(Bloomberg) -- An upheaval in global markets sparked by Chinese artificial intelligence startup DeepSeek triggered volatility in digital assets, raising fresh questions about the outlook for crypto following last year’s boom in prices.
Bitcoin traded at $102,800 as of 6:15 a.m. Tuesday in New York, partly paring a 3% drop from in the prior session that came amid a plunge in the Nasdaq 100 Index of US tech stocks. Tokens such as Ether and Solana snapped deeper selloffs.
The sudden success of DeepSeek signaled growing AI competition from China, exacerbating worries over the sustainability of rich US tech stock valuations predicated on leadership in innovation. The risk for crypto is that such angst can dent wider speculative ardor, blunting the boost from President Donald Trump’s executive order in favor of supportive digital-asset regulations.
Bitcoin’s tight correlation with US tech stocks underlines the vulnerability. A 30-day correlation coefficient for the cryptocurrency and the Nasdaq 100 is at about 0.67, data compiled by Bloomberg show. A reading of 1 indicates assets are moving in lockstep, while minus 1 signals an inverse tie.
For ByteTree Asset Management Chief Investment Officer Charlie Morris, it’s “getting harder to distinguish between Bitcoin and big tech” given the two are moving in tandem. Despite the executive order and a retreat in a dollar gauge this year, “Bitcoin can’t make a new high,” he wrote in a note.
The token reached a record of $109,241 ahead of Trump’s inauguration on Jan. 20 but subsequently slipped back. His presidential action on Thursday failed to trigger much of a market reaction. Bitcoin jumped 465% over 2023 and 2024, leading some to ask how much longer the good times can last.
Trump’s pro-crypto stance remains a powerful pillar of support for Bitcoin and other digital assets, according to Jonathan Yark, senior quant trader at market maker Acheron Trading. Among the most eagerly awaited actions from Trump is the potential creation of a national Bitcoin reserve, something he proposed during his campaign.
“You have the executive branch supporting mightily,” said Ark Investment Management Chief Executive Officer Cathie Wood in a Bloomberg Television interview. “Inclusion of Bitcoin in Treasury reserves I think will have support of all three branches of government, which will be a big change.”
Some corners of the digital-asset market are already mired in a deepening pullback. A gauge tracking the bottom half the largest 100 digital assets is down more than 10% since the turn of the year.
For Bitcoin, a range from $90,000 to $110,000 will likely “continue to hold for some time as the market consolidates,” said Caroline Mauron, co-founder of Orbit Markets, a provider of liquidity for crypto derivatives.
--With assistance from Allegra Catelli.
(Updates with comment from Cathie Wood in ninth paragraph.)
