What is DeepSeek, what is a ‘Sputnik-moment’ and why did this (temporarily) crash Bitcoin?

DeepSeek is the new buzzword of the past few days. American investors call it a ‘Sputnik moment’ and partly because of those two mentions, both crypto and tech shares crashed very hard yesterday. What is going on and what can we expect in the coming days?

DeepSeek

This Chinese app has been one of the most popular in the Apple App store ever since this weekend. It is a free AI that, like ChatGPT, offers help and resolves questions.

In total market cap, the Nvidia selloff today is a little bit bigger than if the entire listed market of Mexico went to zero. pic.twitter.com/WPuBSJ1uzF

— Mike Bird (@Birdyword) January 27, 2025

However, the Chinese industry claims that DeepSeek does this in a much cheaper and efficient way than the American industry can already do. The AI models from Meta and OpenAI, for example, use a lot of energy and are therefore more expensive to operate. They also need to be powered by masses of Nvidia chips, which the Chinese normally cannot use (DeepSeek has about 50,000 of them available, according to rumors).

Whether the Chinese claim is correct remains to be seen, but if it is true, it will deal a major blow to the American model, and as a result American (as well as Dutch, see ASML) tech shares will fall.

Please note, you can clearly see that it is an app from China as you are not allowed to ask questions about Tiananmen or Taiwan.

DeepSeek talks about the protests on Tiananmen Square – and then censors the result afterwards!

There are no cuts in the video; it is the service itself that suddenly replaces the answer.#Censorship pic.twitter.com/3EUOYJgqjY

— Peter Brodersen (@peterbrodersen) January 27, 2025

Sputnik-moment

Renowned American investor Marc Andreessen called it a “Sputnik moment” for the AI industry in a tweet that went viral. That refers to a moment from October 1957.

Deepseek R1 is AI’s Sputnik moment.

— Marc Andreessen 🇺🇸 (@pmarca) January 26, 2025

On that day, the Soviet Union launched Sputnik 1, an artificial satellite that showed that they were far ahead of the Americans in the field of space and rocket technology. The launch of Sputnik came as a psychological shock to the United States, and was a turning point in the ‘Cold War’.

Whether the Chinese will suddenly be the equal of the Americans in the field of AI remains to be seen, but if so, this is indeed a ‘Sputnik moment’.

Bitcoin crash

When tech stocks crash, Bitcoin usually goes lower as well. When Bitcoin goes lower, altcoins fall too, usually a little harder.

The fact that the month of January usually shows a correction in the year after the halving, the fact that we have not yet seen a major pullback since November and also the nervousness of the market makes it clear that things were always gonna go lower for Bitcoin whenever bad news would arise. The question is where we will find support in the following days.

Am I panicking right now? Not yet because the demand for Bitcoin is still very high. It is however a very interesting moment for the tech world.