Bitcoin and other major cryptocurrencies took a significant hit on Monday, as the debut of a revolutionary Chinese artificial intelligence (AI) model fueled a selloff across global markets. The flagship cryptocurrency fell by as much as 6.5% during London morning trading, marking its steepest intraday decline since December 6. Other digital assets mirrored Bitcoin’s downward trajectory, with XRP and Solana each plunging by 9%.
The slump extended beyond the crypto sphere, with U.S. technology futures facing sharp declines amid broader market jitters. Analysts attributed the downturn to concerns over DeepSeek, a Chinese startup’s large language model (LLM), which some believe could disrupt the competitive edge of U.S. AI technology through cost-efficient and groundbreaking open-source innovations.
“The Chinese LLM poses a potential threat to U.S. equity markets by disrupting U.S. AI dominance,” noted QCP Asia in a report released Monday. “Now the question is, how will Trump retaliate?”
Trump’s Executive Order Fails to Buoy Crypto Markets
The market reaction comes just days after President Donald Trump issued an executive order supporting the cryptocurrency sector. Returning to the White House this January, Trump pledged to establish the U.S. as a global hub for digital assets. The order called for the creation of a working group to draft a regulatory framework for cryptocurrencies within six months, as well as to evaluate the possibility of a U.S. “crypto stockpile.” However, the directive fell short of confirming a Bitcoin reserve, a proposal Trump had teased during his campaign.
“Even though the market got 90% of what it wanted with the executive orders, it evidently was mostly priced in,” said Sean McNulty, head of APAC derivatives at FalconX. “Anything short of a Bitcoin reserve that immediately started buying BTC was going to disappoint.”
Bitcoin’s reaction to the announcement had been muted, with modest gains recorded on January 24. Despite the latest setback, the cryptocurrency remains up more than 50% since Trump’s election victory in November, bolstered by his dramatic pivot from crypto skeptic to industry supporter. In December, Trump appointed venture capitalist David Sacks as the nation’s “AI and crypto czar,” further signaling his commitment to advancing the sector.
DeepSeek Sparks Fears of Tech Disruption
Market watchers say the emergence of DeepSeek has compounded risk-off sentiment in the crypto sector, as fears grow that the Chinese AI model could reshape the global technology landscape. Jonathan Yark, senior quant trader at Acheron Trading, commented, “Concerns that DeepSeek will disrupt the technology world have cascaded across futures and to digital assets.”
Meanwhile, traders are keeping a close eye on market sentiment following Trump’s executive actions. “After bullish news like pro-crypto regulatory appointments, new ETF product filings, and executive orders, the market seems to be catching its breath,” said Justin d’Anethan, head of sales at Liquifi, a token launch advisory firm.
Despite Monday’s decline, crypto enthusiasts remain optimistic about the sector’s long-term potential under a pro-crypto administration. However, with China’s DeepSeek AI and regulatory uncertainties looming, volatility in the digital asset market shows no signs of abating.