Following the release of DeepSeek R1 this weekend, the crypto market experienced a sharp decline, with prices dropping around 13% across AI-related tokens. Bitcoin fell to an 11-day low, now trading below $100k, while Near Protocol and ICP saw losses of 11% and 18%, respectively.
DeepSeek has created fears regarding the valuation of established AI firms and their associated cryptocurrencies. Investors are concerned that DeepSeek’s cost-effective model could undermine the market positions of companies like Nvidia and OpenAI, which traditionally require substantial funding.
Multiple Factors Behind the Market Decline
What’s interesting is that Miles Deutscher, one of the most popular crypto analysts globally with over 600k followers on X, believes that not only DeepSeek news affected the crypto market crashing today.
According to Deutscher, three main factors are contributing to the current market dip. First, as mentioned already, fears of a tech sell-off following DeepSeek’s launch are causing concern, with US market futures indicating a negative opening. Crypto markets, being more volatile and operating 24/7, are reacting ahead of traditional markets.
Why is the crypto market dipping? (simplified)
— Miles Deutscher (@milesdeutscher) January 27, 2025
In my opinion, there are 3 main factors right now:
• Fears of a tech-selloff following the launch/hype of DeepSeek (US open is set to be bloody according to futures), crypto is front running as markets are closed & it's a higher…
The second factor Deutscher points to is typical pre-FOMC meeting de-risking by investors. This behavior is particularly pronounced in the current environment, where markets are highly sensitive to interest rates, U.S. dollar movements, and overall liquidity conditions.
Lastly, the market appears to be suffering from a lack of short-term directional clarity following Trump’s inauguration. This political uncertainty, combined with the other factors, has created a perfect storm for market volatility.
That being said, many analysts estimate that the bull run still has another leg up before we enter a new bear market. This means that the current crash could be just a temporary thing and good days for crypto traders are still ahead of us in 2025.
Read also: Here’s Why XRP Price Won’t Stay Flat For Too Long
Follow us on X (Twitter), CoinMarketCap and Binance Square for more daily crypto updates.
Get all our future calls by joining our FREE Telegram group.
We recommend eToro
Wide range of assets: cryptocurrencies alongside other investment products such as stocks and ETFs.
Copy trading: allows users to copy the trades of leading traders, for free.
User-friendly: eToro’s web-based platform and mobile app are user-friendly and easy to navigate.
