With several AI tokens registering triple digital growth in 2024, observers are questioning whether many of these projects have merit.
The artificial intelligence (AI) token market has been on a remarkable upswing over the last few months, with things reaching a fever pitch last month as trading volumes and market valuations skyrocketed across many exchanges.
Data from the crypto platform Bitget revealed that the dedicated AI token zone witnessed an astonishing 400% surge in trading volume throughout February alone, reaching a total market capitalization of over $39 billion.
This rapid rise has primarily been fueled by investors piling into AI-centric concepts like Worldcoin (WLD), Livepeer (LPT) and Arkham (ARKM), all of which have seen their prices erupt over the past few months.
WLD — the token associated with Sam Altman’s AI-powered universal basic income project — traded up around 350% from its listing price in 2023 to over $7 per token in early March. Similarly, since their launch, LPT and ARKM have also posted triple-digit percentage gains of nearly 140% and over 100%, respectively.
Moreover, the average market capitalization of AI tokens listed on Bitget expanded by a staggering 77% in February compared to January, with the average daily number of traders also rising by 80% during this period. Between Feb. 15 and 29, the exchange saw AI token trading volumes spike by 480%.
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 already amassed significant excitement among AI investors and enthusiasts.
As things stand, the AI token mania shows no signs of subsiding, especially with industry giants like Nvidia seeing record revenues and profits driven by rising demand for AI computing power.
Nvidia’s fourth quarter 2023 earnings of $22.1 billion came in well above expectations, with the AI boom identified as a primary catalyst propelling the company’s latest blockbuster results and further fanning the flames of the AI-crypto craze.
Are AI token valuations justified?
While there have been notable developments in AI technology, the space is still in its nascent stages.
Can these projects really justify an AI token market capitalization of nearly $40 billion, or is it just hype?
According to Calanthia Mei, co-founder of Masa Network, a blockchain platform offering resources for AI developers, the market is currently exhibiting a potent mix of real potential and hype:
“I’d encourage everyone looking to enter this market to ask themselves a key question: Is a token truly necessary for this project, and does decentralization play a crucial role in its core focus? Also, where would value ultimately accrue in relation to this token in the long run?”
While the current market valuation might seem full of speculative hype, Mei sees immense long-term potential and value in AI technologies. “AI’s presence in crypto is most definitely here to stay,” she concluded.
Kevin Heng, chief strategy officer and co-founder of Thailand-based crypto exchange Bitazza, excitement, underscoring a transformative shift toward decentralizing AI’s role.
“We view these valuations as early yet realistic,” he said, saying that “AI can act as a force multiplier for blockchain enterprises and vice versa.”
Others remain unconvinced of the inherent value of AI tokens.
In a recent report, Coinbase analyst David Han suggested 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 deliver profitable trades, he believes the long-term sustainability of the ecosystem will require more than just decentralizing AI components.
In an even harsher critique of the market, chief global strategist for financial services giant Société Générale, Albert Edwards, likened the AI token craze to the many financial bubbles we have witnessed in the past:
“Every bubble has a compelling narrative. The current narrative centers on the anticipation of an AI-driven surge in corporate profits to fully justify the current stratospheric valuations. Those of us who lived through the late 1990s [tech] bubble have heard it all before and roll our eyes skyward.”
Despite the hype, there are solid AI use cases
While the numbers may suggest a significant degree of speculation, many market observers argue there are substantive drivers behind the AI token uproar.
Mei said that the “market is surging because AI is the foundational technological trend that has defined our generation. By 2030, AI companies are estimated to create over $1 trillion in value. We’re also seeing the vast multitude of AI use cases driving hype, with one of the most valuable being personalized user experiences.”
She conceded that there is significant hype surrounding the industry, adding that potential investors should closely evaluate whether the AI token they are investing in has real utility.
“In the end, projects that deliver real value and adoption will thrive, while the overhyped ones will fizzle out.”
Toufi Saliba, CEO of HyperCycle — a blockchain project connecting AI machines — highlighted the technological developments propelling AI tokens higher, telling Cointelegraph that increased adoption and awareness of AI technologies (as well as research breakthroughs) can be 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 evolve and deliver value to businesses and consumers,” he added.
The future of AI tokens
As the AI boom continues to permeate the global tech landscape, the surge in AI-linked crypto tokens presents a peek into the future potential of this burgeoning asset class, especially after it outpaced Bitcoin’s most recent record-breaking rally — which saw the digital currency reach a valuation of $73,600.
Industry experts like Markus Levin, co-founder of blockchain data storage firm XYO Network, believe that AI tokens could play a pivotal role in addressing some of the critical challenges (such as privacy concerns and the ever-increasing demand for computing power) facing the AI industry today.
“We will continue to see more and more use cases fusing together the two industries as both AI systems and blockchain networks continue to grow,” he added.
Moreover, investment management firm VanEck believes that crypto-AI tokens could play a crucial role in addressing the issue of digital ownership and data verification, ensuring the integrity and provenance of AI-generated content.
This is particularly crucial as the outputs of generative AI become increasingly indistinguishable from human-created works.
Therefore, as the tech landscape continues to evolve and mature rapidly, these tokens stand to emerge as a driving force, unlocking new possibilities and reshaping industries.
Whether through the development of decentralized AI marketplaces, secure data verification platforms, or the incentivization of computing power, they offer a peek into a future where innovation in the AI realm knows no bounds.
