Crypto inflows fell to $527 million as DeepSeek AI hype drained liquidity

Last week, crypto inflows significantly dropped to $527 million, a sharp decline from the nearly $2 billion seen in previous weeks. This was primarily attributed to the hype surrounding DeepSeek AI, which affected liquidity in both digital assets and stock markets.

According to a recent CoinShares report, investor sentiment was impacted by DeepSeek's ascent. While digital assets still experienced positive inflows, they were considerably lower than before. Prior to the decline, inflows had reached $1.9 billion and $2.2 billion. However, on Monday, the market witnessed $530 million in outflows due to DeepSeek's influence.

The liquidity shift impacted not only crypto but also AI-related stocks like Nvidia and mining companies. This led to market uncertainty and wavering confidence. Despite these factors, Bitcoin exhibited resilience, attracting $486 million in inflows, indicating ongoing investor interest.

Later in the week, the market started to recover, with new inflows exceeding $1 billion. However, this was still below the previous levels of nearly $2 billion per week. The ability to maintain positive inflows suggests that investor confidence in crypto remains relatively strong.

The effects of DeepSeek became a prominent topic in financial and crypto discussions. Emily, a user on X, commented, "DeepSeek vibes are definitely shaking things up," highlighting the uncertainty within the industry. Nevertheless, AI-related crypto assets began to show signs of recovery as DeepSeek's momentum decelerated.

Lennix Lai of OKX commented on the situation, stating that while DeepSeek caused a short-term shock, escalating trade tensions pose a greater concern. Temporary pauses on tariffs have eased some worries, but future developments could lead to increased volatility. He also mentioned that institutional involvement and the integration of crypto into mainstream finance could potentially keep Bitcoin and other major cryptocurrencies linked to risk assets.

In conclusion, broader economic factors, including trade tensions and US jobs data, will continue to influence investor behavior. Amidst the current volatility, long-term crypto investors maintain a focus beyond short-term fluctuations, recognizing that the industry has historically faced and recovered from downturns.