Analyst Claims AI Tokens are More Hype than Value Amid Profitable Trades

2024-03-20, 03:03

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## [TL; DR]
A Coinbase research report concluded that the current performance of AI crypto tokens is driven by hype rather than utility.

The greatest challenges AI crypto token projects are facing include competition from centralized platforms and regulatory concerns.

Render (RNDR), Bittensor (TAO), <a href="/ar/price/fetch-ai-fet" target="_blank" class="blog_inner_link">Fetch.ai</a> (FET), SingularityNet (AGIX), Akash Network (AKT) and AIOZ Network (AIOZ) are the leading crypto AI tokens.

**Keywords**: AI crypto tokens, generative AI in cryptocurrency, AI hype in blockchain, AI token market analysis, Best AI crypto projects, AI technology in crypto, AI-driven cryptocurrency, the future of AI in crypto, AI and blockchain integration, crypto AI tokens value, AI token price predictions, AI in crypto, AI hype vs. value in crypto, top AI blockchain projects, crypto AI ecosystem sustainability
## Introduction
The intersection [between cryptocurrency and artificial intelligence (AI)](https://www.gate.io/learn/articles/understanding-the-intersection-of-crypto-and-ai/1853 "between cryptocurrency and artificial intelligence (AI)") looks transformative.  With the emergence of decentralized autonomous organizations (DAOs) many AI projects have opted to use the blockchain technology to offer their services. In the process most of them have developed their own AI tokens.

Since the beginning of the year some of these AI tokens have been performing remarkably. In this post, we assess the sustainability of AI tokens and the surge in their popularity in 2023. As well, we shall explore the challenges that face AI projects which have adopted the decentralized model. Finally, we shall look at the most promising AI tokens in 2024.

Read also: [AI Tokens Continue to Rise, is the AI+Web3 Craze Hitting?](https://www.gate.io/blog_detail/3894/ai-tokens-continue-to-rise-is-the-ai-web3-craze-hitting "AI Tokens Continue to Rise, is the AI+Web3 Craze Hitting?")
###  Generative AI Boosts Niche Crypto Sub-Ecosystem: A Surge in Popularity over Recent Years
The artificial intelligence (AI) tokens have been trending since 2023 as many people believe they offer utility that go beyond their ecosystems. The interesting fact is that some of these AI crypto tokens have been performing better than the leading cryptocurrencies like <a href="/ar/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> as well as major stocks such as Nvidia and Microsoft.

During the first two and half months of 2024 crypto AI token prices have been increasing leading to a total market value of $24.3 billion. As an example, by the end of February Akash and Render, which are AI driven cryptocurrency, gained by 146% and 99% respectively, outperforming bitcoin whose value rose by only 54% during the same period.

In spite of such outstanding price performance in 2024 [a research report from Coinbase](https://coinbase.bynder.com/m/1bc34d14d28d8d4/original/MktIntel_2024-03-06_Ai.pdf "a research report from Coinbase"), one of the leading crypto exchanges, points out that the recent AI tokens price surge was a result of AI hype in cryptocurrency rather than actual utility.

Coinbase has questioned the assertion that the AI technology is disruptive in nature and has much to offer in the crypto ecosystem. The report states that the crypto AI ecosystem sustainability requires more innovations that benefit the broader economy than just decentralizing AI components.

Read also: [The promise and challenges of crypto + AI applications](https://www.gate.io/learn/articles/the-promise-and-challenges-of-crypto-ai-applications/1781 "The promise and challenges of crypto + AI applications")

According to [David Han, a Coinbase research analyst](https://coinbase.bynder.com/m/1bc34d14d28d8d4/original/MktIntel_2024-03-06_Ai.pdf "David Han, a Coinbase research analyst"), some changes that are taking place in the generative AI sector lead people to question the long-term sustainability of AI technology in crypto.

Although [AI and blockchain integration promises much on paper](https://www.gate.io/learn/articles/intersection-of-crypto-and-ai/1286 "AI and blockchain integration promises much on paper") there has not been much tangible benefits. Some of the best AI crypto projects like Akash are replicating product models of centralized businesses like Amazon by leveraging the computing power of its users for cloud computing purposes.

Such replication of services creates much competition with traditional centralized businesses operating in  various sectors. It is this stiff competition and technical hurdles as well as regulatory challenges which may <a href="/ar/price/render-rndr" target="_blank" class="blog_inner_link">Render</a> most of these top AI blockchain projects unviable.

If the AI hype in cryptocurrency fades due to lack of token utility it will become very difficult for investors to appreciate AI in crypto and envision the contribution that top AI blockchain projects will offer in the future.

Concerning this, Han, in the Coinbase report, says: “We believe some of the emerging trends in the AI sector could actually make it more difficult for crypto-based innovations to gain adoption in light of broader market competition and regulations.”

