The cryptocurrency market has witnessed significant turmoil following the release of China’s DeepSeek R1, an artificial intelligence (AI) model developed for a fraction of the cost of its competitors.

While revolutionary in scope, its launch seems to have rattled the confidence of investors in both AI and crypto markets, leading to a selloff.

DeepSeek Upsets AI Sector

DeepSeek’s disruptive entry into the global AI landscape sent shockwaves across tech and crypto. Unlike more established models such as those offered by OpenAI, which require billions in funding, the Chinese developed DeepSeek for just $6 million, with its capabilities said to rival top-tier systems.

The model’s debut now has investors fearing its affordability and efficiency could undermine the valuation of established AI firms and related stocks. This sentiment was evident as Nvidia, a critical supplier of AI chips, saw its stock tumble by 8.5%.

The ripple effect also extended to the crypto space, with Bitcoin dipping to an 11-day low, dragging other tokens with it.

Almost all currencies in the AI category have suffered losses to varying degrees in the last 24 hours. DOGEai ($DOGEAI) was the biggest loser, shedding nearly 45% of its value since yesterday.

Another token hit heavily by the mayhem was Empyreal (EMP), an AI project meant to democratize the crypto space by simplifying complex financial instruments and landscapes for users and developers. In 24 hours, its price went from almost $189 to $132. However, at the time of this writing, it had started to recover and had moved up to $144.83.

Henlo (HENLO), a Telegram mini-app that combines hamster racing and AI agents to create passive earning opportunities, also saw its native token plunge 20%. The dip means that across seven days, the cryptocurrency has lost nearly 43% of its value. However, despite the loss, the current price remains at a 60% improvement over its level from a month ago.

Major AI Tokens Not Spared

More well-known AI tokens such as NEAR Protocol (NEAR) and Internet Computer (ICP) were not spared either. NEAR registered an 11.1% drop, with its price going from an intra-day high of $5.04 to a low of $4.41, per data from CoinGecko.

Meanwhile, ICP’s 24-hour loss stood at 8.5%. Across seven days, the damage was much more significant, with the coin shedding more than 18% of its worth. Its somewhat diminished market cap of $4.01 billion still keeps it at #40 on the list of largest cryptocurrencies by market cap.

Overall, the AI category is down 13.3% since yesterday, with the combined value of its 548 tokens dropping to about $36.2 billion. Its 12% plunge over the last week means it has performed markedly worse than the broader crypto market, which is down 7.7%.