The cryptocurrency market suffered a sharp decline, led by AI token losses following the release of the disruptive DeepSeek R1 model.

The cryptocurrency market experienced a significant drop as its total market capitalisation fell by over 6%. This downturn appears to be primarily driven by the release of DeepSeek R1, a groundbreaking AI language model created by DeepSeek, a Chinese AI lab. The model's capabilities rival or surpass those of leading AI systems like OpenAI's, while requiring much less computational power and resources, making it accessible on devices as small as smartphones. Dubbed “AI’s Sputnik moment”, its disruptive potential has triggered volatility in AI-related assets, particularly impacting cryptocurrencies associated with artificial intelligence. Tokens such as Render, Near Protocol, The Graph, and Artificial Superintelligence have seen double-digit percentage losses. Additionally, GPU-dependent cryptocurrencies have experienced steep declines, largely because of reduced confidence in their long-term prospects. Alongside this, the market also saw significant leveraged liquidations worth $853 million, exacerbating the sell-off. This cascade of liquidations has created downward price momentum, highlighting the destabilising effect of over-leveraged trades in volatile crypto markets. The overall cryptocurrency market cap slipped below its 50-day simple moving average (SMA), a key support line, and risks further losses if bearish trends continue. However, renewed buying activity could stabilise the market and potentially restore price levels to January highs. Investors are advised to tread carefully as the market becomes increasingly unpredictable due to advanced AI developments and fluctuating investor sentiment.