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DeepSeek Emerges as Potential Black Swan Event for Crypto

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Chinese AI startup DeepSeek has sent shockwaves through global financial markets. As the narrative goes mainstream, Bitcoin and crypto markets recorded a bloodbath on Monday, with nearly $1 billion in total liquidations.

Founded less than two years ago, DeepSeek has risen to prominence, positioning itself as a competitor to established AI giants like OpenAI, Meta, and Nvidia.

Crypto Market in Turmoil Amid DeepSeek Hype

The unveiling of DeepSeek has coincided with a sharp sell-off in the crypto market. Bitcoin (BTC) dropped over 5% in a matter of hours, with major altcoins seeing even steeper declines of 8–10%. According to data on Coinglass, in the past 24 hours, 316,282 traders were liquidated, with the total liquidations reaching $861.48 million as of this writing.

Total Liquidations
Total Liquidations. Source: CoinglTotal Liquidations

Some ascribe the latest market crash to DeepSeek’s growing popularity and its implications for the stock market. Among them was Ash Crypto, an industry veteran who attributed this volatility to broader market reactions stemming from DeepSeek’s ascent.

“This has nothing to do with the crypto market and everything to do with the US stock market,” he explained.

Ash Crypto linked the crypto downturn to a reevaluation of overvalued tech stocks in light of DeepSeek’s competitive edge. Similarly, Ran Neuner, founder of Crypto Banter, issued a stark warning about the potential ripple effects of DeepSeek’s emergence.

He argued that the wealth generated by AI and tech stocks in recent years has been a significant driver of risk-on investment in crypto markets.

“If these stocks take a hit, people will lose fortunes, and this could crash all risk markets as people scramble out of risk,” Neuner said.

The crypto analyst described the situation as a potential “black swan” event. These remarks, among others, highlight how DeepSeek’s rise has unsettled markets.

DeepSeek Emerges as a Disruptive Competitor

With a development cost of under $10 million, DeepSeek has emerged as a disruptive competitor, sparking debate among experts about its long-term implications. Adam Kobeissi, founder of The Kobeissi Letter, highlighted DeepSeek’s unprecedented growth.

Kobeissi contrasted it with OpenAI’s decade-long journey and multibillion-dollar funding, posing a pointed rhetoric on X (formerly Twitter).

“OpenAI was founded 10 years ago, has 4,500 employees, and has raised $6.6 billion in capital. DeepSeek was founded less than 2 years ago, has 200 employees, and was developed for less than $10 million. How are these two companies now competitors?” he wrote.  

The disruptive nature of DeepSeek has led Kobeissi to conclude that no company is safe from AI competition. Tommy Shaughnessy of Delphi Ventures echoed this sentiment, emphasizing DeepSeek’s potential to reshape the AI playing field.

He noted that the platform’s open-source nature could catalyze innovation at the application layer, which, in his opinion, could drive a shift away from reliance on costly infrastructure like Nvidia GPUs.

“DeepSeek ensures an open-source future… forcing all AI labs to accelerate innovation,” he said.

Of note is that the AI crypto segment also suffered in the aftermath of DeepSeek’s rise. Data on CoinGecko shows the market capitalization of AI crypto tokens is down by almost 13% to $36.4 billion.

AI Crypto Tokens Market Cap
AI Crypto Tokens Market Cap. Source: CoinGecko

This slump is likely amid speculation of the implications for GPU demand, which is often a driving fundamental for AI projects. Against this backdrop, Shaughnessy warns that this transformation could destabilize markets, particularly as investors reevaluate the valuations of hardware providers like Nvidia.

Indeed, beyond its low development cost, DeepSeek’s appeal also lies in its efficiency. Unlike traditional AI models, which require significant computational resources, DeepSeek is designed to operate with a fraction of the infrastructure. This raises questions about the long-term viability of high-cost providers like Nvidia and OpenAI.

Kyledoops, a technical analyst at Crypto Banter, tied the market reaction to macroeconomic factors, particularly the Federal Reserve’s upcoming decision on interest rates. He suggested that the Fed’s stance could either exacerbate or alleviate market jitters:

“BTC is plummeting today due to China’s AI DeepSeek triggering market reactions. Could the FOMC meeting become a catalyst for a market move that leaves the bears in disbelief?” Kyledoops wrote.

