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Cryptocurrency-Exposed Stocks Drop Amid Bitcoin Decline and Market Uncertainty

Cryptocurrency-exposed stocks fell on Monday due to Bitcoin's price drop and broader market sell-off, influenced by AI concerns and regulatory uncertainty.
Published on 2025-01-27

Cryptocurrency Stocks Slip Amid Market Volatility

Cryptocurrency-exposed stocks declined on Monday, driven by a drop in Bitcoin's price and a broader market sell-off. Bitcoin fell below $100,000, reflecting a wider decline in equity markets, particularly in technology stocks. This downturn was partly attributed to the emergence of a disruptive new artificial intelligence model from Chinese start-up DeepSeek, which has raised concerns about the return on investments in AI infrastructure.

Impact of DeepSeek's AI Model

DeepSeek's new AI model, claimed to rival OpenAI's ChatGPT at a lower cost, has sparked speculation about its potential impact on the tech industry. This has led to heightened uncertainty among investors, exacerbating worries about the returns on significant investments made by tech giants in their AI initiatives.

Regulatory Uncertainty Under Trump

Sentiment in financial markets was further weighed down by lingering uncertainty over President Donald Trump’s policies for the crypto industry. Trump has announced plans to draft a regulatory framework for the sector, though details remain vague. This follows his campaign promise to loosen regulatory restrictions on crypto, marking a shift from the stricter oversight during the Biden administration.

Trade Tensions and Market Fears

Investors are also monitoring Trump’s trade policies, particularly his threat to impose 25% tariffs on Colombia over migration issues. Although Colombia has since complied with Trump’s demands, delaying the proposed levies, concerns persist about potential tariffs on other major economies, including Mexico, Canada, China, and the European Union.

Federal Reserve Policy Meeting

Adding to the market jitters are expectations around the upcoming Federal Reserve policy meeting. The central bank is widely expected to maintain interest rates while adopting a hawkish stance, further denting risk appetite.

Bitcoin and Crypto Prices Plummet

By 07:23 ET, Bitcoin had dropped 5.6% to $98,987.9, while Ether fell over 7% to $3,060.67, and XRP declined by 11% to $2.78. This downturn also affected crypto-linked stocks, with significant declines in premarket trading for companies like Riot Platforms, Cipher Mining, Coinbase, and MicroStrategy.

The combination of technological disruptions, regulatory uncertainty, and geopolitical tensions has created a challenging environment for cryptocurrency-exposed stocks, reflecting broader market volatility and investor caution.

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