With multiple AI tokens set to triple figures by 2024, observers are questioning whether many of these projects are valuable.
The artificial intelligence (AI) token market has been on a significant rise over the past few months, reaching a frenzy last month as trading volumes and market valuations surged across many exchanges.
Trading volumes in the dedicated AI token space surged 400% in February alone, with a total market capitalization of more than $39 billion, according to cryptocurrency platform Bitget.
This rapid rise is largely due to investors piling into AI-centric concepts such as Worldcoin ( WLD ), Livepeer (LPT), and Arkham (ARKM), all of which have seen their prices explode over the past few months.
WLD — the token associated with Sam Altman’s AI-driven universal basic income project — was trading around 350% higher than its 2023 listing price at over $7 per token in early March. Similarly, LPT and ARKM have also seen triple-digit percentage gains since their launch, at nearly 140% and over 100%, respectively.
In addition, the average market value of AI tokens listed on Bitget in February increased by 77% from January, and the average number of daily traders also increased by 80%. The exchange's AI token trading volume surged 480% between February 15 and 29.
Another reason for this enthusiasm can be attributed to the upcoming release of OpenAI's Sora text-to-video AI model, which seems to have caused great excitement among AI investors and enthusiasts.
As it stands, the AI token craze shows no signs of abating, especially as industry giants like Nvidia are seeing record revenue and profits driven by the growing demand for AI computing power.
Nvidia's fourth quarter 2023 revenue was $22.1 billion, far higher than expected, and the AI boom is considered to be the main catalyst driving the company's latest blockbuster results and further inciting the AI cryptocurrency craze.
Despite the remarkable development of AI technology, the field is still in its infancy.
Do these projects really justify the nearly $40 billion market value of AI tokens? Or is it just hype?
Calanthia Mei, co-founder of Masa Network, a blockchain platform that provides resources for AI developers, said the market currently exhibits a powerful combination of real potential and hype:
"I encourage everyone who wants to enter this market to ask themselves a key question: Does this project really need a token? Does decentralization play a vital role in its core focus? Also, where will the value of this token ultimately increase in the long run?"
While current market valuations seem full of speculative hype, Mei sees huge long-term potential and value in AI technology. "The presence of AI in the crypto space is definitely here to stay," she concluded.
Kevin Heng, chief strategy officer and co-founder of Thai cryptocurrency exchange Bitazza, told us that this growth is not just about short-term excitement, but also highlights the transformative shift in the role of decentralization in AI.
He said: "We believe these valuations are early and realistic. AI can be a force multiplier for blockchain businesses and vice versa."
Others remain unconvinced of the intrinsic value of AI tokens.
In a recent report, Coinbase analyst David Han said that AI-related tokens may be more hype than actual value, at least in the short to medium term.
While he did acknowledge that some crypto AI tokens continue to offer lucrative transactions, he believes that the long-term sustainability of the ecosystem requires more than just a decentralized AI component.
Albert Edwards, chief global strategist at financial services giant Societe Generale, was more critical of the market, likening the AI token craze to many financial bubbles we have witnessed in the past:
“Every bubble has a compelling story. The current narrative is focused on expectations of a surge in AI-driven corporate profits to fully justify the current high valuations. Those of us who lived through the late 1990s [tech] bubble have heard it all before and have turned our eyes to the sky.”
While the numbers may indicate a large degree of speculation, many market observers believe there are substantive drivers behind the AI token frenzy.
May said, “The market is booming because AI is a fundamental technology trend that will define our generation. By 2030, AI companies are expected to create more than $1 trillion in value. We are also seeing a multitude of AI use cases driving the hype, one of the most valuable being personalized user experience.”
She acknowledged that there is a lot of hype in the industry, adding that potential investors should carefully evaluate whether the AI tokens they invest in have real utility.
“Ultimately, projects that provide real value and adoption will thrive, while over-hyped projects will fail.”
Toufi Saliba, CEO of HyperCycle, a blockchain project that connects AI machines, highlighted the technological developments that are driving AI tokens higher, telling Cointelegraph that increased adoption and awareness of AI technology (along with research breakthroughs) are likely key drivers.
Whether this growth is sustainable in the long term will depend on how effectively projects like HyperCycle, SingularityNET, Fetch.ai, Ocean Protocol and other decentralized AI technologies continue to grow and create value for businesses and consumers, he added.
As the AI boom continues to permeate the global tech sector, the surge in AI-related crypto tokens offers a glimpse into the future potential of this emerging asset class, especially after it surpassed Bitcoin’s recent record-breaking gains – which saw the digital currency rise to a valuation of $73,600.
Industry experts such as Markus Levin, co-founder of blockchain data storage company XYO Network, believe that AI tokens can play a key role in addressing some of the key challenges facing AI, such as privacy concerns and the growing demand for computing power.
The AI industry today.
He added: “As AI systems and blockchain networks continue to evolve, we will continue to see more and more use cases that bring the two industries together.”
In addition, investment management firm VanEck believes that crypto AI tokens can play a vital role in solving digital ownership and data verification issues, ensuring the integrity and provenance of AI-generated content.
This is especially important as the output of generative AI becomes increasingly indistinguishable from human-created works.
As such, these tokens will be a driving force, unlocking new possibilities and reshaping industries as the technology landscape continues to evolve and rapidly matures.
Whether it is through decentralized AI marketplaces, the development of secure data verification platforms, or the incentivization of computing power, they offer a glimpse into a future where innovation in the AI space will be endless.
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