Amid crypto market turbulence, one sector defies expectations. Investors are rushing to capitalize on this trend - but is it sustainable?
The crypto market remains extremely choppy as we approach the end of August. But things appear to be turning around for AI tokens, with the broader altcoin sector also showing muted signs of recovery.
TL;DR…
- AI tokens outperformed: The top 10 gained an average of 14.1%, fueled by Nvidia’s upcoming Q2 earnings.
- Major gainers: Artificial Superintelligence Alliance (+47.2%) and Render (+34.9%) lead while the broader crypto market dipped 2%.
- Nvidia’s earnings: Consistent beats have AI token holders optimistic, but a miss could trigger a quick retrace.
- August struggles: Despite the AI pump, this August could end up as one of the worst closes for the crypto market in years.
Let’s dive in and see if we can tease out what’s going on this week.
An Explosive Move Looms Large
Over the last week, AI tokens have seen a dramatic resurgence while Bitcoin has suffered higher than normal volatility. Bitcoin's volatility index is now sitting at 3.1%, near its highest value in the last year.
The Bitcoin ETFs are adding an average of $113.6 million in BTC per day, while the amount of BTC sitting on centralized exchanges is falling rapidly. Because of this, some believe that a BTC supply shock is coming sooner or later.
Keep tabs on Bitcoin ETF flows here.
Given that election years tend to be among the most bullish for financial markets, this could send Bitcoin soaring, sending AI tokens skyrocketing with the rising tide (NFA).
Weekly News Roundup
As one of the fastest developing and best-funded emerging industries, there is rarely a shortage of significant developments in the AI space.
This week has proven to be no different, with the crypto AI sector seeing a flurry of sizeable investments alongside strong fundamental development of novel blockchain-enabled products.
Here’s what’s hot in AI this week:
- Hodler Investments and Entro Capital Management Ltd partner to establish a $500 million Digital Energy Infrastructure (DEI) Fund — with a focus on DePIN and AI.
- San Francisco-based crypto startup Story Protocol will use blockchain technology to tackle AI-based intellectual property theft following a16z-led $80 million funding round.
- AI-focused blockchain computes layer Space and Time locks in another $20 million in funding following a Series A funding round. Early backers include Microsoft's Venture Capital Fund known as M12 as well as SamsungNext.
- IBM Research reveals its new enterprise AI scaling technology — the 25.6 billion transistor Spyre accelerator chip.
- Fetch.ai allocates $10 million in annual funding for startups building AI agent solutions in new Innovation Lab initiative and announced a new Internship Incubator Programme.
- Elon Musk pledges his support for California's SB 1047 AI safety bill which aims to regulate large-scale AI systems. Key points include requiring a built-in kill switch, whistleblower protection, and mandatory incident reporting.
- Coinbase is now using machine learning to automatically predict upcoming traffic and scale accordingly, helping to avoid downtime during sudden high demand.
- OpenAI is developing a new AI model known as "Strawberry". The new model will be better equipped to deal with programming-related queries and novel math problems.
Major Movers
Though the rest of the market witnessed choppy conditions, AI tokens have been pulling away over the last week.
Indeed, the 10 largest AI tokens are in the green on the 7-day timeframe with the average AI token gaining 14.1%, compared to the market average loss of 2%.
The Artificial Superintelligence Alliance token leads the pack, tacking on an impressive 47.2% over the last week. Meanwhile, Render (RENDER), NEAR Protocol (NEAR) and Bittensor (TAO) gained 34.9%, 10.5% and 9.3% respectively over the same period.
The reasons behind the pump are clear.
AI tokens are moving ahead of Nvidia’s Q2 earnings report, which will be published on August 28, 2024. Investors often use earnings reports to evaluate the potential of the associated company and the broader sector it operates in — in this case, the AI sector.
Overall, the crypto AI sector is currently outperforming most others this August, despite being net red for the month. This is hardly surprising since August is historically a bad month for the crypto market — potentially due to the "summer doldrums" low trading volume phenomenon or the end of the fiscal year for some funds.
As the best-performing blue chip stock of this decade and the market leader in the AI sector, Nvidia’s performance is a strong indicator for AI tokens. Given that it has consistently beaten analyst earning expectations, AI token holders are clearly betting that this trend will continue.
That said, if earnings fall below expectations, AI tokens could quickly retrace their entire weekly move, and then some.
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