Chinese Artificial Intelligence Caused Bitcoin to Fall: What Shocked the Market
27 January 2025 17:08
Bitcoin and other cryptocurrencies have fallen sharply after the emergence of a new Chinese model of artificial intelligence, which has triggered a global sell-off in risky assets. This was reported by "Komersant Ukrainian" reports with reference to Bloomberg.
The largest cryptocurrency fell by 6.5% on Monday morning, the largest intraday drop since December 6. Bitcoin was trading at around $99,200 as of 12 am Kyiv time.
Smaller tokens suffered even greater losses: XRP was down 9%, Solana fell by about the same amount. The drop in cryptocurrencies mirrored the general weakness in most stock markets, with futures on US tech companies falling sharply.
Crypto traders have so far not paid much attention to Donald Trump’s executive order to support the industry last week, shortly after his return to the White House. Some believe that prices have already reflected this move. Fears that Chinese startup DeepSeek’s artificial intelligence model will affect the valuation of tech companies have fueled negative sentiment toward cryptocurrencies on Monday.
“China’s large language model (LLM) poses a potential threat to U.S. stock markets, disrupting U.S. dominance in AI due to its cost-effectiveness and revolutionary open-source technology. Now the question is, how will Trump react?”
– qCP Asia reported on Monday.
Trump’s first moves
The drop comes after Trump on Friday ordered the creation of a task force to advise the White House on cryptocurrency policy. The group is supposed to propose a regulatory framework for digital assets in the US within six months and evaluate the creation of a cryptocurrency reserve. However, the executive order did not confirm that the US would create a bitcoin reserve, while Trump promised to do so during the election campaign.
The digital asset market took the January 24 decree in stride, showing moderate growth. But bitcoin has risen by more than 50% since Trump’s victory in early November. Trump had previously been skeptical of cryptocurrencies, but changed his mind during the campaign, in part because the industry increased its involvement in the election through significant political donations.
Asian stocks rose in early trading on Monday, despite renewed trade war fears after Trump ordered punitive sanctions against Colombia for refusing to accept US deportation flights.
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What shook up the cryptocurrency market
The fluctuations in the crypto market are caused by a new Chinese artificial intelligence model from the startup DeepSeek, which recently overtook ChatGPT to become the most popular free program in online app stores.
The main advantage of DeepSeek is its ability to provide accurate and fast answers to user queries, which makes it attractive to a wide audience. In addition, the app is still free, which contributes to its massive adoption.
The success of DeepSeek has caused concern among Western tech companies, which believe that Chinese developers could pose serious competition in the AI market. Some experts note that the emergence of such applications could change the global balance of power in the technology sector.
Despite its success, DeepSeek has faced criticism over the possible use of user data and the ethical aspects of AI. Some users have expressed concerns about the privacy of their data when using the application.
The developers of DeepSeek state that they are committed to ensuring the security and privacy of user data, and continue to work on improving AI algorithms to provide better and more accurate answers.
Bitcoin
Bitcoin is the world’s first and most popular cryptocurrency, which appeared in 2009. It was created by a person or a group of people under the pseudonym Satoshi Nakamoto, who remain anonymous to this day. Bitcoin is based on blockchain technology and has no centralized governing body.
Bitcoin is “mined” using a special mining technology, which is a digital analogy of mining physical minerals. Similarly to physical minerals, the number of Bitcoins is limited – there are only 21 million tokens in existence. So far, 19 million tokens have been mined, which is more than 90% of all “deposits”. Therefore, mining is becoming more and more difficult and expensive.
Bitcoin, like anything else in the world, can be exchanged for anything else, including traditional currencies. The value of Bitcoin shows the level of trust in it.
Bitcoin is considered a reliable and well-secured currency with a very high level of confidentiality. In the Bitcoin system, all information about transactions is open, but information about owners is completely anonymous. That is why Bitcoin, like some other cryptocurrencies, is popular among Ukrainian corrupt officials.
Initially, Donald Trump called cryptocurrencies a fraud, but during the last election campaign he changed his mind dramatically. Trump talks about maximizing the promotion of cryptocurrencies in the United States and promises to make the US the cryptocurrency capital of the world. The current boom in bitcoin and the cryptocurrency market in general is taking place against the backdrop of these promises.
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