Despite the immediate market turbulence, some experts see long-term opportunities in the intersection of AI and crypto. Shaughnessy emphasized the potential for intelligent applications and agents to transform industries, driving innovation and value creation at the application layer.

Neuner, while acknowledging the risks, also highlighted the potential for this disruption to force governments to reassess monetary policy.

Disclaimer

In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and ConditionsPrivacy Policy, and Disclaimers have been updated.



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Illinois, Indiana Push for State-Owned Bitcoin Reserves

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Illinois and Indiana have introduced bills to establish a Strategic Bitcoin Reserve. They join a growing list of US states exploring Bitcoin as a financial asset. 

While Illinois aims to create a Bitcoin reserve fund, Indiana’s bill differs slightly. It explores how blockchain technology can enhance state agency operations. In addition, the bill explores investments in Bitcoin exchange-traded funds (ETFs).

Illinois’ Push for a Bitcoin Reserve

Illinois State Representative John M. Cabello has introduced House Bill 1844 (HB1844), also known as the Strategic Bitcoin Reserve Act. The bill highlights Bitcoin’s potential as a decentralized, finite digital asset that could serve as a hedge against inflation and economic volatility.

“A strategic bitcoin reserve aligns with Illinois’ commitment to fostering innovation in digital assets and providing Illinoisans with enhanced financial security,” the bill read.

The proposed bill seeks to establish the Strategic Bitcoin Reserve Fund, overseen by the State Treasurer. It offers provisions for accepting Bitcoin donations from residents and government entities.

Furthermore, the bill specifies a minimum holding period of five years. Therefore, any Bitcoin added to the fund would be held for the specified time before the state could sell, transfer, or convert it into another cryptocurrency. 

The bill also lays out guidelines for securing and managing the fund. It requires transparency through regular reports and gives the State Treasurer the power to set necessary rules.

Indiana’s Bitcoin Strategy

Meanwhile, Indiana is taking a slightly different approach. House Bill 1322, authored by state Representative Jake Teshka and co-authored by Representatives Shane Lindauer and Cory Criswell, focuses on both blockchain adoption and Bitcoin investment strategies. 

The bill directs the Department of Administration to explore how blockchain technology could improve government efficiency, data security, and consumer experience.

“The department of administration (department) shall issue a request for information for purposes of exploring how the use of blockchain technology could be used by a state agency to: (1) achieve greater cost efficiency and cost effectiveness; and (2) improve consumer convenience, experience, data security, and data privacy,” HB1322 states.

It also paves the way for state-managed investment in Bitcoin. The bill allows funds from the public employees’ retirement fund, state teachers’ retirement fund, and public officers’ funds to be invested in approved Bitcoin exchange-traded funds (ETFs). 

These include spot Bitcoin ETFs, which hold Bitcoin directly. Additionally, it includes Bitcoin futures ETFs. These track Bitcoin’s price movements through derivatives.

This move comes as Utah and Arizona advance legislation to invest public funds in digital assets. Furthermore, Texas Lieutenant Governor Dan Patrick has made the Bitcoin Reserve a top priority for 2025.

Similar proposals from South Dakota and Kentucky may follow as state representatives prepare to introduce bills creating a Strategic Bitcoin Reserve.

Disclaimer

In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and ConditionsPrivacy Policy, and Disclaimers have been updated.



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Lt. Gov. Dan Patrick Lists Texas Bitcoin Reserve as a “Top Priority”

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Dan Patrick, Lieutenant Governor for the State of Texas, listed Bitcoin Reserve as a top priority for 2025. Other industry-adjacent priorities include “Texas D.O.G.E.” and electrical grid upgrades.

However, Patrick did not give any clear indications of pro-crypto sentiments before today and actually criticized the mining industry in Texas last year. It is unclear how deep his newfound commitment to the industry will go.

A Texas Bitcoin Reserve

The movement to create a US national Bitcoin Reserve has been growing in strength for months now. Around 15 states are crafting legislation for state-level Bitcoin reserves, and Texas has been an early and persistent member of this coalition.

Today, Lt. Gov. Dan Patrick listed the establishment of a Texas Reserve as a “top priority” for 2025.