Furthermore, Han said that the fact that some [AI crypto tokens outperform bitcoin at some stages](https://www.gate.io/blog_detail/2239/warum-ubertreffen-ki-fokussierte-kryptowahrungen-den-bitcoin "AI crypto tokens outperform bitcoin at some stages") does not mean they have utility. It’s a question of AI vs. hype in crypto which can only be answered through the benefits or non-benefits of the best AI crypto projects.

Read also: [Crypto and AI to Drive Massive Surge in Electricity Use](https://www.gate.io/blog_detail/3804/crypto-ai-electricity-consumption-surge "Crypto and AI to Drive Massive Surge in Electricity Use")

In relation to this Han clarified: “We find that the performance of AI-related crypto tokens are supported by AI market headlines and can support positive price movements even on days where bitcoin trades lower. Thus, we believe that many AI-related tokens could continue to be traded as a more general proxy to AI progress.”

In the same report Han says that the AI crypto tokens have been performing very well due to the general cryptocurrency's bullish nature. This is because during the same period memecoins that rely on hype and community support have been rallying as well. Han’s point is that the market has inflated the perceived values of AI cryptocurrency.

The attention which the market is giving to generative AI in crypto is emanating from the industry’s perception of the potential of AI. For example, many people believe that AI will do many things such as generating videos _script_s, essays and project proposals more efficiently than humans. Whereas these narratives sound convincing the world is still waiting to prove the real potential of the AI industry. 
### Key Trends in AI Crypto
There are a few key trends in the AI in crypto sector. One of the major trends in the AI sector is the adoption of open-source models and the integration with existing platforms to improve efficiency and enhance cost effectiveness.

AI crypto projects are also adopting more advanced hardware than before which will further enhance their capacity. The projects are also shifting from model training to inference which promotes their capabilities.

Although Coinbase believes that AI has few use cases in the crypto sector [Vitalik Buterin, the Ethereum co-founder thinks otherwise](https://twitter.com/VitalikButerin/status/1759369749887332577?lang=en "Vitalik Buterin, the Ethereum co-founder thinks otherwise"). Buterin asserts that AI in the crypto sector can help to fix bugs that exist within smart contract protocols. 
![](https://gimg2.gateimg.com/image/article/17109037084.jpeg)
Source: [x.com ](https://twitter.com/VitalikButerin/status/1759369749887332577?lang=en "x.com ")

Further to this, Buterin emphasized that AI-driven audits can rectify problematic codes with smart contracts such as the <a href="/ar/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> one. In the end, this reduces risks arising from vulnerabilities which blockchain protocols may have.

More interestingly, Coinbase has identified what the AI industry has to do to unleash the potential of artificial intelligence and machine learning in the cryptocurrency sector. For instance, the AI in crypto sector can use artificial intelligence to improve the accessibility of blockchain data. Other use cases of artificial intelligence in the sector include [AI token market analysis](https://www.gate.io/price/view/artificial-intelligence "AI token market analysis") and AI token price predictions. 
### Challenges with Crypto AI Projects 
Like in the case of other blockchain platforms crypto AI projects also face challenges. The greatest challenge relates to their technologies. Although AI crypto projects aim to implement full decentralization their current infrastructures depend much on centralized data sources and components.

Regarding this Han said, “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.”

He added, “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.” Despite these challenges the future of AI in crypto is still bright.  
### AI Market Capitalization and the Most Promising AI Tokens Right Now (AGIX
According to [CoinGecko’s AI token market analysis](https://www.coingecko.com/en/categories/artificial-intelligence "CoinGecko’s AI token market analysis") the artificial intelligence coins have a total market capitalization of $24.3 billion after losing by 1.2% within the last 24 hours.

Notably, there are many promising AI tokens which include Render (RNDR), Bittensor (TAO), Fetch.ai (FET), SingularityNet (AGIX), Akash Network (AKT) and AIOZ Network (AIOZ). As an example, RNDR and TAO have market caps of $4,454,327,079 and $4,096,150,973, respectively. The market capitalizations of the other leading AI tokens are shown in the next image. 
![](https://gimg2.gateimg.com/image/article/17109037775.jpeg)
Source: [CoinGecko ](https://www.coingecko.com/en/categories/artificial-intelligence "CoinGecko ")

The AI token <a href="/ar/price-prediction" target="_blank" class="blog_inner_link">price prediction</a> indicates a bullish outlook. Despite the fact that AI crypto tokens are in red their prices will likely rise when most of the leading cryptocurrencies like ETH and bitcoin trend upwards. 
## Conclusion 
A recent Coinbase report pointed out that the key driver behind the AI crypto tokens rally is AI hype in the blockchain rather than utility. The future of the AI crypto tokens will likely depend on the right innovation and integration with centralized platforms. Currently the AI crypto token total market value stands at $24.3 billion.

<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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