The Breakdown Why China's DeepSeek AI Model Crashed Bitcoin
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Jan 29, 2025 The release of China's DeepSeek AI model sent Bitcoin tumbling under $100k, sparking debates over market reactions. The impact of AI on Bitcoin volatility and its ties to tech stocks is analyzed. Attention also shifts to the Fed's pause on interest rate hikes, adding layers of complexity to market dynamics. Additionally, Japan's shift in economic policy poses new challenges, with inflation driving interest rates to a 25-year high and influencing global market movements, including Bitcoin.
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DeepSeek's Impact on Bitcoin
- Bitcoin dropped 5%, hitting a two-week low of $98,000 after DeepSeek's release.
- The market's volatile reaction raises questions about the real impact of AI on Bitcoin's value.
DeepSeek's Competitive Advantage
- DeepSeek's R1 model is cheaper and more efficient than competitors, causing market fear.
- This has sparked concerns about the value of big tech investments in AI.
Overvalued AI Infrastructure?
- DeepSeek's low training costs challenge the high investments of US tech giants in AI.
- Some analysts believe this could indicate overbuilt data centers and inflated valuations.