DeepSeek Shocks the Market with New AI Model

Remo
Remo Zuiderwijk Content specialist

29 January 2025

Every week, Amdax summarizes what's happening in the crypto market for you. Want to learn more? Click through for further insights. 

This newsletter is a co-production with our partner Bitcoin Alpha.

Market Update 

Stay informed in three steps:

1. New Cost-Efficient AI Model Disrupts Financial Markets

Financial markets opened the week in the red following the introduction of DeepSeek’s new AI model from China. The model can deliver performance on par with OpenAI’s leading systems—at just one-tenth of the cost. This development triggered declines in major chip stocks and was reflected in broader stock indices and the crypto market.

2. Bitcoin Mostly Moves Sideways

The "DeepSeek crash" also impacted bitcoin’s price, which dropped by 7% overnight from Sunday to Monday, briefly touching $98,000. Over the following days, the price cautiously climbed back above $100,000. Zooming out, bitcoin has mostly been trading sideways since its rally late last year. The question remains: when will the upward trend resume?

3. Altcoins Take a Bigger Hit

It's a familiar pattern: when bitcoin declines, altcoins tend to fall even harder. This was evident at the start of the week, as the broader altcoin market trended downward, with only a few exceptions. Given the strong gains seen in November and early December, this correction in altcoins is hardly surprising.

News Overview

Signal out of the noise:

  • Czech Central Bank Considers Adding Bitcoin to Reserves. Ales Michl, governor of the Czech National Bank, revealed in an interview with the Financial Times that the bank is considering allocating 5% of its $146 billion reserves to bitcoin. Michl highlighted bitcoin’s low correlation with bonds, making it an attractive diversification option. The decision isn’t final yet—further analysis is required before any concrete steps are taken.
  • Wave of ETF Applications Floods Washington Under ‘New Rules’. According to Bloomberg analyst James Seyffart, tijd nearly 30 ETF applications have been submitted in a short period, including ones for Dogecoin, Trump’s own TRUMP memecoin, and BONK. Applicants are hoping for quick approval under Trump’s crypto-friendly policies, though analysts believe some filings are mainly marketing moves in an increasingly competitive ETF market.
  • Leadership Turmoil at Ethereum Foundation Sparks Debate. The Ethereum community is grappling with growing criticism toward the foundation overseeing the network’s development. Concerns include lack of effective marketing, perceived centralization, and inefficient leadership. Meanwhile, Lido’s founder has suggested creating a “Second Foundation” to drive innovation. Despite internal tensions, key Ethereum upgrades planned for 2025 remain unaffected for now.
  • SEC Opens the Door for Banks to Hold Crypto. The new Republican leadership at the SEC has  overturned SAB 121, a rule that previously made it nearly impossible for banks to custody crypto for clients. SEC Commissioner Hester Peirce called the decision a major victory, while Senator Cynthia Lummis noted that the rule stifled innovation in the U.S. Naturally, the banking sector welcomed the change.
  • Younger Generations See Crypto as a Retirement Asset, Says Bitget Study. A notable shift in retirement planning: 20% of Gen Z and Gen Alpha prefer crypto over traditional assets like real estate, private pension plans, and savings accounts. The study found that 40% of young adults have already invested in crypto, with 78% having more faith in alternative savings options than in traditional pension systems. Despite growing interest, volatility, regulation, and security concerns remain barriers to broader adoption.

Amdax's take:

DeepSeek’s groundbreaking AI model has shaken the industry, raising doubts about the profitability and valuations of major AI firms. This uncertainty has rippled into the crypto market in the short term. However, in the long run, this development may have little impact on most crypto assets, as crypto isn't directly tied to AI.

Behind The Scenes

Fantom (FTM) Rebrands to Sonic (S)

Sonic (formerly Fantom) is a blockchain platform designed to build decentralized applications (dApps), support DeFi, gaming, NFTs, and more.

The rebrand goes beyond just a name change—it includes speed and security upgrades to the network. Trading Sonic (S) is now available via the Amdax app and web platform.

Remo
Remo Zuiderwijk Content specialist

Our website uses cookies

We use cookies to personalize content and advertisements, to offer social media features and to analyze our website’s traffic. We’ll also share information about your usage with our partners for social media, advertising and analysis. These partners can combine this data with data you’ve already provided to them, or that they’ve collected based on your use of their services.