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Coinbase report urges “caution” on AI coins despite boom


An evaluation by an analyst has raised concerns about the artificial intelligence (AI) token market, cautioning that the recent surge in prices may be driven more by hype than actual value.

David Han, a research analyst at Coinbase, compiled a report questioning the long-term sustainability of AI tokens, citing intense market competition and technical challenges as significant barriers ahead.

The current rise in AI adoption across various sectors is boosting prices, but Han suggests that the current valuations might be overinflated without stable conditions to support them even in the near future.

$26 Billion Market Capitalization for AI Cryptocurrencies

The report scrutinizes the assertions by cryptocurrency-based platforms about their potential to revolutionize the AI landscape, while raising doubts. This caution comes despite remarkable returns for major tech companies.

Nvidia, the leading chip supplier for AI applications, experienced a 15% increase in its stock value this week amidst an overall market boom.

The total value of AI crypto projects has surpassed $26 billion this year, with 37% of these gains recorded in the last week alone, as highlighted by CoinGecko. While this could fuel optimism for some, Coinbase recommends caution regarding future prospects and the exaggerated claims of success put forth by crypto platforms.

Han acknowledged the upcoming regulatory hurdles and broader market challenges faced by AI tokens, along with the technical complexities associated with decentralized networks, a core aspect of crypto AI projects.

“AI tokens tend to benefit from positive overall market performance in the cryptocurrency space and AI-related news coverage,” stated the analyst.

“Given the rapid evolution of AI, we remain apprehensive of ambitious assertions that crypto-focused platforms are uniquely positioned to disrupt the industry, casting doubt on the sustained long-term value growth for most AI tokens, particularly those operating on a fixed token model,” Han added.

Thus far in 2024, AI tokens like Akash and Render have outperformed the broader cryptocurrency market, achieving gains of 146% and 99% respectively, in contrast to the notable 54% rise in Bitcoin.

Image credit: Ideogram

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