Why Is Crypto Going Down? Fake DeepSeek Tokens Affect Thousands of Traders ⋅ Crypto World Echo

A wave ofunauthorized cryptocurrency tokens exploiting the name of Chinese AI sensationDeepSeek has emerged on multiple blockchain networks, with one fraudulent tokenbriefly reaching a market capitalization of $48 million despite explicitwarnings from the company.

This ishappening asDeepSeek has triggered significant panic on Wall Street, draggingcryptocurrencies down as well. Bitcoin (BTC) briefly dropped below $100,000,while XRP tested monthly lows. Let’s take a closer look at why crypto is goingdown.

Fake DeepSeek Token Hits$48 Million Market Cap as AI Hype Fuels Surge

The primaryimpostor token, launched on the Solana blockchain earlier this month, generatedapproximately $150 million in trading volume and attracted over 22,000 walletholders, according to data from Solana token tracker Birdeye. DeepSeek hasexplicitly denied any connection to cryptocurrency projects and warned usersabout potential scams.

The scam’stiming coincided with DeepSeek’smeteoric rise to prominence in the artificial intelligence sector, whereits cost-effective AI model has challenged industry giants. The fraudulenttoken’s creators attempted to legitimize their offering by creating falseassociations with DeepSeek’s official social media presence and website.

A secondunauthorized DeepSeektoken also gained significant traction, reaching a $13 million market cap with$28.5 million in trading volume before declining to $8.6 million. Theseincidents are part of a broader trend of scammers exploiting popular technologytrends in cryptocurrency markets.

“DeepSeek will accelerate AI development both in the US andoverseas, denying hegemony over AI,” commented Paul Howard, Director at Wincent. “There is little impact for trading, anything an LLM could offer has already been available for a while, and a lower cost base will do little to influence the way institutional players interact with the crypto market, which is at the amplified risk end of the stock market.”

Why Is Crypto Going Down?

Bitcoin’sprice recently dipped below $100,000, reaching an 11-day low, amid a broaderselloff in technology stocks. This downturn was triggered by DeepSeek’sannouncement of more affordable AI models, which intensified competition in thetech sector and led to significant declines in tech equities.

At thebeginning of this week, Bitcoin dropped to just under $98,000, testing the50-day exponential moving average. All major altcoins followed suit: Ethereum(ETH) tested the psychological support level of $3,000, while XRP formed a longlower wick, dipping to $3.05.

The Nasdaq100, heavily weighted with technology companies, experienced notable losses,reflecting investor concerns over DeepSeek’s potential impact on establishedtech firms.

Thecryptocurrency market, particularly Bitcoin, has shown a strong correlationwith technology stocks, especially during periods of market stress. As techstocks declined, Bitcoin’s value also dropped, highlighting its sensitivity toshifts in investor sentiment within the tech industry.

However, byWednesday, January 29, 2025, the market appears to be stabilizing. Bitcoin iscurrently rebounding by 1.3%, testing the $102,630 level. Moreover, analysts arestill being highly positive, some of them even predicting, thatBitcoin price this year may reach $200K mark.

From Fake TRUMP to FakeDEEPSEEK Tokens

Thephenomenon has been amplified by recent legitimate crypto initiatives,including formerPresident Donald Trump’s official meme coin launch, which may haveinadvertently legitimized similar schemes. Blockaid reported that “Trump”-brandedtoken scams doubled from 3,300 to 6,800 daily following the officiallaunch.

Majordecentralized finance platforms have implemented protective measures, withcompanies like Uniswap and DexScreener partnering with security firms to filterout fraudulent tokens. However, the decentralized nature of blockchaintechnology makes it challenging to completely prevent such scams.

As of presstime, the primary fake DeepSeek token’s volume had decreased to $2 million,though thousands of wallets still hold the unauthorized asset. The incidentserves as a stark reminder of the risks in cryptocurrency markets, particularlyduring periods of intense speculation around emerging technologies.

To prevent any potential harm, we reiterate that @deepseek_ai is our sole official account on Twitter/X.Any accounts:- representing us- using identical avatars- using similar namesare impersonations.Please stay vigilant to avoid being misled!

— DeepSeek (@deepseek_ai) January 28, 2025

Why is Silicon ValleyAfraid of DeepSeek?

SiliconValley is concerned about DeepSeek because theChinese startup has disrupted the AI landscape by offering advanced models at afraction of the cost. Unlike U.S. firms that rely on high-end hardware,DeepSeek has leveraged widely available Nvidia H800 chips to develop AI modelsthat are reportedly 50 times cheaper to operate than OpenAI’s.

Thiscost-efficiency, combined with an open-source approach, has raised concernsamong U.S. tech leaders about China’s growing influence in AI. DeepSeek’s rapidrise, underscored by its AI assistant surpassing ChatGPT in downloads, signalsa shift in the global AI race. Furthermore, the Chinese government’s supportfor DeepSeek highlights AI as a strategic industry, intensifying geopoliticaltensions and fueling fears in Silicon Valley about maintaining dominance in AIinnovation.

“Similar to the headlines we saw around quantum computing several months ago,both software and hardware will continue to advance, reduce cost, and increaseaccess,” Howard added. “Moreover, in the medium term for crypto, pay attention to macro and technumbers due out this week as to influencing the majors, whilst we see a continuedpullback in the pricing of AI tokens the last 7 days not necessarily correlatedwith DeepSeek news itself.”

Deepseek engineers getting a $5K bonus after wiping out $1 trillion in the market pic.twitter.com/OjjKIokDwx

— naiive (@naiivememe) January 28, 2025

Why is Crypto Going Down? FAQ

Why Is the Crypto MarketFalling?

Thecryptocurrency market is currently experiencing a downturn due to a combinationof factors, including broader sell-offs in technology stocks and the impact offraudulent token schemes. The recent surge and collapse of unauthorizedDeepSeek-branded tokens have contributed to heightened volatility, shakinginvestor confidence.

Additionally,DeepSeek’s disruption of the AI sector has triggered concerns on Wall Street,leading to declines in tech stocks, which have historically correlated withBitcoin and other cryptocurrencies. As a result, Bitcoin briefly fell below$100,000, while major altcoins like Ethereum and XRP also tested key supportlevels.

Will Crypto Rise Again in2025?

Despite therecent downturn, analysts remain optimistic about the long-term outlook forcryptocurrency in 2025. Bitcoin has already shown signs of recovery, reboundingto over $102,000. Some analysts predict that Bitcoin could reach $200,000 bythe end of the year, supported by institutional adoption, potential regulatoryclarity, and continued demand for decentralized assets. However, marketvolatility remains a key factor, and investors should remain cautious aboutspeculative trends and potential scams.

This article was written by Damian Chmiel at www.financemagnates.com.