The launch of generative artificial intelligence DeepSeek became the main event of the week. It would seem that news about affordable and useful technologies is positive. However, the DeepSeek R1 model not only undermined the positions of the leading American AI companies, among which OpenAI is the leader with its ChatGPT, but also caused the collapse of tech stocks. However, the most interesting thing is how and why DeepSeek negatively affected the cryptocurrency market and what will happen next?
Consequences of the DeepSeek launch
On January 27, 2025, DeepSeek released its R1 model, which impressed the market with performance that is identical to OpenAI o1-mini, but requires significantly less cost. As a result, the Nasdaq Composite lost more than $1 trillion in capitalization, Shares of such giants as Nvidia, Google and Microsoft have suffered a significant drop. The reason for this reaction is the fear of a potential loss of American dominance in the field of artificial intelligence (AI). Investors began to question the justification of billions of dollars in AI investments, as DeepSeek demonstrated that a similar result could be achieved at a much lower cost.
Leading AI development firms train their models on supercomputers using up to 16,000 integrated circuits, while DeepSeek uses only about 2,000 chips from Nvidia’s H800 series.
GPUs are crucial for performing computationally intensive tasks required in industries such as cryptocurrency mining and artificial intelligence. For example, cryptocurrency miners use Nvidia GPUs to solve math problems that validate transactions on the blockchain and receive rewards for doing so (the Proof-of-Work or PoW mechanism).
Interestingly, DeepSeek’s entry into the market has lowered the price of even spot uranium, which is considered key to the development of energy-intensive artificial intelligence. On January 28, the price dropped by $3.90 per pound of uranium oxide (U3O8) to $67.30 per pound, which means a weekly drop of $6.55 per pound.
How has DeepSeek affected the crypto market?
The news of the R1 launch had an immediate impact on the crypto market, especially on companies specializing in cryptocurrency mining. The largest players in cryptocurrency mining, such as Riot Platforms (RIOT), Cipher Mining (CIFR), Core Scientific (CORZ), and TeraWulf (WULF), experienced a sharp drop in share prices by 20-30%.
The reason was the fear that DeepSeek would reduce dependence on expensive GPUs. The training of the R1 model (as the Chinese say anyway) cost only $5.6 million, while last year the training of GPT5 was close to $1.2 billion!
In addition, companies that have started to diversify their business with hosted AI solutions, such as Hut 8 and Iris Energy, have also felt the negative effects. The launch of R1 has created competition in this segment, as this AI model from DeepSeek has demonstrated computational efficiency even without the most advanced processors. This increased the pressure on companies focusing on infrastructure services in the AI space.
The general decline in mining stocks may also have a negative impact on the value of bitcoin as investors begin to worry about the financial stability of the main players in the sector. BTC briefly dropped below $100 thousand.
AI-oriented crypto projects also received a strong jab. Tokens that rely on high-performance graphics processing units (GPUs), such as Render (RENDER), The Graph (GRT), and Fetch.ai (FET), experienced a drop of 11-15%.
- In short, Render (RENDER) is a decentralized rendering platform that uses video cards to process graphics and visualization.
- The Graph (GRT) is a protocol for indexing and querying data in blockchains that actively uses GPUs to quickly process and analyze large amounts of information.
- And the Fetch.ai (FET) project integrates AI and blockchain to create autonomous AI agentsthat perform complex calculations and data analysis.
In general, all tokens or projects related to AI (at least by name) were affected. During On January 27 alone, 330,767 traders liquidated on the exchanges, bringing the total amount to $941.63 million.
Deeply Sick or is competition — always good?
Despite the short-term negative impact, there are positive aspects for the crypto market. The main one is the reduction in the cost of launching blockchain solutions with AI. DeepSeek’s open-source code allows it to be integrated into existing crypto projects, reducing the cost of creating and maintaining decentralized AI applications.
In addition, by reducing the cost of computing, DeepSeek opens up opportunities for scaling AI in Web3 projects, which can stimulate the development of the crypto economy in general.
After the initial panic, the crypto market has begun to stabilize, and some AI tokens are already showing signs of recovery.
DeepSeek has become a catalyst for change in the tech world. Time will tell whether its impact was so negative. However, in the long run, it could be the key to more efficient and affordable AI solutions in the cryptocurrency space, believes cryptoanalyst Aggie. In his opinion, the DeepSeek shock may turn out to be «bullish» for the crypto market, especially for the AI-related sector.
Despite the short-term chaos, Aggie argues that the open nature of DeepSeek and the reduced costs of launching AI-powered blockchain applications have the potential to make cryptocurrency projects more sustainable and profitable eventually.
For example, frameworks such as ai16z, which have already integrated DeepSeek technology, demonstrate how these advances can lower the financial barriers to deploying AI-based solutions in the crypto ecosystem.
Co-founder of Eliza Labs by ai16z Shaw wrote on the X platform that more powerful models are always good for AI agents.
This is already evident in the price: AI16Z tokens are currently worth $0.6104 (+8.05%), the market capitalization has increased to $671.47 million (+8.06%), and the daily trading volume has increased to $150.74 million (+28.23%).
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