AI crypto tokens plummet despite tech giants' breakthroughs, leaving investors puzzled as big money pours into the sector.
AI is widely touted as the next big thing, but you wouldn’t think it while looking at the charts.
In today’s piece, we dive into the details and find out what’s going on. Is AI just a false narrative or is it just experiencing growing pains?
Let’s find out!
TL;DR…
- AI advancements surge: X’s Grok 2.0 and Google’s Gemini Live are pushing AI capabilities forward, making it more accessible and powerful.
- Crypto AI tokens falter: Despite NVIDIA’s stock success, most crypto AI tokens have seen significant drops, with many returning to early 2024 levels.
- Big investments signal confidence: Binance Labs and others are heavily investing in AI, indicating strong belief in its long-term potential.
- Institutional interest rises: Grayscale’s AI-focused funds are gaining traction, reflecting growing institutional interest in blockchain-AI projects.
What’s New in AI
As one of the fastest-moving sectors, there is generally no shortage of new developments in the AI space.
This week we saw the release of X’s Grok 2.0 model, bringing with it bias-free image creation capabilities, in addition to improved reasoning and coding abilities.One X user tested its sentiment analysis abilities and found it spot on.
OpenAI remains tight-lipped on its much-anticipated GPT-5 model. Current Polymarket community predictions suggest a 33% chance of it launching this year. Some believe that it may be the first model to introduce autonomous agents, potentially supercharging the digital assistant sector.
Beyond this, there is an approximately 7% chance that OpenAI will announce it has achieved AGI in 2024 — arguably humanity’s greatest triumph… or tragedy.
Google also threw its hat into the ring this week with the announcement of Gemini Live — its next-generation AI-powered assistant.
Far away from the limited Google assistant of the past, Gemini Live is capable of free-flowing conversation, complex task handling, contextual awareness, image editing, and a lot more.
This puts AI at the fingertips of the hundreds of millions of Pixel phone users, helping the AI sector gain mindshare.
But what about the crypto AI sector?
NVIDIA Yay, Crypto AI Nay
As the bellwether of the AI industry, we can typically gauge sentiment in the AI space based on how well NVIDIA Corp stock is performing.
Over the past week, NVDA reclaimed almost its entire last month's drop and is now less than a 10% move to its all-time high.
Did you know? NVDA is one of the only blue chips to outperform Bitcoin in the last decade.
Nonetheless, crypto AI projects haven’t followed suit. The average AI token is currently down 29% for the month with most major AI tokens suffering a sizeable dump in the last 24 hours alone.
Track your favorite AI projects on our dedicated AI & big data token screener.
But more than this, many crypto AI projects have essentially roundtripped their entire 2024 positive move. With Bittensor (TAO), Render (RNDR), Theta Network (THETA) and others back down to prices not seen since February.
Looking further at the price action, recent low float, and high FDV AI projects have performed worse than expectations.
This includes the likes of io.net. Despite raising funds at a fully diluted valuation of $1 billion, the project token $IO has been in freefall since launch despite just 10% of its token supply circulating.
The same has been seen in similarly low float tokens across other sectors, including ZKsync (ZK) and Starknet (STARK) — both of which have plummeted following their TGE. This suggests it isn’t a sector-specific phenomenon.
This admittedly dated article helps to explain why Fully Diluted Valuation (FDV) is an important metric to understand as a trader/investor.
All of this is fueled by a spate of poor indicators for the crypto economy, including the announcement of a new global health emergency (Mpox is back!) and Berkshire Hathaway seemingly bracing for a recession.
Crypto Heavyweights Making Moves
Though current price action paints a bearish picture, crypto industry titans appear to see a bright future for the AI sector.
Binance Labs has been betting big on the next generation of crypto AI projects.
On August 14, Sahara AI announced a $43 million Series A co-led by Binance Labs, Pantera Capital and Polychain. Helping to bring its multi-layered AI-centric blockchain stack to market.
Moreover, Binance Labs just announced its investment into MyShell, a decentralized platform for finding and creating AI-native apps. As per data from CryptoRank, AI projects now constitute 15% of its known investments.
Google search trends also radiate optimism. Interest in AI is continuing to gain momentum with no signs of slowing down.
In July, Grayscale launched its decentralized AI fund, which allows institutional investors to gain exposure to prominent crypto AI assets, including Near, Filecoin, Render and a small amount of Bittensor.
In just under a month of operation, the fund has amassed an AUM of $1.1 million. For comparison, the separate Grayscale Bittensor Trust is gaining size much faster and currently has an AUM of $1.5 million — despite launching just last week.
One thing is for sure, it’s still early days for the Crypto AI landscape. With the first pureplay blockchain-enabled AI projects now live and operating and high hopes for deeper integrations in the future, there appears to be significant room for further growth.
Indeed, this is a sentiment shared by Cardano co-founder Charles Hoskinson, who recently elaborated on the potential overlap between crypto and AI at his Ai4 2024 Keynote. This is exhaustively summarized in the tweet below.
With Q4 generally the strongest quarter for the crypto market, there is good reason to believe there are good times ahead.
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