DeepSeek news is sinking crypto too, but will the slump last?

The news that DeepSeek’s new R1 model was created in just two months for under $6 million is triggering a significant sell-off, not only for the tech sector but for the crypto market, too.  

The free Chinese open AI model, launched in December, targets competitors like OpenAI’s Chat GPT and Meta’s Llama and has risen to the top of Apple’s App Store. While tech stocks like Nvidia, Microsoft, and Oracle are taking the brunt of the beating, the crypto market is also hurting. As of 11 a.m. ET, crypto’s market cap was down 5.5% in the past 24 hours, according to CoinGecko.  

The crypto ecosystem has been on a massive bull run in recent weeks, thanks mainly to Trump 2.0, but today some are panicking as they watch their assets tumble.

“DeepSeek just crashed crypto,” Altcoin Daily said on X.

Bitcoin’s dipped below $100,000 overnight, but has regained some of its losses already. Experts said that while markets have reacted aggressively, this probably won’t affect crypto in the long term.

“While this is bad news for investors in US tech stocks, it’s not bad news for the crypto industry,” said Charles Wayn, cofounder of Web3 infrastructure and digital credential network Galxe.

“Yes, we’ve seen a slide in crypto tokens today, but it won’t last as crypto is the biggest beneficiary of AI technology.”

While the correlation between bitcoin and tech stocks has been strong, hitting a two-year high in January, for most of 2024, the connection had actually broken down.

Several experts echoed the idea that the latest DeepSeek news as good for crypto, predicting the sell-off will ultimately slide off crypto within a day or two.

Kevin Rusher, founder of the real-world asset tokenization platform RAAC, went further.

“Crypto will probably be one of the biggest beneficiaries of growth in AI — wherever it comes from — if it can move blockchain technology forward and open up new possibilities for trading and more,” Rusher said.

“Most likely, we’ll see that reflected in the value of AI tokens over the coming days.”

Yaël Bizouati-Kennedy is a financial journalist who’s written for Dow Jones, The Financial Times Group, and Business Insider.