Chinese-made DeepSeek AI outperforms U.S. models, casting doubt on U.S. AI dominance; AI sector market cap dropped 14.7%.
TL;DR…
- Market Correction: The cryptocurrency market underwent a deep correction; Bitcoin fell under $100K, down 7.7%, but climbed to 58.3% dominance.
- AI Sector Impact: Chinese-made DeepSeek AI outperforms U.S. models, casting doubt on U.S. AI dominance; AI sector market cap dropped 14.7%.
- AI Token Performance: Despite the overall downturn, select AI tokens like Delysium and zKML gained amid market-wide collapse.
- Significant Developments: OpenAI launches Operator Agent; Virtuals expands on Solana; John McAfee returns as AI agent promoting AIntivirus.
If you’ve looked at the charts recently, you’ve probably noticed that the market suffered a deep correction today.
Practically every cryptocurrency in the top 100 by market capitalization is down over this period, with no sector escaping unscathed.
Let’s see how the AI sector handled the recent storm.
>> Did you miss last week’s AI update? Check it out here.
Market Overview
As always, the reasons behind the recent crash aren’t black and white. Instead, it appears to be a combination of several events.First is Donald Trump’s recent executive order to “evaluate the potential creation and maintenance of a national digital asset stockpile” via a working group.
This was widely considered a watered-down version of his promise during his campaign to establish a national Bitcoin Reserve.
Additionally, recent news about the Chinese-built AI system called DeepSeek has shed extreme doubt on which country is the dominant player in the AI sector, sending U.S. tech stocks tumbling.
Source: Bitcoin (BTC) Coin Page
Bitcoin (BTC) is down 5.4% over the last week, falling under the $100K threshold before it bounced back to its current value of around $101,200.Its dominance has soared to 58.3%—its highest value since November 2024—as altcoins suffer a brutal sell-off.
AI Sector Recap
The AI sector was hit hard over the last week, with nine out of 10 of the largest AI tokens by market capitalization (mcap) in the red over this period.
Source: DeXe (DEXE) Token Page
DeXe (DEXE) was the only top 10 AI token to buck the trend, recording an impressive 13.7% growth.
Besides this, a handful of other AI tokens managed to stay in the green over the last week. Some of this week’s most resilient tokens include:
- Delysium (AGI): gained 28.8%
- zKML (ZKML): gained 10.3%
- Marlin (POND): gained 8.4%
- Chainbounty (BOUNTY): gained 7.5%
The market tends to flock to strength during periods of significant decline, partially explaining why some tokens explode even during a market-wide collapse—often in the absence of fundamentals.
Unfortunately, these tokens do not represent the AI sector as a whole. Instead, more than 90% of AI tokens suffered deep losses this week.
Among the top 10 by market cap, Injective (INJ) is the worst performer, recording a 17.1% seven-day decline.
If you thought that was bad, wait until you see how this week’s worst performers fared:
- Node AI (GPU): lost 34.9%
- Spectral (SPEC): lost 30.6%
- Echelon Prime (PRIME): lost 28.6%
- PAAL AI (PAAL): lost 26.3%
Source: Top AI & Big Data Tokens Page
Overall, the AI sector has retraced more than two months of growth. Its market cap now sits at $43.9 billion, down 9.5% in a week, back to where it was seen in late November 2024.
If you kicked yourself for not buying before the December run-up—you just got another chance (NFA).
>> Click here to see how your favorite AI tokens were affected.
According to DefiLlama's narrative tracker, the AI sector was hit particularly hard during the recent crash.
It's currently ranked 20th out of the 22 sectors tracked by the platform in terms of mcap-weighted returns. The sector saw a particularly terrible -14.3% mcap-weighted change over the last seven days, with only the Bridged Governance Tokens and PolitiFi sectors performing worse over this period.
AI News Roundup
Though the market suffered a significant blow today, major developments continue to occur in the background, demonstrating clear positive momentum for the industry.
Some of this week’s most significant developments include:
Open Source AI Model DeepSeek Matches o1 Performance: DeepSeek AI, developed by a Chinese team, matches or exceeds OpenAI's performance using reinforcement learning without initial fine-tuning. It has achieved impressive results in AI benchmarks and operates at a cost 98% lower than comparable models. DeepSeek is open-source, allowing free use and modification, and has quickly become the No. 1 app on the U.S. Apple App Store.
OpenAI Launches Operator Agent: OpenAI has launched Operator, a research AI that autonomously navigates and performs tasks on the web for U.S. Pro users. Using its Computer-Using Agent model, Operator can handle repetitive tasks securely through web interfaces, with plans for broader integration into ChatGPT.
Virtuals Expands to Solana: Virtuals Protocol has expanded to the Solana blockchain, introducing the Meteora Pool and Strategic SOL Reserve. This move includes allocating 1% of transaction fees to support creators and agents within the ecosystem. The expansion also features a Venture Partner Model providing grants to early-stage projects, enhancing the platform's commitment to fostering blockchain-based innovation.
John McAfee’s Digital Resurrection: In a move no one predicted, John McAfee is back as an AI agent. An AI representation of John McAfee has been promoting a new meme coin called AIntivirus. Though initially perceived as a hack, security firm PeckShield and McAfee's wife later confirmed that his accounts are secure and legitimately involved in this project.
>> That’s a wrap for this week’s AI update! Check in next Monday for another dose of AI news, updates, and developments.
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