AI agent tokens are experiencing a resurgence after suffering a $5 billion loss this week due to DeepSeek’s sudden popularity. 

Several challenges for DeepSeek emerged today, shifting market sentiment and fueling gains in AI-related tokens.

DeepSeek Faces Mounting Pressure

On Wednesday, Alibaba unveiled Qwen 2.5, an AI model it claims outperforms DeepSeek-V3. This announcement shook investor confidence in DeepSeek’s sustainability in the AI sector.

Additionally, OpenAI accused DeepSeek of using “distillation” techniques to train its AI models on OpenAI’s outputs. This is a potential breach of OpenAI’s terms of service. 

“Deepseek’s r1 is an impressive model, particularly around what they’re able to deliver for the price. We will obviously deliver much better models, and also, it’s legit invigorating to have a new competitor! We will pull up some releases,” Sam Altman, OpenAI CEO, wrote on X (formerly Twitter). 

The technique allows smaller models to replicate the performance of larger ones at a fraction of the cost. More importantly, it raises ethical and legal concerns within the AI research community.

Further complicating DeepSeek’s troubles, Italy’s data protection authority initiated an investigation into its use of personal data. 

As a result, DeepSeek’s app has been blocked from Apple and Google stores in Italy. 

“DeepSeek is not that special, the only thing that makes it better is that you can use it for free. China knew that USA won’t compete with free and cheaper products. USA, instead of competing, they want to ban the app in USA. The only solution for USA is banning the competition,” Mo Magoda wrote on X (formerly Twitter). 

AI Agent Coins See Market Rebound

Following these developments, AI Agent coins, which had faced heavy losses earlier this week, began to recover. 

Virtuals Protocol surged over 8%, while AIXBT and Ai16z both gained over 10% as investors redirected their focus toward decentralized AI projects.

The market correction comes after DeepSeek’s initial rise had diverted attention from AI-focused cryptocurrencies, leading to a sharp decline in their valuations. 

At the beginning of this week, DeepSeek unveiled its AI assistant, which rivals existing models but operates at a fraction of the cost. 

This innovation led to a substantial selloff in US technology stocks, with companies like Nvidia losing $589 billion from its market capitalization. Consequently, the stock price of crypto mining companies and AI-based cryptocurrencies dropped sharply. 

However, as the hype cools down, the market is starting to see the potential downsides of this new AI model. 

Also, several fake DeepSeek meme coins have surfaced on decentralized exchanges. Although DeepSeek has clarified it doesn’t associate with any cryptocurrency, scammers are still exploiting the hype. 

Bittensor (TAO) price is up less than 1% in the last 24 hours, but it stands out as the only top AI coin in the green, while others like RENDER, FET, and INJ are all in the red. TAO’s technical indicators suggest growing bullish momentum, with its BBTrend reaching its highest level in three weeks and a potential golden cross forming on its EMA lines.

Additionally, the Ichimoku Cloud setup remains positive, reinforcing the possibility of further upside. Whether TAO can reclaim $500 in February or face a pullback will depend on how it reacts to key resistance and support levels in the coming days.

TAO Ichimoku Cloud Flashes Bullish Setup

The Ichimoku Cloud chart shows a bullish setup, with TAO price currently trading above the cloud, indicating strong momentum. The green cloud ahead suggests that support is forming, which could help sustain the uptrend.

Additionally, the price remains above the blue Tenkan-sen line, signaling that short-term momentum is still in favor of the bulls. However, the recent pullback suggests that some resistance is being encountered, and a deeper correction could test lower support levels.

If TAO maintains its position above the cloud, the bullish trend could continue, with potential retests of recent highs. However, if selling pressure increases and the price falls below the Tenkan-sen and Kijun-sen lines, a move toward the cloud could occur.

A breakdown into the cloud would signal a shift to consolidation, while a drop below it could indicate a potential trend reversal. For now, the overall outlook remains bullish as long as Bittensor stays above key support levels.

TAO BBTrend Climbs to 3-Week High

TAO BBTrend has surged to 10.6, up from 1 earlier today, after being negative yesterday and reaching -2.7. This marks a significant shift in momentum, as BBTrend turning positive often indicates increasing bullish pressure.

Notably, this is the highest level since January 7, suggesting a potential strengthening trend. TAO was the only winner of the day among the top five biggest artificial intelligence cryptos.

BBTrend (Bollinger Band Trend) measures momentum by analyzing price positioning within Bollinger Bands. Positive values indicate bullish momentum, while negative values suggest bearish pressure.

With TAO’s BBTrend now at 10.6, the strongest level in weeks, it signals that buying momentum is returning. If it continues rising, Bittensor price could push higher, but if it starts declining, a short-term correction may follow.

TAO Price Prediction: Will It Go Back to $500?

TAO’s EMA lines indicate that a golden cross could form soon, as the shortest-term moving average is rising and nearing a crossover above the longest-term one.

If this bullish signal confirms, TAO could gain momentum and test the $495 resistance level. A breakout above that could push the price toward $522, and if the uptrend remains strong, TAO price may rally to $588, marking a potential 26% surge.

However, if the uptrend fails to sustain and momentum reverses, TAO could face a pullback toward the $434 support level. Losing this support could accelerate the decline, with further downside targets at $382 and $362.

A drop to these levels could put TAO at risk of losing its position as the top artificial intelligence coin in market cap.