cai!
After sending global markets into the red, China may now offer a short-term reprieve.
Bitget Research’s Ryan Lee points out that Lunar New Year bonuses and festive spending typically fuel crypto trading, though lower institutional activity could also mean higher volatility.
Beyond the holiday pump, crypto faces bigger tests ahead — the Federal Reserve’s interest rate decision, Big Tech earnings, and whether AI-crypto projects can prove they’re more than just a speculative side hustle.
Edited by Ankush Chibber. If you have any tips, ideas or feedback, please get in touch: talk-to-us@moniify.com
