AI Tokens Battered as DeepSeek Turmoil Intensifies

It’s been a punishing end to January for AI tokens, with the wider industry left reeling by the runaway success of China’s DeepSeek. 

Data from CoinGecko shows that the total market capitalization of coins linked to AI agents has cratered by almost $6 billion in the past two weeks.

Screenshot: CoinGecko

The past seven days have been especially painful for ai16z (now being rebranded to ElizaOS) after a 38.6% plunge in its token’s value.

AI-focused stocks and altcoins alike underwent a huge recalibration after DeepSeek rocketed to the top of Apple’s App Store. 

Nvidia was unseated as the world’s most valuable company — losing $600 billion of its market capitalization in a single trading session — as investors digested the ramifications of an AI model built using cheaper chips.

Even Bitcoin wasn’t immune from these sell-offs, as a close correlation to the tech-heavy Nasdaq 100 meant the world’s biggest cryptocurrency touched lows of $98,000 at one point.

Decentralized AI projects have enjoyed a groundswell of funding — with data from PitchBook suggesting that such startups raised a staggering $436 million in 2024 alone.

Given DeepSeek had said its AI model both outperformed the likes of ChatGPT and had been built for just $6 million, the valuations and expenditure of businesses jockeying for position in this unpredictable industry came under careful scrutiny.

At this point, it’s worth remembering that DeepSeek’s claims are now being met with a healthy dose of cynicism. The White House’s AI czar, David Sacks, has now pointed to research that suggests the true cost of building this model is more than $1 billion. He has also alleged there’s “substantial evidence” it was trained using OpenAI tools.

The concept of AI models being developed in a decentralized way is worthy of consideration. There are growing concerns that this technology, which is set to define the 21st century and disrupt countless millions of jobs, could end up in the control of Web2 giants. As well as a lack of transparency concerning how they’re developed, this could exacerbate issues surrounding user privacy and control of data.

Yet some crypto-focused projects are struggling to shake off the charge that they are simply jumping on the bandwagon — and adding the letters “AI” to their websites simply to gain investor interest. A perennial question is whether they even need a token to operate, or whether this just serves as another vehicle for speculation.

With few exceptions, AI tokens have suffered much harsher sell-offs than the wider crypto market since DeepSeek’s ascension. It’s too early to tell whether this is the start of a prolonged contraction, or a hasty overreaction.

But make no mistake, opportunities do lie ahead. The mere fact that David Sacks has been crowned as the White House’s AI and crypto czar shows Trump’s new administration believes that there’s a crossover between both emerging technologies. A forward-thinking approach to regulation, and an insatiable drive for the U.S. to lead the world, mean this is still a must-watch industry for 2025 — and surprises should be expected.