Deepseek Raid: How a Chinese ChatGPT Competitor Ignited a $1 Billion Crypto Market Meltdown

The past few days on the crypto market have been anything but pleasant. Total liquidations across leveraged positions have approached the $1 billion mark, leaving bulls with the lion's share of losses.

The cryptocurrency market experienced a turbulent week with massive liquidations in the leveraged derivatives market, reaching nearly $1 billion. Bulls incurred the majority of these losses.

Bitcoin's price dropped below the crucial $100,000 level as the perpetual futures liquidations were heavily skewed toward long positions, showing a staggering imbalance of 1,700%.

The sell-off was primarily driven by an event outside the crypto space. Headlines emerged in the AI industry about Deepseek, a Chinese competitor to ChatGPT. This new chatbot, which is reportedly 20 times cheaper to operate, sparked a ripple effect in the stock market, leading to a single-day loss of $500 billion in Nvidia's valuation.

The broader markets, including the NASDAQ, took a substantial hit, and this sentiment spilled over into crypto, exacerbating the sell-off.

Later, CNBC personality Jim Cramer provided a pessimistic analysis of Nvidia's massive losses, speculating on the potential implications for the broader market. However, as many crypto enthusiasts anticipated, Cramer's commentary coincided with an unexpected shift in the crypto market. Known for the "Inverse Cramer Effect," his bearish take signaled a local bottom for Bitcoin.

Following Cramer's analysis, Bitcoin staged an impressive comeback, surging back above the $100,000 mark. This sharp rebound was not merely symbolic; it triggered an avalanche of short liquidations, as bearish traders saw their positions wiped out in a 31% surge in liquidations.

The market remained fragile as traders closely monitored BTC's price action around key levels. At the time of writing, a daily close above $101,300 would indicate that this was not just a shakeout and that buyers still had some strength.

Otherwise, the turbulence might continue, potentially bringing further pain to both bulls and bears.