Crypto Tumbles Amid DeepSeek AI Fears and Policy Uncertainty

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Bitcoin and other cryptocurrencies fell sharply on Monday, driven by concerns over a new artificial intelligence (AI) model developed by a Chinese startup, DeepSeek. The model triggered a global selloff in riskier assets, mirroring declines in stock markets and US technology futures.

Bitcoin dropped as much as 6.5% during London morning trading, marking its steepest intraday decline since December 6. Altcoins faced even steeper losses, with XRP and Solana sliding 9%. The crypto market’s slump coincided with broader market weakness, reflecting growing fears that DeepSeek’s AI model could disrupt US dominance in AI due to its cost efficiency and open-source technology.

“The Chinese LLM [large language model] poses a threat to US tech markets, raising questions about how Trump’s administration might respond,” said QCP Asia in a report.

Last week, President Trump signed an executive order establishing a working group to draft a regulatory framework for digital assets and evaluate the creation of a US crypto stockpile. However, the order stopped short of confirming a Bitcoin reserve, which Trump had promoted during his campaign.

Crypto traders, who had anticipated Trump’s pro-crypto policies, viewed the executive order as largely priced in. “The market got 90% of what it wanted, but anything short of an immediate Bitcoin reserve was going to disappoint,” said Sean McNulty, head of APAC derivatives at FalconX.

Bitcoin’s price is up over 50% since Trump’s election victory in November, reflecting the growing optimism surrounding his administration’s support for the sector. Trump, once a crypto skeptic, shifted his stance during the campaign, with significant support from the crypto industry in the form of political donations. He has vowed to make the US the global leader in crypto and named venture capitalist David Sacks as the administration’s AI and crypto czar.

In the days leading up to his inauguration on January 20, Trump and Melania launched memecoins — highly volatile tokens with questionable value — further showcasing his embrace of the digital asset industry.

Despite recent bullish news such as regulatory appointments, new ETF filings, and the executive order, the crypto market appears to be pausing for breath, according to Justin d’Anethan, head of sales at Liquifi.

Meanwhile, Asian stocks edged higher on Monday, even as trade war concerns resurfaced after Trump imposed sanctions on Colombia for refusing US deportation flights over human rights issues. Market-maker Acheron Trading’s Jonathan Yark noted that concerns over DeepSeek’s disruptive potential have “cascaded across futures and into digital assets.”

As of 10 a.m. in London on Monday, Bitcoin was trading around $99,200.

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