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DeepSeek’s AI Breakthrough Sparks Volatility in Cryptocurrency (COIN) Markets

Quiver Editor

Bitcoin (GBTC) slipped to an 11-day low on Monday, falling below the $100,000 threshold amid a broader selloff in technology stocks. The world’s largest cryptocurrency dropped roughly 6% to $98,852.17 by midday in London, its lowest level since Jan. 16. Analysts attributed the downturn to a wave of risk-off sentiment sparked by concerns over Chinese AI startup DeepSeek, whose low-cost model has challenged Western dominance in the artificial intelligence space. This development, dubbed AI’s “Sputnik moment,” has rattled technology markets globally.

Bitcoin (COIN), which had rallied past $100,000 following President Donald Trump’s election victory, faced headwinds as the optimism surrounding his administration’s impact on digital assets began to wane. Trump’s executive order last week to create a crypto-focused working group failed to impress investors, leaving expectations unmet for immediate support of the cryptocurrency sector. Additionally, a decline in Nasdaq futures compounded the weakness in crypto markets, highlighting their vulnerability to broader risk sentiment.

Market Overview:
  • Bitcoin fell to $98,852.17, marking its lowest level in 11 days.
  • Technology stocks tumbled globally amid concerns over China’s DeepSeek AI breakthrough.
  • Nasdaq futures slid, exacerbating weakness in cryptocurrency markets.
Key Points:
  • Bitcoin’s decline is linked to broader risk-off sentiment driven by tech sector concerns.
  • Disappointment over the Trump administration’s limited crypto support weighed on sentiment.
  • Federal Reserve policy uncertainty and interest rate concerns added pressure to risk assets.
Looking Ahead:
  • Markets await outcomes of the Federal Reserve’s policy meeting this week.
  • Investors look to Trump’s crypto-focused working group for regulatory clarity.
  • Broader risk sentiment will likely continue influencing cryptocurrency performance.
Bull Case:
  • Bitcoin’s drop below $100,000 is seen as a temporary correction, with analysts highlighting strong support at $98,000 and the potential for a rebound to $105,000 or higher in the near term.
  • Long-term forecasts remain bullish, with models like the Bitcoin Power Law predicting prices could reach $170,000–$200,000 by the end of 2025, driven by increasing adoption and favorable macroeconomic conditions.
  • President Trump’s creation of a crypto-focused working group signals potential regulatory clarity, which could attract institutional investors and support Bitcoin’s long-term growth.
  • Despite short-term volatility, Bitcoin’s resilience above key psychological levels like $100,000 underscores its position as a leading digital asset in a maturing market.
  • The selloff presents a buying opportunity for long-term investors as Bitcoin remains well-positioned to benefit from broader trends in decentralized finance and digital payments.
Bear Case:
  • Bitcoin’s decline below $100,000 reflects broader risk-off sentiment in global markets, exacerbated by concerns over China’s DeepSeek AI breakthrough and its potential to disrupt U.S. tech dominance.
  • The cryptocurrency’s sensitivity to Nasdaq futures highlights its vulnerability to macroeconomic factors and broader equity market performance, limiting its appeal as a safe-haven asset.
  • Disappointment over Trump’s crypto-focused working group failing to deliver immediate policy support has dampened investor optimism about regulatory tailwinds for the sector.
  • High valuations and speculative trading activity leave Bitcoin exposed to further downside risk, with analysts warning of potential declines to support levels at $92,000 or even $87,000 if bearish momentum persists.
  • Increased competition from alternative cryptocurrencies and emerging blockchain technologies could erode Bitcoin’s market share and long-term dominance in the digital asset space.

Despite the recent slump, analysts suggest Bitcoin remains positioned for long-term strength, contingent on favorable regulatory developments and broader adoption. The Federal Reserve’s upcoming policy meeting could also provide direction for riskier assets like cryptocurrencies. Meanwhile, the emergence of DeepSeek has highlighted the potential for increased competition in the tech space, underscoring the importance of innovation and cost efficiency for market leaders.

As Bitcoin and other digital assets navigate a volatile market environment, the focus will remain on both policy clarity from the Trump administration and macroeconomic factors. While near-term headwinds persist, the evolving landscape for cryptocurrencies presents significant opportunities for investors with a long-term perspective.

About the Author

David Love is an editor at Quiver Quantitative, with a focus on global markets and breaking news. Prior to joining Quiver, David was the CEO of Winter Haven Capital.

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