Can US Fed steady the ship after DeepSeek’s shockwave to Crypto market?

DeepSeek triggers losses in crypto assets, driving profit-taking.

Economist at Beykent University in Istanbul says that bullish periods often lead to profit-taking, and DeepSeek’s emergence has created a strong motive for investors to realise profits.  / Photo: Reuters
Reuters

Economist at Beykent University in Istanbul says that bullish periods often lead to profit-taking, and DeepSeek’s emergence has created a strong motive for investors to realise profits.  / Photo: Reuters

The open-source and free release of Chinese artificial intelligence (AI) chatbot DeepSeek has sent shockwaves through the crypto market, triggering a sharp selloff in digital assets. Now all eyes are on the US Federal Reserve’s upcoming interest rate decision.

DeepSeek, a large language model (LLM), operates with significantly lower resource consumption than its rivals, including US-based OpenAI’s ChatGPT and Google’s Gemini. Its rapid rise in popularity across global mobile app stores triggered stock losses among major Western tech firms such as Nvidia.

While Nvidia and other affected companies have seen some recovery, Bitcoin has lost over 5 percent, while altcoins have plunged as much as 15 percent. Blockchain-based AI projects have suffered the steepest declines.

The total market capitalisation of cryptocurrencies has dropped from $3.6 trillion to $3.3 trillion.

Decline in crypto assets

Mustafa Batuhan Tufaner, an economist at Beykent University in Istanbul, told Anadolu Agency that DeepSeek’s ability to offer a more efficient AI service at a lower cost has raised concerns about the viability of highly expensive AI projects, contributing to the decline in crypto assets.

“As in every sector, AI is a major driving force in the crypto market. Investment volume in AI is substantial, and chips play a crucial role in crypto mining. So developments in AI and chip technology can have a profound impact on the crypto market,” he said.

Tufaner said Bitcoin and several other cryptocurrencies reached record highs when Donald Trump won a return ticket to the White House last fall, as expectations of a pro-crypto economic stance fueled a bullish market.

He emphasised that bullish periods often lead to profit-taking, and DeepSeek’s emergence has created a strong motive for investors to realise profits.

“The key question now is how other AI projects will respond to DeepSeek. In the medium term, potential geopolitical shifts stemming from Trump’s trade policies will also influence the crypto market,” he said.

“There is an expectation of a bull run in the crypto market, but short-term fluctuations will persist. The Fed’s rate decision and other macroeconomic indicators will be key factors, and Fed Chair Powell’s statements on the timing of rate cuts will have a significant impact on market sentiment,” he added.

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