Vlad Hryniv
Artificial intelligence continues to attract the attention of the industry with its breakthroughs. More and more AI projects are being popularized and discussed, including in the crypto industry. AI-based tokens are one such example, as more and more cryptocurrency users have invested in them over the past year. However, Coinbase analyst David Hahn noted in his latest report that the value of AI tokens has already been exceeded. This report is quite complicated for readers, so I propose to consider some key points.
The analyst believes that rapid changes in the field of artificial intelligence “make us cautious” about the long-term sustainability of most AI tokens. He notes that some trends in the AI industry may complicate the introduction of cryptocurrency innovations in light of widespread market competition and regulation.
CoinGecko’s data shows that the total value of AI-related projects has grown to $26 billion. Approximately 30% of this growth occurred in one day, coinciding with the rise in Nvidia shares.
Since the beginning of the year, some AI tokens have experienced significant growth, outperforming even Bitcoin. However, according to David Khan, AI-related cryptocurrencies usually benefit from general market sentiment and news headlines. Emphasizing that the attention to AI tokens is exaggerated, and the coins may not have a sustainable demand in the short to medium term.
To support this statement, the report provides an example of the price dynamics of the Worldcoin token. As the analyst explained, the Worldcoin World ID 2.0 update on December 13, 2023, did not generate interest in the coin. However, the promotion of the token by founder Sam Altman led to a 50% increase in the value of WLD in two days. Similarly, the price of the coin tripled when OpenAI released a new AI model, Sora.
Coinbase analyzed the intersection of AI and cryptocurrencies in two categories. The first covers a case where the use of a neural network improves the crypto industry. These improvements range from creating human-readable transactions to using modeling results as part of protocols. Numerous successful integrations support this case.
A great example is Vitalik Buterin’s recent experience with AI. The expert spoke about the successful application of a neural network as a method of correcting technical errors in the blockchain code base.
Another example is the Web3 wallet authorization method. Companies such as OKX, WhiteBIT, and Bybit have implemented this feature to provide a more secure and convenient way of authorization.
In the second case, a certain potential of cryptocurrencies for traditional artificial intelligence systems is considered. The analyst notes that cryptocurrencies are trying to change the traditional structure of artificial intelligence through decentralization, which includes computation, validation, identification, etc.
The report notes that despite the current hype around the neural network, AI-powered token trading still lacks “sustainable demand drivers.” The lack of clear forecasts and valuation methods means that cryptocurrency trading is largely based on memetic speculation.
“Eventually, price and utility will converge — the open question is how long it will take and whether the utility will rise to meet the price or vice versa. That said, we do think that a continued constructive crypto market and outperforming AI sector could sustain a strong crypto-AI narrative for some time” the analyst writes.
David Hahn recommends that cryptocurrency users who are interested in trading AI tokens in the future should be careful and study the tokens before investing in them.
Summarizing, David Hahn notes that “the role of cryptocurrencies in AI does not exist in a vacuum.” Emphasizing that any decentralized platform competes with centralized alternatives and must be analyzed in the context of broader business and regulatory requirements.
He believes that displacing centralized developers for the sake of decentralization is not enough to achieve full integration.
“Generative AI models have existed for a handful of years, and already retain a certain level of decentralization due to market competition and open source software.”
The analyst emphasizes that the interaction between AI and cryptocurrencies is still in its infancy, but due to the rapid development of the AI industry, this may change shortly.
David Hahn concludes the global report with the following words:
“A decentralized AI future, as it is currently envisioned by many in the crypto industry, is not guaranteed — in fact, the future of the AI industry itself is still largely undetermined. As a result, we think it prudent to navigate such a market carefully and more deeply examine how crypto-based solutions can truly provide a meaningfully better alternative, or at the very least, understand the underlying trading narrative.”
The integration of artificial intelligence into blockchain technologies is becoming increasingly popular. The growing number of AI tokens only confirms this. Although Coinbase analysts consider them “overvalued,” a huge number of users continue to invest their funds, emphasizing their value.
However, it is important to note that you should always conduct market research and be careful when choosing an investment option.