Source: Cointelegraph
Compiled by Coolman, Foresight News
With some AI tokens tripling in price by 2024, observers are beginning to question whether some of these projects have real value.
The AI token market has been trending significantly upward over the past few months, reaching a fever pitch last month as exchange volumes and market valuations soared.
In February alone, trading volume in the AI token zone surged 400%, with a total market capitalization exceeding $39 billion, according to data from cryptocurrency platform Bitget.
The market attributes this rapid rise to the large influx of investors into the token market with AI as the core concept. The prices of various tokens including Worldcoin (WLD), Livepeer (MPT) and Arkham (ARKM) have all increased in the past few years. skyrocketed within a month. In early March, WLD's trading price rose to $7. Based on the 2023 issuance price, WLD's price increased by more than 350%. LPT and ARKM have also achieved gains of nearly 140% and over 100% respectively since their issuance.
In addition, compared with the data in January, the average market value of AI concept coins on Bitget increased by 77% in February. During this period, the average number of daily traders increased by 80%. Between February 15 and 29, the trading volume of Bitget AI tokens surged by 480%.
Also triggering the rally is the impending release of Open AI’s Sora model, a text-driven, video-generated AI model that has sparked a huge buzz among investors and enthusiasts.
As things stand, the market’s enthusiasm for AI tokens shows no sign of waning, especially as industry giants like Nvidia are already enjoying record highs in revenue and profits driven by growing demand for AI computing power. It is reported that Nvidia’s profit in the fourth quarter of 2023 was US$22.1 billion, far exceeding the company’s expectations. The AI craze that kicked off at the end of 2023 is widely regarded as the catalyst that drove its performance to new highs, and also spawned widespread enthusiasm for AI tokens in the cryptocurrency market.
Are AI token valuations reasonable?
While AI technology has made significant advances, the field overall is still in its infancy. So are the $40 billion valuations of these AI tokens justified, or are they completely hyped?
Calanthia Mei, co-founder of Masa Network, a blockchain platform that aggregates AI developer resources, believes that the current AI token market is showing a situation where real potential and hype coexist:
“I would advise anyone looking to enter this market to ask themselves a key question: Does this project really need a token, and does decentralization play a key role at its core? Also, where will this token ultimately accumulate value in the long run?”
Although the current market valuation is full of speculative hype, Mei believes that AI technology has huge long-term value and potential, and AI tokens will exist in the crypto market for a long time.
Kevin Heng, chief strategy officer and co-founder of Thai cryptocurrency exchange Bitazza, told Cointelegraph that this growth represents more than just a short-lived market enthusiasm, but also highlights the overall shift of AI into a decentralized role. Heng noted that while it's still early days for the AI market, I think this valuation is realistic. AI can increase the power of blockchain hundreds of times, and vice versa.
Others are skeptical about the intrinsic value of AI tokens.
Coinbase analyst David Han pointed out in a recent report that, at least in the short term, the growth in the value of AI-related tokens is more due to hype than actual value. Although he admitted that some encrypted AI tokens are indeed profitable, the long-term sustainable development of the ecosystem requires more than just decentralized AI components.
Albert Edwards, chief global strategist at financial services giant Société Générale, was even more critical of the market, comparing the AI token craze to past financial bubbles: Every bubble has a fascinating story. The current bullish view on AI tokens believes that AI models are "good" at driving corporate profit growth, which indirectly proves that current valuations are reasonable. However, these inferences are unreliable for those of us who have experienced the "tech" bubble in the late 1990s.
The hype and solid AI use cases are real
Although market figures indicate that user investment behavior exists to a large extent in the field of AI tokens, many market observers point out that there are substantial driving factors behind the booming market trend of AI tokens.
Mei believes the market is surging because AI is the foundational technology trend that defines our generation. It is estimated that the value created by AI companies will exceed $1 trillion by 2030. Hype in the AI industry certainly exists, but in the end, projects that can thrive are always projects that can truly bring value and widespread adoption. Over-hyped projects will gradually fade away. Potential investors should carefully evaluate whether their promising AI tokens Really useful.
AI blockchain infrastructure HyperCycle CEO Toufi Saliba has repeatedly emphasized that the continued advancement of AI tokens should focus on higher technological developments, and pointed out that the adoption rate of AI technology, increased awareness, and breakthroughs in research may be key drivers of the market.
Whether this growth can be sustained 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 bring value to businesses and consumers, he added.
The future of AI tokens
As the AI craze continues to permeate the global technology sector, the surge in AI-related cryptocurrencies has allowed people to see the future potential of this new asset class.
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 solving some of the key challenges currently facing the industry, such as privacy issues and the need for increased computing power. As AI systems and blockchain continue to develop, we will continue to see more and more convergence cases in the two fields.
In addition, investment management company VanEck believes that AI + crypto tokens can play a key role in solving digital ownership and data verification issues, thereby ensuring the completeness and traceability of AI-generated content. As AI output becomes increasingly indistinguishable from human-created work, this is particularly important for the sustainable development of the AI industry.
As the technology field continues to mature, these tokens will bring new possibilities to the AI + Crypto field and complete the reshaping of the industry. Whether through the development of a decentralized AI market, a secure data verification platform, or an incentive mechanism involving computing power aggregation, these AI concept coins undoubtedly provide a glimpse into the future of endless innovation in this field.
