- A recent research report from PayPal indicates that AI cryptocurrency projects may not be delivering the expected value despite the surge in the projects’ token prices.
- The market for artificial intelligence crypto tokens has seen a 30% increase, reaching a total of $26 billion since Wednesday.
- The report underscores the challenges faced by AI crypto projects in terms of market competition and technological barriers, particularly in comparison to established players like Microsoft and OpenAI.
A new study by Coinbase, a blockchain company, suggests that the significant price hikes in tokens associated with artificial intelligence bitcoin ventures may be driven more by hype than actual utility.
David Han, a research scientist at Coinbase, pointed out in the report that these projects are encountering intense competition and technological hurdles that could impede their progress.
Han expressed a contrasting viewpoint in the report released on Wednesday, stating that the perceived value of certain AI tokens might be inflated due to the widespread focus on the Internet of Things (IoT) sector. He also mentioned that many IoT tokens might lack sustainable long-term demand drivers.
“Challenging Path Ahead”
This year, data from CoinGecko reveals that the collective valuation of bitcoin projects has surged to $26 billion. Notably, a substantial portion of this growth, around 30%, occurred in just one day, coinciding with a surge in Nvidia’s stock value. Nvidia leads the market in producing chips utilized in AI software, and its shares have risen by 15% this year.
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Despite the rapid evolution in AI, Han emphasized that Coinbase remains cautious about bold assertions claiming that platforms centered on cryptocurrencies are uniquely positioned to disrupt the industry.
In 2024 so far, AI tokens have outperformed the broader bitcoin market. Tokens like Akash and Render have experienced significant growth of 146% and 99%, respectively, compared to Bitcoin’s 54% increase since the year began. The future outlook for many of these projects remains uncertain, according to Han.
Han highlighted the existing challenges faced by crypto AI products in navigating market dynamics and regulatory environments.
The complexity is further compounded by technical obstacles stemming from decentralized networks, which form the foundation of crypto-AI initiatives.
Optimism Surrounding AI
Han attributed the proliferation of crypto AI projects to the enthusiasm surrounding artificial intelligence technologies.
He noted that AI tokens often benefit from positive performance correlations with both the broader crypto market and relevant AI news developments.
Han pointed out that certain AI tokens have outperformed stocks of AI-centric companies like Nvidia and Microsoft in recent months.
Despite the speculative nature of investments, Han suggested that AI cryptocurrencies could still yield gains even during Bitcoin price downturns.
Speculative trading based on hype rather than real-world utility may lead to price corrections if the technology fails to meet expectations, as per Han.
Challenges Ahead
Han cited Akash Network as an example of an AI-related project facing immediate challenges.
Akash Network incentivizes users to share their computing resources for decentralized cloud computing services, akin to offerings from tech giants like Google and Amazon. Described as the “Airbnb for data centers,” Akash Network has encountered supply-demand imbalances despite increasing usage.
Han highlighted the need for adjustments in token supply structures for projects like Akash to address these issues.
Coinbase suggested that nuanced application scenarios could be critical for the success of crypto-AI projects as they compete with established centralized services like Amazon Web Services or ChatGPT.
The key question, according to Han, is whether these projects can offer unique and valuable propositions to retain investor interest.
Market Movements in Crypto
- Bitcoin has seen a 1% increase since Wednesday’s close, trading at approximately $67,700.
- Ethereum is currently priced at $3,880 per ether.
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Tyler Pearson, a young industry editor at DL News based in Alberta, Canada, is currently leading the editorial team. For any news tips or inquiries, reach out to Tyler at [email protected].
