Coinbase Warns Against Recent Rally in Crypto AI Projects


In the midst of the recent craze around crypto AI projects, crypto exchange Coinbase has issued stern warnings, noting that the massive surge in various artificial intelligence crypto projects is more of a hype than true value.

Crypto AI Projects Face Major Hurdles

According to a report written by David Han, a research analyst at Coinbase, the initiatives face fierce competition and technological challenges that might considerably delay their advancement. Han wrote:

“Our contrarian view is that the value potential for many AI tokens may be overstated as a result of broad attention on the AI industry, and that many AI tokens may lack sustainable demand side drivers in the short to medium term”.

He went on to say that Crypto AI technologies have “an uphill battle against broader market and regulatory forces.” Coinbase claims that the technological challenges associated with decentralized networks, which are at the heart of crypto-AI initiatives, will exacerbate the problem.

Nvidia’s Stock Rises

According to CoinGecko, the overall value of crypto AI projects increased to $26 billion this year. Notably, over 30% of these gains came during the previous day, owing to another increase in the shares of Nvidia, the main manufacturer of processors for AI applications. Nvidia’s stock has risen by 15% this week.

Despite this rise, Coinbase remains wary owing to the rapid advancement of AI, which calls into question Han’s bold statements that crypto-focused companies are uniquely positioned to disrupt the sector.

AI pricing surpassed the whole crypto market in 2024. Since the beginning of the year, tokens such as Akash and Render have witnessed impressive growth of 146% and 99%, respectively, compared to Bitcoin’s 54% increase. However, Han points out that the majority of these projects’ futures remain unknown.

AI Hype and Headwinds Ahead

Han observed that the spike in crypto AI initiatives is mostly driven by the buzz around AI. He went on to say, “AI tokens generally experience significant gains alongside the broader crypto market and are often influenced by AI-related news headlines.”

According to Han, in recent months, several Crypto AI tokens have beaten AI-related equities such as Nvidia and Microsoft. Han also claimed that AI tokens might still gain in value even as Bitcoin prices fall, due to what he called “memetic speculation.”

This happens when speculators invest in a project based on hype rather than genuine utility and acceptance. Han emphasized that such speculative activity might lead to a price fall if the technology does not live up to the promise.

Author: Simeon

Simeon is a seasoned crypto writer with a passion for exploring the fascinating world of blockchain and digital currencies. With a background in finance and technology, Simeon brings a unique perspective to his writing, delving into the complexities of decentralized finance, cryptocurrency trading, and emerging blockchain projects.

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