On Jan 20 2025, Chinese AI startup DeepSeek launched its R1 AI model, announcing that they had developed a ChatGPT competitor for just under $6 million in computing costs, compared to billions spent by US companies. The model quickly gained traction and became highest-rated free app on Apple's App Store within a week, demonstrating its effectiveness despite US chip restrictions on China.
The market response on Monday, Jan 27 2025, was dramatic - Nvidia, the leading AI chip manufacturer, suffered the largest single-day market value loss in history ($588.8 billion), while the NASDAQ fell 3.1%. Major tech companies and energy providers focused on AI infrastructure saw significant declines, marking a potential shift in the AI industry landscape. Data center companies tumbled, energy companies like Constellation Energy fell 20.85%, and companies like Meta (which had just announced plans for $65 billion in AI development spending) faced sharp stock declines, all driven by DeepSeek's demonstration that advanced AI could potentially be developed at a fraction of current costs, and despite the ban on the sale of Nvidia chips to China.
The tech sector shock rippled through the cryptocurrency market, with Bitcoin dropping from $105,000 to below $98,000, though it later recovered to around $103,000, highlighting the growing interconnection between AI technology advances and crypto markets.
Crypto liquidations hit $820.3m with 80% of those long positions on Jan 27 as Bitcoin price dipped below $100k.
The crypto market cap dropped 7.48% between Jan 26 and Jan 27, from $3.61 tn to $3.34 tn. As of today, Jan 28, it has recovered to $3.51 tn, a 4.74% increase over the last day. Meanwhile, the total crypto market 24h volume increased 12.14% to $161.08 bn, with total volume in DeFi currently standing at $10.18 bn, representing 6.32% of the total crypto market 24h volume. The volume of all stablecoins is $146.25 bn, which is 90.79% of the total 24h volume.
BTC and ETH spot ETFs recorded net outflows on the first trading session of the week, with BTC Spot ETFs recording net outflows of $457.6m while ETH Spot ETFs recorded net outflows of $136.2m.
Bank of China released a financial support plan, the "Action Plan for Supporting the Development of the Artificial Intelligence Industry Chain", through which over the next 5 years, the bank will allocate at least 1 trillion yuan, or approximately $138 billion, to provide financial support to entities in the AI sector.
Nasdaq submitted a proposal to the US Securities and Exchange Commission (SEC) to allow in-kind creation and redemption on the BlackRock iShares Bitcoin Trust (IBIT). This would allow large institutional investors, called authorized participants, to buy and redeem shares of the fund directly to bitcoin instead of cash.
MicroStrategy’s Michael Saylor announced that the company had spent around $1.1 bn to acquire 10,107 BTC at an average price of $105,596 per BTC between Jan 21 and Jan 26. The company's total holdings now stand at 471,107 BTC.
The Ethereum Foundation (EF) recently sold another 100 ETH for around 307k DAI, a stablecoin pegged to the US dollar, marking the third time in 2025 that the EF has sold ETH. This move was unexpected, as they had previously announced plans to use 50,000 ETH to participate in DeFi to generate yield. The change in strategy raised questions about the foundation's next moves and their potential market impact.
On Jan 23 2025, President Trump signed a crypto executive order titled "Strengthening American Leadership in Digital Financial Technology". The order establishes a Digital Asset Markets Working Group which will review existing regulations and propose a comprehensive federal framework for digital assets within 180 days while also exploring the creation of a national crypto stockpile, promoting dollar-backed stablecoins, prohibiting CBDCs, and revoking the previous 2022 executive order on digital assets.