Although the push for a national-level reserve is apparently growing, it has received a few setbacks. President Trump issued an executive order to create a “digital stockpile,” which is neither Bitcoin-exclusive nor integrated with the Federal Reserve.

Some have feared that this half-measure may sap energy for a national reserve, but Texas is still trying to stockpile Bitcoin.

Initially, Patrick announced the names of 25 bills with the “top priority” designation and will follow up with 15 more. However, only a few of these directly or indirectly benefit crypto. The Texas Bitcoin Reserve proposal is an obvious help, as is the “Texas D.O.G.E.” proposal.

However, the governor preemptively addressed these concerns, saying he limited his initial set of goals:

“Senators like having a low bill number since it shows their bill is a priority of the Lt. Governor and has a high probability of passage. Just because a bill is not included in the top 40 does not mean it is not a priority for me or the Senate. There will be hundreds of bills that pass the Senate, all of which are important to Texas,” Governor Patrick claimed.

Additionally, several other priority bills would clearly help Texas’ Bitcoin industry through one avenue: crypto mining. The state has become a hub for mining, with several leading companies relocating to Texas in the last year.

Some of Patrick’s other priorities, like investing in the electrical grid or water supply, would likely benefit this industry.

“A US state moving to hold BTC on the books? That’s next-level adoption. If this passes, Texas wouldn’t just be mining-friendly – it’d be holding hard money on a state balance sheet,” wrote Mario Nawfal.

Ultimately, though, it may be too early to get particularly excited. Patrick has occupied this position for a decade, and he hasn’t made any substantial pro-crypto statements or policies before this.

In fact, he publicly criticized the mining sector last year. In short, the governor may have placed a top priority on a Texas Bitcoin Reserve, but the bill still needs to pass.

Disclaimer

In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and ConditionsPrivacy Policy, and Disclaimers have been updated.



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Why Is It Bullish for Bitcoin and Crypto?

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The Federal Reserve kept its benchmark interest rate unchanged at 4.25%-4.50% on Wednesday.  This marks a ‘hawkish pause’ as inflation remains elevated and economic activity grows at a steady pace. 

The decision follows three consecutive rate cuts in late 2024 but signals that policymakers remain cautious about premature monetary easing.

Steady Interest Rates Likely to be Bullish for Crypto 

There haven’t been any major market movements following the announcement. Usually, steady rates are bearish for the crypto market. Fed’s stance suggests that capital will not flow into high-risk assets as quickly. 

However, major cryptocurrencies saw a modest uptick. Bitcoin, Solana, and XRP each gained nearly 2% in the hour after the news. 

So, there’s likely a market optimism over continued liquidity stability. A pause in rate hikes is generally viewed as bullish for risk assets, including cryptocurrencies. 

Lower interest rates—or expectations of stable rates—make traditional fixed-income investments less attractive. This drives investors toward higher-yielding assets like equities and crypto. 

“Trump’s out here begging for a cut, but the Fed’s like ‘nah.’ It’s bad news for crypto, cause when interest rates stay high, investors chill out and avoid risk. But if Powell flips the script and gets all dovish, we could see some action,” Mario Nawfal wrote on X (formerly Twitter).

Additionally, a ‘Hawkish Pause,’ suggests that economic conditions are stable enough to avoid aggressive tightening. This creates a favorable environment for crypto markets, which thrive on liquidity and investor confidence.

Bitcoin Daily Price Chart on Wednesday. Source: TradingView

Fed’s Policy Stance and Market Expectations

Despite keeping rates steady, the Fed’s statement indicated that inflation remains elevated and removed previous references to progress toward its 2% goal. This suggests that further rate cuts may not be imminent. 

However, steady employment levels and economic resilience reduce recession fears, supporting speculative assets like Bitcoin and other cryptocurrencies. 

President Trump had urged the Fed to continue cutting rates, but central bank officials chose to maintain their current stance.

Overall, the crypto market will closely monitor any signals of future liquidity expansion. Until the Fed shifts toward rate cuts or implements measures that increase monetary stimulus, altcoins are expected to underperform Bitcoin

Bitcoin, with its stronger institutional appeal and macro resilience, remains the safer bet in a hawkish monetary environment.

Disclaimer

In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and ConditionsPrivacy Policy, and Disclaimers have been updated.



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