What is DeepSeek & Its Influence on Crypto?

Have you heard about the latest AI model that has taken the world of cryptocurrency by storm? This powerful AI engine made such an impact that Bitcoin's price dropped 6% just by its debut. Crazy, right?

You must be thinking, what is this AI model and how can a single AI system have such a strong influence on the crypto market? Don’t worry, this article has detailed answers to your every question. To satisfy your curiosity, the AI model in question is DeepSeek. In this blog post, we’ll discuss everything related to it, including its foundation, functionality, and the impact it’s having on the world of crypto.

What is DeepSeek: A Chinese AI Startup Company?

DeepSeek is a Chinese artificial intelligence company that has caused a significant downfall in American tech companies and the US stock market. It isn’t just a single AI system but has several models designed for different fields. Its most prominent model is the DeepSeek R1, which was launched on 20 January 2025.

You would be shocked to know that this single model is the sole reason behind the latest bearish market conditions for Bitcoin. But before discussing how it happened, let’s understand what DeepSeek really is.

DeepSeek is a Chinese AI startup company that specializes in developing LLMs (large language models). It gained its fame from its latest model, the DeepSeek R1, which has proved its worth in less than a month. This AI model has better functionality and features than the Open AI’s CHAT GPT O1 model and Meta AI’s LLAMA model. Even Google’s Gemini is way inferior to DeepSeek R1.

And to our surprise, its creation cost is way less than every other AI model. While other tech companies had spent millions and billions of dollars on their AI models, DeepSeek had a total training budget of only 5.6 million dollars. Moreover, this chatbot is completely free with no premium prices. This little detail shows that its developers are not interested in making money; they are more dedicated to benefiting the world!

The Founder of DeepSeek

Liang Wenfeng, a Chinese entrepreneur, is the mastermind behind DeepSeek. He established DeepSeek with the goal of competing with the Western market. Before founding DeepSeek, Liang made a name for himself in the world of quantitative finance. He co-founded High Flyer, a successful quantitative hedge fund, before establishing DeepSeek in May 2023.

Although the initial models of this Chinese startup company were also successful, they were not able to gain Western attention. It happened when DeepSeek launched its “R1” model that American companies finally accepted their defeat.

This model specifically made headlines worldwide when its launch led to a 6% drop in Bitcoin’s price. Liang's dedication and hard work towards his mission made it possible for DeepSeek R1 to not only compete but surpass the Western AI chatbots.

Top Large Language Models of DeepSeek

DeepSeek has developed several powerful AI models, each designed for different purposes. Here are some of the top large language models (LLMs) created by DeepSeek:

DeepSeek Coder: The 1st open-source model launched by the company to address queries related to the field of computer science and coding. It was officially released in November 2023.
DeepSeek LLM: It was made public a month after the release of DeepSeek Coder, in December 2023. It is the 1st ever general-purpose model launched by the company.
DeepSeek-V2: This model is the 2nd and improved version of LLM. Hence, it is better in performance and has a lower budget than the 1st one.
DeepSeek-Coder-V2: It is an upgraded version of DeepSeek Coder and is designed for more complex coding problems. It was released last year in July 2024.
DeepSeek-V3: This model was released 2 months ago, in December 2024. It is built using a combination of different architectures that makes it ideal to handle a range of different tasks.
DeepSeek-R1: This is the most prominent model and the main reason behind DeepSeek’s Western fame. It was released in January 2025 and is quite similar to the DeepSeek-V3 model.
Janus-Pro-7B: Janus Pro 7B is the latest model released by the company. It is specifically made as a vision model and has the ability to generate images.

Each of these models plays a crucial role in different fields, proving that DeepSeek is not just an AI company but a leader in advanced AI-driven solutions.

Does DeepSeek Have Any Direct Relation with the Crypto World?

The answer to this question is NO! DeepSeek has no direct relation with any factor of the crypto world. Deep Seek has no direct connection with crypto, but its sudden entrance into the market has indirectly affected the crypto market.

The launch of its R1 AI model has had a significant influence on the US stock market. Just a week after its release, it became the most downloaded app on the App Store and Google Play Store in the US. This insane popularity and success had shaken the entire America, which led to a sharp and sudden decline in tech stocks.

This decline impacted businesses that had significant stakes in AI and blockchain technologies. These businesses started selling their crypto assets to support themselves, which led to a panic situation in the crypto market. The sudden selling pressure as well as the decline of US stocks caused a sharp drop in Bitcoin’s price, which affected the entire crypto market.

In short, even though DeepSeek has no direct connection to crypto or AI coins, its impact on technology stocks and investor behavior created a chain reaction that influenced the market and the launch of its R1 model was the main reason behind it.

