China AI Jitters Send Crypto Tumbling, But That Could Be a Buying Opportunity

At some point, the music in the AI arms race was going to stop. On Monday, the loud screech was heard around the world — with a selloff trickling into crypto as Bitcoin dipped 6% in early morning trading. Here’s why AI jitters caused the selloff — and why it could be a buying opportunity if crypto’s correlation with stocks is to break.

As always, we covered the selloff, the upcoming Fed rate cut decision, and everything else you should know in crypto this week on our weekly Monday live show (above.) Let’s dig in:

Beginning of the AI Bubble Burst?

A Chinese AI company, DeepSeek, de-throned OpenAI’s ChatGPT as the number-one, free downloaded app on the App Store Monday, panic flooded the market.

NVIDIA, the chip giant that has benefited the most from everyone beefing up their own compute power by buying up all their chips, saw shares fall 15% in early trading. The reason is, DeepSeek seemingly was able to match OpenAI’s performance with just a fraction of the resources. From CNBC,

Estimates differ on exactly how much DeepSeek’s [model] costs, or how many GPUs went into it. Jefferies analysts estimated that a recent version had a “training cost of only US$5.6m (assuming US$2/H800 hour rental cost). That is less than 10% of the cost of Meta’s Llama.” But regardless of the specific numbers, reports agree that the model was developed at a fraction of the cost of rival models by OpenAI, Anthropic, Google and others.

That would obviously become a problem for NVIDIA. These tech giants have been plowing billions and billions of dollars into buying up compute resources. If a relatively small competitor just proved that training AI models really has gotten that much cheaper, the Metas and the Alphabets of the world are going to look really dumb buying up infinitely more chips —and delivering a worse product.

The thinking is, fewer chips needed from NVIDIA could take the steam out of the AI trade — and thus, is contributing to a risk-off sentiment this week. But that probably doesn’t impact crypto really all that much — because if you’ve been following our recent posts, the narrative is all about regulatory changes in Washington and a continued uptick in money flowing into crypto. (Though decentralized cloud compute project Akash Network did slip by about 10%.)

Billions Pour Into Crypto

As markets wobble, momentum in crypto regulation and adoption keeps building. Last week, the SEC quietly reversed key restrictions, allowing banks to custody crypto assets. Meanwhile, Hester Peirce’s Crypto Task Force is most likely about to re-visit prior denials in crypto, including the ability for Ethereum ETFs to stake their holdings, or for Bitcoin ETFs to allow for in-kind redemptions. Notably, BlackRock filed for in-kind redemptions last week, and that should signal confidence in an approval under the new pro-crypto regime.

As that confidence grows, so did the amount of inflows to crypto investment products. CoinShares tracked a total of $1.9 billion in inflows for crypto investment products last week.

And then there’s MicroStrategy. Michael Saylor’s firm just announced its 12th consecutive Bitcoin buy — scooping up $1.1 billion worth at over $105,000 per coin. The company now holds 471,107 $BTC acquired for ~$30.4 billion at ~$64,511 per bitcoin.

🛠️ Ethereum’s “Wartime Offensive”

Ethereum’s ecosystem is doubling down on innovation and outreach to counter Solana’s rise. ETH Denver is fast approaching, and the Ethereum Foundation’s new initiative, Etherealize, aims to win over Wall Street by emphasizing Ethereum’s modular infrastructure and scalability.

We caught up with Gitcoin founder Kevin Owocki to chat why Ethereum’s challenge lies in communicating its long-term vision amid growing competition from Solana and others.

🎭 Trump vs. Powell: A Rematch

This week also brings a political showdown. Fed Chair Jerome Powell will make his first rate decision under President Trump’s second term, setting the stage for renewed tensions.

Trump has already called for rate cuts, while Powell shows no intention of bowing to pressure. Markets anticipate no changes, but crypto prices could feel the impact depending on Powell’s tone and Trump’s reaction. Fireworks are likely to follow the decision at 2PM EST on Wednesday.

🌟 Coinage Makes History

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