The launch of DeepSeek, a low-cost Chinese large language model, is putting pressure on the markets, sending Bitcoin BTC/USD back below $100,000 on Monday.
What Happened: DeepSeek’s launch on Jan. 20 rippled through to global markets on Monday, as the Chinese AI system, developed for just $6 million, outperforms OpenAI’s vastly more expensive ChatGPT.
According to cryptocurrency influencer The DeFi Edge, this development challenges the perception of U.S. tech dominance, triggering sell-offs in overvalued U.S. tech stocks like Nvidia and Microsoft.
The Nasdaq 100 dropped 2%, and the crypto market, often correlated during crashes, followed suit.
Meme coins also took a hit, with Trump TRUMP/USD and Dogecoin DOGE/USD losing 10% and 9%, respectively.
Additional pressures include The Bank of Japan raising interest rates to a 15-year high, contribute to market uncertainty.
What Experts Are Saying: Bob Elliott of Unlimited Fnds noted that “much of the move is concentrated in the various AI names that have powered U.S. tech stocks higher.”
This sharp downturn in US markets contrasts with more muted reactions globally, with European stocks down just over 1% and Chinese stocks showing minimal movement in either direction.
Interestingly, the commodities market has remained relatively stable amid the turmoil. Elliot observed that crude oil prices have been flat, while copper was “only down modestly.”
Gold, after an initial dip, has recovered to trade flat for the day, benefiting from falling U.S. bond yields.
Elliot suggests that these market dynamics are primarily “US stock centered, and particularly US tech stock focused rather than a broad based challenge to global growth.”
He points out that markets had been pricing in “euphoric growth” for 2025, with high expectations for tech earnings and accelerated growth across other sectors.
The analyst concludes by questioning whether this market downturn could be significant enough to impact the real economy, stating, “More needed, but this could be the start.”
What’s Next:
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