In a dramatic turn of events that highlights the increasingly interconnected nature of technology and cryptocurrency markets, Bitcoin experienced its steepest single-day decline since December as concerns over Chinese artificial intelligence developments sparked a broader selloff in tech stocks and digital assets.
The world’s leading cryptocurrency plummeted as much as 6.5% on Monday, briefly falling below the psychological $100,000 threshold before partially recovering to trade at approximately $101,500 by late morning in New York. The sharp decline, which caught many investors off guard, marks the largest intraday drop since December 6 and underscores the volatile nature of cryptocurrency markets even amid increasing institutional adoption.
The catalyst for this market turbulence appears to be the emergence of DeepSeek, a Chinese startup whose new artificial intelligence model has raised concerns about U.S. technological dominance in the AI sector. The announcement sent shockwaves through global markets, with technology stocks leading the decline and cryptocurrencies following suit in a pattern that demonstrates the strengthening correlation between these asset classes.
“The Chinese LLM poses a potential threat to U.S. equity markets by disrupting U.S. AI dominance with their cost efficiency and groundbreaking open-source technology,” noted QCP Asia in a Monday report, referring to large language models. The firm raised pointed questions about potential retaliatory measures from the Trump administration, adding another layer of uncertainty to already nervous markets.
The market downturn has been particularly severe for smaller cryptocurrencies, with XRP and Solana experiencing even steeper declines than Bitcoin. XRP saw its value plunge by as much as 14%, while Solana dropped 11% before both digital assets managed to recoup some of their losses. This pattern of smaller cryptocurrencies experiencing more pronounced volatility during market stress periods is consistent with historical trends and reflects their relatively lower market liquidity.
The timing of this market correction is particularly noteworthy as it comes in the wake of President Donald Trump’s recent executive order on cryptocurrency policy, issued shortly after his return to the White House. The order, which established a working group to advise on crypto policy and called for the development of a regulatory framework within six months, had been anticipated as a potential catalyst for further market gains. However, traders appear to have largely priced in these developments, with some market participants expressing disappointment that the order stopped short of immediately establishing a U.S. Bitcoin stockpile—a campaign promise that had generated significant excitement within the crypto community.
Sean McNulty, head of APAC derivatives at digital-asset prime brokerage FalconX, offered insight into the market’s reaction: “Even though the market got 90% of what it wanted with the executive orders, it evidently was mostly priced in.” He emphasized that anything less than an immediate Bitcoin purchasing program was likely to disappoint market expectations.
The market’s response highlights the evolving relationship between cryptocurrency and traditional financial markets. Bitcoin’s correlation with technology stocks has notably increased in 2025, particularly following the successful launch of Bitcoin ETFs and Trump’s pro-crypto stance, which helped drive prices higher throughout the previous year. This growing correlation suggests that cryptocurrencies, once viewed as a hedge against traditional market risks, are increasingly being treated as part of the broader technology investment landscape.
The current market dynamics also reflect the complex interplay between geopolitical tensions, technological competition, and digital asset markets. The emergence of Chinese AI capabilities as a market-moving force for cryptocurrencies illustrates how the digital asset space has become increasingly sensitive to developments in the broader technology sector and international competition for technological supremacy.
As markets digest these developments, investors and analysts are closely watching for signs of stabilization and potential policy responses from both U.S. authorities and other major global players. The cryptocurrency market’s reaction to these events serves as a reminder of the sector’s maturation and its growing integration with traditional financial markets, while also highlighting the continuing influence of technological advancement and geopolitical factors on digital asset valuations.
For investors and market participants, the current situation underscores the importance of maintaining a balanced perspective on cryptocurrency investments and understanding their increasing correlation with broader market trends and technological developments. As the digital asset space continues to evolve, such connections are likely to become even more pronounced, potentially reshaping how market participants approach cryptocurrency investment strategies in the future.
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