Cryptocurrency markets face renewed volatility risks as DeepSeek, a Chinese AI startup, prepares to release its next-generation model. Market analysts note that a similar release in January 2025 triggered a major sell-off, erasing over $330 billion from crypto markets in a single day. With equities already jittery and the Bitcoin Fear & Greed Index signaling persistent bearish sentiment, observers warn that any stock market FUD could quickly spill over into digital assets.
A more complex relationship between equities and crypto has emerged since last October’s market crash. While the Nasdaq finished Q4 up 2.4%, Bitcoin [BTC] dropped 6.3%, indicating a stronger investor confidence in traditional stocks. This dynamic means any fear, uncertainty, and doubt in equities could swiftly impact cryptocurrency valuations.
The U.S. stock market is showing nervousness ahead of another potential “DeepSeek-led” crash. This puts Bitcoin under particular scrutiny given its historical reaction to similar macro events.
For context, DeepSeek is reportedly preparing to release its next-gen model soon. Its previous model launch in January 2025 caused NVIDIA [NVDA] to drop 17% in one day, wiping out an estimated $600 billion in market value.
The Nasdaq 100 fell 3% for an approximate $1 trillion loss during that event. Other major tech stocks like Microsoft also declined 5%-6%, erasing hundreds of billions in capitalization.
Cryptocurrency markets were hit hard as well, with over $330 billion erased. Bitcoin and various altcoins dropped between 8% and 15% in that single day. This history underscores how stock market crashes have recently spilled into the crypto sector.
Since the October crash, market sentiment has become a key indicator for crypto. The wider market faces heightened capitulation risks not from crypto-specific trends, but because macro volatility is pushing capital out of risk assets.
The Bitcoin Fear & Greed Index continues to hover in red, signaling persistent bearish sentiment. Consequently, minor equity market shocks can amplify price swings in crypto.
Notably, the market is already pricing in a break below the $60,000 level for Bitcoin. Growing FUD around DeepSeek, historical trends pointing to potential wipeouts, and Bitcoin‘s relative weakness compared to equities suggest this positioning is significant.
Macro data shows Bitcoin‘s recent moves have been largely driven by broader market volatility. This is why another DeepSeek event could likely push BTC below this key support zone.
