Risk assets faced a downturn amidst growing concerns over the Chinese AI Model R1 from DeepSeek, which has emerged as a strong competitor to OpenAI's model.
Impact on the Market
The market downturn links to innovations in artificial intelligence. The R1 model from China's DeepSeek has surpassed ChatGPT, becoming the most downloaded free app on Apple's App Store. It led to significant declines in stocks of tech giants like Nvidia, and in major indexes such as S&P 500, NASDAQ, and Dow Jones.
Bitcoin's Correlation with Equities
The latest Bitfinex Alpha report highlights a rising correlation between bitcoin and traditional equities, with a current level of 0.7 indicating strong interconnection. "When equity markets rally, bitcoin benefits from this momentum. Conversely, any shift could trigger a domino effect on bitcoin, amplifying volatility," according to Bitfinex.
Bitcoin’s Price Stabilizes
Despite recent fluctuations, bitcoin's volatility has significantly declined, with prices stabilizing. The drop in implied volatility by more than 13% after recent peaks suggests that traders consider current levels sustainable. This trend also indicates that the market awaits further news and inflows to maintain current price levels.
The risk asset market continues to adapt to macroeconomic changes, with the relationship between cryptocurrencies and traditional assets playing a key role in future dynamics.
