Coinbase report urges “caution” on AI coins despite boom

An analyst has urged caution on the artificial intelligence (AI) token market, warning the recent surge in prices could be fuelled more by hype, rather than its actual value.

In a report compiled by David Han, a research analyst at Coinbase, the long-term viability of the tokens was questioned, due to key factors. Intense competition within the market and technical issues were flagged as realistic obstacles in the way of AI tokens, further along the road.

At present, the proliferation of AI across many industries is driving the price up but Han believes the current values attributed could be overstated, without sustainable conditions to maintain the status even in the short-term future.

$26 Billion market capitalization for AI crypto

The report examines the claims made by crypto-based platforms of the potential to make a significant impact on the AI landscape, but questions remain. This caution comes despite landmark returns for heavyweight firms in the tech space.

Nvidia, the world’s largest supplier of chips used in AI, has enjoyed a 15% spike in its shares this week, as part of an overall boom.

The total value of AI crypto projects has already exceeded $26 billion this year, with CoinGecko underlining 37% of these gains have occurred in the last seven days. That would be grounds for serious optimism for some, but Coinbase has urged restraint on future prospects and the bold claims of prosperity raised by crypto platforms.

Han was cognizant of the upcoming regulatory challenges and wider market dynamics stacked against AI tokens as well as pointing to the technical difficulty presented by decentralized networks, which are the main idea of crypto AI projects.

“AI tokens generally benefit from strong associated performance in both the broader crypto market as well as related AI news headlines,” said the analyst.

“Rapid changes in AI make us cautious of bold claims that crypto-focused platforms are uniquely positioned to disrupt the industry, making the path towards long-term and sustainable value accrual to most AI tokens uncertain in our view, especially for those on a fixed token model,” Han continued.

So far in 2024, AI tokens such as Akash and Render have performed better than the overall crypto market, with respective gains of 146% and 99%, comparing favorably to the not-insignificant 54% increase in Bitcoin.

Image credit: Ideogram

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Graeme Hanna