Why China's DeepSeek is causing crypto market plunge?

Cryptocurrency Market Faces Downturn Amid DeepSeek Launch

The cryptocurrency market is experiencing a significant decline, with Bitcoin (BTC) falling sharply by over 7%. This drop has brought BTC's price below $100,000 for the first time in over ten days. The decline in BTC's value mirrors a similar trend in the stock market, with the NASDAQ dropping over 3%.

DeepSeek's Impact on Market Dynamics

The launch of DeepSeek, a Chinese artificial intelligence (AI) startup, has caused ripples in both the cryptocurrency and stock markets. DeepSeek's AI model, marketed as a cost-effective alternative to existing AI technologies, has led to a sell-off in tech stocks. Notably, companies like Nvidia have seen their stock prices plummet by 17%.

BTC's Response to Market Volatility

BTC, often considered a "digital gold" and hedge against inflation, has not been immune to market volatility. Its price drop below $100,000 has raised investor concerns about the sustainability of its bullish trend. However, analysts remain cautiously optimistic, observing that BTC's derivatives metrics have remained stable, indicating professional traders' preparedness for the downturn.

Broader Market Sentiment

DeepSeek's launch has highlighted the growing correlation between the cryptocurrency market and traditional financial markets. As uncertainty in the tech sector persists, investors are shifting their risk appetite, leading to sell-offs in both tech stocks and cryptocurrencies. This trend suggests a potential extended correction in the crypto market if the traditional markets fail to stabilize.

Conclusion

While DeepSeek's launch has triggered an immediate decline in BTC and tech stocks, the long-term outlook remains uncertain. Investors are advised to exercise caution and closely monitor market developments. The interplay between traditional financial markets and cryptocurrencies will likely continue to shape future trends amidst the evolving global economic landscape.