TLDR
Chinese AI app DeepSeek’s sudden rise has triggered a $212 billion crypto market crash, dropping global market cap to $3.42 trillion
Bitcoin fell below $100,000, with a critical support level being tested after a 5% decline
Major altcoins including Ethereum, XRP, and Solana saw drops of 8-10%
Large-scale liquidations occurred, with $613 million worth of positions liquidated in 24 hours
Trump’s administration has created a cryptocurrency working group to propose new regulations and explore a national crypto stockpile
The cryptocurrency market experienced a sharp decline on January 27, 2025, with over $212 billion wiped from the global market capitalization. The downturn began after DeepSeek, a Chinese AI application, unexpectedly rose to the top spot on Apple’s App Store, sparking concerns about U.S. tech valuations.
DeepSeek’s development costs of under $10 million stand in stark contrast to ChatGPT’s $157 billion valuation, raising questions about potential overvaluation in the U.S. tech sector. This disparity prompted a sell-off in U.S. technology stocks, which quickly spread to cryptocurrency markets.
Bitcoin, the leading cryptocurrency, dropped below $100,000, trading at $99,969, marking a more than 5% decrease from its recent high of nearly $110,000. The psychological support level of $100,000 is now being tested, with the price briefly touching $99,902 during the day’s trading.
Bitcoin Price on CoinGecko
The market decline triggered substantial liquidations across cryptocurrency exchanges. Within 24 hours, $613 million worth of positions were liquidated, with long traders bearing the brunt of the losses at $569 million. The largest single liquidation event occurred on the HTX exchange, involving a position worth $98.46 million.
Alternative cryptocurrencies (altcoins) faced even steeper declines. Ethereum, XRP, and Solana experienced drops between 8% and 10%. Popular meme coins weren’t spared, with Dogecoin and Shiba Inu falling by 8% and 7% respectively. PEPE and TRUMP tokens saw more severe impacts, with nearly 13% losses.
The market turbulence coincides with recent political developments in the United States. Following his election victory, President Donald Trump has initiated steps to reshape cryptocurrency policy, ordering the creation of a dedicated working group to propose new regulations and explore the possibility of establishing a national cryptocurrency stockpile.
BlackRock CEO Larry Fink has revealed ongoing discussions with sovereign wealth funds regarding Bitcoin investments, highlighting continued institutional interest despite market volatility. This development suggests potential long-term support for cryptocurrency markets, even amid short-term price fluctuations.
The Federal Reserve’s upcoming policy meeting, the first since Trump took office, has added another layer of market uncertainty. While rates are expected to remain unchanged, Trump has publicly called for immediate rate cuts, citing declining oil prices as justification.
Cryptocurrency trader Arthur Hayes has predicted a potential correction to the $70,000-$75,000 range for Bitcoin. Hayes suggests this could trigger what he terms a “mini financial crisis,” though he maintains an optimistic long-term outlook, projecting a $250,000 Bitcoin price by year-end.
The correlation between cryptocurrency and traditional stock markets has become increasingly apparent during this downturn. Bitcoin and other digital assets have shown similar trading patterns to high-growth technology stocks, particularly those influenced by AI-related market sentiment.
U.S. government debt, which exceeded $34 trillion at the start of 2024, continues to influence market dynamics. The combination of Covid-related stimulus measures and subsequent inflation control efforts has created a complex economic environment that affects both traditional and cryptocurrency markets.
Market analysts note that DeepSeek’s success has particular implications for U.S. tech valuations. The app’s ability to achieve performance comparable to OpenAI’s models with lower chip requirements has raised concerns about the sustainability of current tech sector valuations.
The crypto market’s response to these developments demonstrates its sensitivity to broader economic and technological trends. Trading volumes have increased substantially during this period of volatility, indicating active market participation despite declining prices.
Recent data shows the global cryptocurrency market capitalization now stands at $3.42 trillion, reflecting a 5.4% decrease over the past 24 hours. This adjustment represents one of the larger single-day movements in recent market history.
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