BTC Recovers After DeepSeek Spooks The Market

The crypto market has been up and down over the past week. Bitcoin tumbled below $100,000 before recovering back above $102,000. Along with crypto, the stock market plummeted as well with $787 billion wiped out in a single day.

But wait, what’s going on here?

Wasn’t Trump supposed to be the shot in the arm that the markets needed? So, what happened?

In short…

Well, mostly an AI company from China.

Let’s dig deeper.

DeepSeek Eats Nvidia’s Lunch

DeepSeek-R1, the new reasoning model from China-based DeepSeek, made headlines with its disruptive debut. DeepSeek not only tanked Nvidia’s stock by $420 billion in market cap—the biggest one-day drop in history—but also sent ripples across the tech and AI landscape. 

Here is how DeepSeek is competing against ChatGPT. DeepSeek is now a top performer in AIME, MATH-500, and GPQA benchmarks compared to ChatGPT.

When it comes to the AIME benchmark, DeepSeek outperformed ChatGPT’s o1 by ~8,500 steps

However, it's not just the performance that is mindboggling. Consider the following.

DeepSeek was developed in just under 2 months! For a fraction of the cost of ChatGPT. DeepSeek reports that training their model cost approximately $5.8 million. While there is ongoing debate about the total development cost, let’s assume a conservative estimate of $2 billion—a figure roughly 350 times their stated training expense.

For comparison, OpenAI recently raised $6.6 billion in its latest funding round alone. The scale of operations also differs significantly: OpenAI employs around 4,500 people, which is approximately 22 times the workforce of DeepSeek, with just 200 employees. 

Moreover, DeepSeek achieved its breakthrough using significantly less advanced hardware than OpenAI’s state-of-the-art systems

Basically, DeepSeek provides a lot more bang for your buck. What they managed to do in just a few days have brought the multi-billion dollar companies like Microsoft and Google to shame. 

Also, they showed that it is possible to create sophisticated AI models using chips that are far less advanced. Meaning, that companies like Nvidia were extremely bloated and overvalued.

Hence, the dump was bound to happen. 

But what makes DeepSeek so different? Let’s take a closer look.

Key Technical Innovations

DeepSeek-R1’s success is rooted in its unique approach to optimizing AI models for cost, performance, and hardware accessibility.

8-bit Precision Computing

DeepSeek-R1 replaces traditional 32-bit floating-point numbers with 8-bit precision, reducing memory usage and computation requirements significantly without sacrificing accuracy.

Implication: Allows high-performance AI to run on consumer-grade GPUs and mobile devices, bypassing the need for Nvidia’s top-tier chips like the H100.

Compressed Key-Value Indices

Implements a 93% compression of key-value pairs, drastically reducing VRAM usage while maintaining inference performance.

Implication: Training and running models are now feasible on lower-end hardware, democratizing AI access.

Multi-Token Prediction

Simultaneously predicts multiple tokens in a sequence, doubling inference speeds and improving long-context understanding.

Implication: Enhances user experience in applications requiring real-time interactions, such as chatbots and customer support.

Mixture-of-Experts (MoE) Architecture

Activates only small parts of the model (“experts”) dynamically during tasks, significantly reducing computational overhead while maintaining high accuracy.

Implication: Allows advanced models to run efficiently on decentralized setups and consumer-grade hardware.

Versatility

Users have successfully run DeepSeek-R1 on iPhones, showcasing the model’s ability to operate locally without relying on large-scale data centers or high-speed internet.

Implication: Opens the door to mass-market adoption of AI at an unprecedented scale.

Market Implications

The rise of DeepSeek has given the Chinese markets a major leg up over their American counterparts.

By optimizing its AI model for cost and hardware efficiency, DeepSeek has not only challenged the dominance of US-based AI but also positioned China as a formidable player in the global AI race. 

Over the past few years, the US has funneled billions of dollars into AI development and semiconductor manufacturing, with Nvidia emerging as a key beneficiary. 

The US government has also implemented stringent export bans on advanced chips and technologies to limit China’s progress in AI. 

Yet, DeepSeek’s success demonstrates how Chinese engineers have bypassed these barriers by focusing on efficiency and innovation over brute computational power.

While US companies like OpenAI and Anthropic rely on vast data centers, cutting-edge Nvidia GPUs, and multi-billion-dollar budgets to maintain their edge, DeepSeek has delivered comparable—or even superior—performance with a fraction of the resources. 

So, What Does This Do To Crypto?

Crypto dropped because of its close correlation with US tech stocks. It is as simple as that. 

However, to crypto’s credit, the market has recovered the losses it suffered in the last few days. Patient diamond hands who didn’t listen to all the FUD were able to profit from the drop, while paper hand holders sold off at a loss.

This is what happens every single time. Newbie investors who are not well-versed with the markets listen to the noise and end up losing their gains.

This is why groups like Coiners exist. Our group has experienced traders who are veterans of the market providing deep insight about actual market conditions. For example, this is what one of our group members had to say about the DeepSeek crash:

Don’t listen to the noise. Listen to the experts.

You are responsible for your gains. Join the Coiners ASAP.