Crypto Takes a Hit: Bitcoin Slumps Amid Chinese AI Breakthrough

Chinese AI Shakes Global Markets: Bitcoin Drops Below $100,000 Amid Tech Disruption

Editorial Team (ET)May 8, 2025

Bitcoin, the leading cryptocurrency, experienced a dramatic tumble on Monday morning, dropping as much as 6.5% in London trading hours. This marked its largest intraday fall since December 6, shaking investor confidence. The slump wasn’t limited to Bitcoin—other cryptocurrencies like XRP and Solana bore the brunt of a selloff, plunging by approximately 9%.

The decline came as global markets reeled from the unveiling of a groundbreaking large language model (LLM) developed by Chinese AI startup DeepSeek. The model’s potential to disrupt US technology markets created a wave of risk aversion, amplifying pressure on the crypto sector.

DeepSeek’s AI Sends Shockwaves Through Global Markets

DeepSeek’s AI model, renowned for its cost-efficient and open-source technology, has become a flashpoint of concern. Analysts worry it could threaten the dominance of US technology firms, particularly in the AI space. According to QCP Asia, “The Chinese LLM poses a potential threat to US equity markets by disrupting AI dominance.”

This unexpected development triggered a ripple effect, with investors offloading riskier assets, including cryptocurrencies. The move highlights how closely intertwined global technology and digital asset markets have become.

Muted Reaction to Trump’s Pro-Crypto Executive Order

Just days earlier, former President Donald Trump—who recently re-entered the White House—signed an executive order aimed at boosting the US crypto industry. The order called for a working group to draft a regulatory framework for digital assets and explore the establishment of a federal crypto stockpile.

Despite the significance of this long-anticipated move, crypto markets displayed only a modest reaction. Analysts believe the order was largely priced into the market, with no immediate confirmation of a Bitcoin reserve dampening enthusiasm.

Sean McNulty of FalconX explained, “Even though the market got 90% of what it wanted with the executive orders, anything short of a Bitcoin reserve was going to disappoint.”

Trump’s Crypto Pivot: A Game Changer or Just Noise?

Once a crypto skeptic, Trump has shifted his stance dramatically in recent months. His campaign platform featured promises to make the US a global leader in crypto, backed by political donations from industry leaders. Venture capitalist David Sacks was appointed as a crypto and AI czar, underscoring the administration’s commitment to the sector.

However, critics remain skeptical of Trump’s sincerity, especially after the launch of memecoins by him and his wife Melania during the days leading up to his inauguration. While these volatile tokens grabbed headlines, they also raised questions about the seriousness of his crypto agenda.

The Path Forward for Bitcoin and Crypto Markets

Bitcoin, which was trading at $99,200 as of 10 a.m. in London, remains under pressure. Traders are weighing the impact of Trump’s executive actions, DeepSeek’s AI model, and renewed geopolitical tensions.

Jonathan Yark of Acheron Trading noted, “Concerns about DeepSeek disrupting the tech world have cascaded across futures and into digital assets.” Meanwhile, Asia’s stock markets saw mixed reactions as fears of a tech disruption were offset by a brief rally in some sectors. Crypto markets, while still volatile, are showing resilience. With Bitcoin up more than 50% since Trump’s election victory, the long-term outlook remains cautiously optimistic.

Conclusion

The cryptocurrency market’s decline underscores its sensitivity to global events, from technological breakthroughs to geopolitical shifts. While Trump’s pro-crypto stance offers potential tailwinds, the emergence of DeepSeek’s AI model has added fresh uncertainty to an already volatile market. As the world watches how these developments unfold, investors must navigate a complex landscape of risks and opportunities.

Bitcoin

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