Crypto Market Plunge: AI Competition and Yen Carry Trade Drag Down Market

The crypto market experienced a wave of drastic adjustments today. The price of Bitcoin once fell below $98,000 and is now reported at $98,909, with a 24-hour drop of more than 6.3%. Ethereum fell more than 8% during the day, approaching $3,000. The altcoin market fell sharply, and many of them almost wiped out all the gains of the second round of the bull market, causing market panic.

DeepSeek triggered an earthquake in the US technology circle, and US stocks fell across the board

Recently, Chinese AI startup DeepSeek has released two large models, DeepSeek-V3 and DeepSeek-R1, which have comparable performance to OpenAI, but are extremely cheap compared to the current highly valued AI companies in the United States. Concerns that DeepSeek may disrupt the market, especially doubts about the future prospects of technology giants such as Nvidia, have triggered bearish sentiment among investors and dragged down the entire market. U.S. stock index futures plunged in early Asian trading on Monday, and further spread to the crypto market.

US stock futures market quotes

In addition to AI competition, the market generally believes that another factor that exacerbates market volatility is Japan's interest rate hike policy. Last August, Japan raised interest rates from 0.1% to 0.25%, causing a flash crash in global financial markets. Last Friday, Japan raised interest rates again, raising interest rates to 0.5%, and higher interest rates are ending yen carry trades. Previously, many investors invested funds in global asset markets by borrowing low-interest yen for carry trades. With Japan's interest rate hike, borrowing costs have risen, making carry trades much less attractive and forcing investors to repatriate funds and sell previously held US dollar assets to repay loans. This change in capital flows has put double pressure on the US stock market and the crypto market, further exacerbating market volatility.

The current crypto market is being affected by multiple internal and external factors, showing a significant correction trend. Against this background, investors should remain calm and pay close attention to market dynamics to formulate reasonable investment strategies. At the same time, we still need to maintain a cautious and optimistic attitude towards the long-term development trend of the encryption market, and look forward to the market being able to seek new development opportunities in fluctuations.

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