Bitcoin Price Drop and Opportunity for Bitcoin Investors

The panic in the crypto market is mostly due to the sudden and huge drop in Bitcoin’s price. Bitcoin prices have dropped almost 6% in just a few weeks. This price drop has caused two different situations. One where investors are backing off and withdrawing their assets to avoid further possible loss. This is because no one is sure whether the prices will decrease more or not.

On the other hand, it has also become an opportunity for new investors to stake bitcoin while its prices are lower than usual. Bitcoin has faced many price drops before but has always recovered. As DeepSeek’s influence settles and tech stocks regain balance, Bitcoin’s price might rebound, offering profits to these new investors.

How DeepSeek Could Disrupt Traditional Crypto Models?

DeepSeek’s indirect relation with the cryptocurrency gives it the potential to change the way the crypto market works. Here’s how DeepSeek could disrupt traditional crypto models in both positive and negative ways:

Positive Disruptions

Market Influence Through Investor Sentiment

DeepSeek’s success in AI development has already shaken the US stock market, causing companies to rethink their investments. If DeepSeek continues to dominate the tech space, investors may shift their focus to AI-related technologies, indirectly influencing crypto market trends.

New Opportunities for Crypto-Based AI Projects

The popularity of DeepSeek may inspire crypto projects to develop AI-powered blockchain solutions. Companies in the crypto space could explore partnerships or integrations with DeepSeek, leading to new innovations in decentralized AI services.

Effects on Technology and Blockchain Funding

Few companies in the blockchain and cryptocurrency sector can stand on their own without support from technology investors. If further investment does start pouring into AI-driven initiatives, the blockchain industry as a whole would benefit because these firms would be more willing to invest in the crypto-A.I. crossover.

Negative Disruptions

Market Volatility Due to Shifting Investments

After DeepSeek’s R1 model launch, many investors withdrew funds from crypto and blockchain projects to reinvest in AI. If DeepSeek continues to dominate tech headlines, traditional crypto investors might move their money away, causing more instability in crypto markets.

Less Investment for New Crypto Projects.

Investors and crypto projects as a whole could find it extremely difficult because, as DeepSeek becomes popular, it will capture attention from industries outside of blockchain, driving the funding that would otherwise flow into blockchain businesses that are focused on new crypto projects.

Threat to Decentralization

DeepSeek is a China-based AI company, and its rise raises concerns about centralized control over technology. If DeepSeek's influence extends into crypto, it could challenge the decentralized nature of blockchain by encouraging more centralized AI-driven financial models.

Potential Regulations Due to DeepSeek’s Impact

There is a chance that new limitations may arise from governments due to DeepSeek’s visible effects on traditional financial markets. These boundaries will have the possibility to apply to cryptocurrency.

These are some possible disruptions that can occur with the influence of DeepSeek and the crypto market will need to adapt to these changes to maintain its stability and growth.

Challenges and Limitations Faced by DeepSeek in the Crypto World

DeepSeek and Crypto are two different worlds connected through the US stock market. Although DeepSeek has recently affected the Crypto market, there’s no surety of happening the same in the future. Here are a few challenges and limitations faced by DeepSeek in the Crypto world:

1.No Direct Connection to Crypto

DeepSeek is an AI-focused company and does not have any direct involvement in cryptocurrency. It does not develop blockchain projects, AI crypto coins, or decentralized finance (DeFi) solutions. Because of this, its influence on the crypto market is indirect and mostly happens through investor sentiment and financial shifts rather than real blockchain innovations.

2.Market Volatility and Unpredictability

The crypto market is already known for its high volatility. When DeepSeek’s R1 model launched, it shook tech stocks and forced companies to pull out funds from different investments, including crypto. However, this kind of influence is temporary and does not guarantee long-term market shifts. Bitcoin and other cryptocurrencies have faced many price fluctuations, and DeepSeek’s impact may fade as markets adjust.

3.Risk of Government Regulations

The US government has always monitored the impact of AI advancements on the crypto market. Since DeepSeek has influenced the market, it may face some strict regulations. Many countries have banned DeepSeek for several reasons. So, there could be a possibility for the US government and other major economies to ban it as well.

The Road Ahead

DeepSeek has a feature that allows its users to make their personal AI agents for free. These Agents could be used for any purpose including crypto trading as well. So, investors might start to consider this opportunity to automate their crypto works. Moreover, many crypto companies are exploring ways to combine AI with blockchain. In the future, DeepSeek’s advanced AI models could be used for this purpose as well.

It could also attract crypto and blockchain businesses. Platforms like Blockchain, Solana, or Ethereum may sign a partnership with this AI startup company to have better AI features. All these are just predictions, we will which one of them will come true in the future.

What Is DeepSeek? How Its AI Model Influence on Crypto?