- According to a new report from Coinbase, AI crypto projects are not creating the value that the rise in the project’s tokens would suggest.
- The $26 billion market for AI crypto tokens has risen 30% since Wednesday.
- The report pointed to technical and market hurdles as AI crypto projects compromise AI incumbents such as OpenAI and Microsoft.
The soaring prices of tokens representing artificial intelligence crypto projects reflect more hype than actual usage, says a new research report from cryptocurrency exchange Coinbase.
According to a report written by Coinbase research analyst David Han, these projects face stiff competition and knee-jerk technical hurdles.
“Our paradoxical view is that the potential value of many AI tokens may be overestimated as a result of widespread attention to the AI industry, and that many AI tokens have short- to medium-term “Sustainable demand-side drivers may be missing,” Han wrote in the article. Wednesday's report.
“Battle uphill”
According to CoinGecko, the total value of crypto projects soared to $26 billion this year. About 30% of this increase came in the past day alone, as the stock price of Nvidia, a market leader in chips used in AI applications, rose again. Nvidia's stock price rose 15% this week.
Stay ahead with our weekly newsletter
Despite the rise, rapid changes in AI have made Coinbase “cautious about bold claims that crypto-focused platforms are uniquely positioned to disrupt the industry,” Han wrote. Ta.
So far in 2024, AI prices have outperformed the broader cryptocurrency market. AI tokens such as Akash and Render are up 146% and 99% since the beginning of the year, compared to Bitcoin's 54% rise. Still, the outlook for most of these projects is uncertain, Han wrote.
Crypto AI products face “an uphill battle with the broader market and regulatory forces,” he wrote.
Coinbase says technical challenges related to decentralized networks (a core concept of crypto AI projects) will make the fight even more difficult.
Join our community for the latest stories and updates
AI hype
Han said crypto AI projects are proliferating because of the hype around AI.
“AI tokens generally benefit from associated strong performance in both the broader crypto market and related AI news headlines,” Han wrote.
In recent months, many AI tokens have outperformed AI stocks such as Nvidia and Microsoft, Han wrote.
According to Han, AI tokens could still profit even if the price of Bitcoin falls due to “memetic speculation.”
This happens when speculators bet on a project's success based on hype rather than actual practicality or adoption.
If the technology doesn't live up to the hype, such speculation could lead to a price correction, Han wrote.
Headwind
Han cited Akash Network as one AI-related project facing looming headwinds.
In this project, users pay to repurpose their computing power into cloud computing, a decentralized form of the same kind of products offered by Amazon and Google. The company likens Akash Network to “Airbnb for data centers.”
Although usage of Akash is increasing, potential supply and demand issues are starting to emerge, Han wrote.
As more users connected their systems to the network, fees were diluted due to lack of demand.
Akash and similar projects will likely need to change the structure of their token distribution, Han said.
According to Coinbase, “nuanced” use cases will win out as crypto AI projects look to acquire users from established, centralized projects like Amazon Web Services and ChatGPT.
The question remains whether it can offer something new and useful before investors flock elsewhere, Han wrote.
Virtual currency market movements
- Bitcoin is up about 1% since Wednesday, trading at about $67,700.
- Ethereum was flat on the day at $3,880.
what we are reading
Tyler Pearson is our incoming markets correspondent. DL News. He is based in Alberta, Canada. Do you have any hot tips? Contact him: ty@dlnews.com.
