According to Coinbase, hype plays a major role in the rise of cryptocurrency AI projects. News often influences the broader market, which helps AI tokens gain value.
An analyst has cautioned that the artificial intelligence (AI) token market may be more hype than real value and that this could explain the recent price surge.
Several important factors raised doubts about the tokens’ long-term viability, according to a report written by Coinbase research analyst David Han. Further down the road, fierce market competition and technological difficulties were identified as practical barriers to AI token adoption.
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The price is rising due to AI’s widespread use across many industries. Still, Han thinks this could be overstating the situation, given that long-term sustainable conditions are needed to support the status quo.
JUST IN: Coinbase Warns Against the Recent Rally In Crypto AI Projects
— Crypto Chiefs News (@CryptoChiefNews) March 8, 2024
AI projects face major hurdles
According to a report by Coinbase research analyst David Han, the projects encounter intense competition and technical challenges that could seriously hinder their progress. Han said,
“Our contrarian view is that the value potential for many AI tokens may be overstated due to broad attention on the AI industry and that many AI tokens may lack sustainable demand side drivers in the short to medium term”.
He continued by saying that crypto AI products face “an uphill battle against broader market and regulatory forces”. According to Coinbase, the challenge will be made more difficult by the technical hurdles linked with decentralized networks, which constitute the fundamental concept of crypto-AI projects.
According to data from CoinGecko, the total value of crypto AI projects has increased to $26 billion this year. Remarkably, about 30% of these gains occurred within the last day, fueled by another rise in Nvidia’s stock, the leading provider of chips for AI applications. This week, Nvidia’s shares have increased by 15%.
Despite this surge, Han asserts boldly that platforms focused on cryptocurrencies are uniquely positioned to disrupt the industry; however, Coinbase is cautious because AI is evolving so quickly.
AI prices have surpassed the broader crypto market in 2024. Since the start of the year, tokens like Akash and Render have seen remarkable gains of 146% and 99%, compared to Bitcoin’s 54% rise. However, Han pointed out that most projects still have an uncertain future.
AI tokens might be exaggerated.
The proliferation of platforms such as Hugging Face, which hosts over 530,000 AI models for public use, and a culture of open-sourcing models have propelled the explosion of the crypto-AI space.
This transparency encourages both competition and teamwork. Additionally, it makes it possible to create models that, in some cases, outperform closed-source alternatives. Furthermore, the trend towards more affordable, smaller models points to a future in which artificial intelligence can be more widely distributed and integrated into a wider range of applications.
David Han highlights the unpredictability and volatility of AI tokens, especially those with fixed tokenomic models. Though AI is advancing with great promise, he warns of real-world obstacles that may prevent widespread adoption.
The need for prudent investment strategies is highlighted by the rapid evolution of AI technologies and the speculative nature of AI tokens’ performance highlight.
AI Tokens Skyrocket Amidst Nvidia’s Market Momentum
— Coinvestors 🌐 (@CoinvestorsNews) March 7, 2024
However, Han said they still think many near-term persistent demand drivers need to be added to the AI narrative trade. A lack of clear adoption forecasting and metrics has enabled a wide range of memetic speculation, which may not be long-term sustainable in their view. 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.
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