AI-related token prices soar: Is it delusional speculation or an unfinished Tower of Babel?

Source: Cointelegraph

Compiled by: Coolman, Foresight News

Some AI tokens have tripled in price in 2024, leading observers to question whether some of these projects have real value.

The AI token market has shown a significant upward trend over the past few months, reaching a fever pitch last month with a surge in exchange trading volume and market valuation.

According to data from cryptocurrency platform Bitget, the trading volume in the AI token sector skyrocketed by 400% in February, with a total market capitalization exceeding $39 billion.

The market attributes this rapid rise to a massive influx of investors into the AI-centric token market, with various tokens including Worldcoin (WLD), Livepeer (LPT), and Arkham (ARKM) experiencing explosive price increases over the past few months. At the beginning of March, the trading price of WLD rose to $7, representing an increase of over 350% compared to its issuance price in 2023. LPT and ARKM have also achieved increases of nearly 140% and over 100%, respectively, since their issuance.

Additionally, compared to data from January, the average market capitalization of AI concept coins on Bitget grew by 77% in February. During this period, the daily average number of traders increased by 80%. From February 15 to 29, the trading volume of Bitget AI tokens surged by 480%.

Another reason for the surge is the upcoming release of OpenAI's Sora model, a text-to-video generation AI model that has generated significant excitement among investors and enthusiasts.

As it stands, there are no signs of waning enthusiasm for AI tokens in the market, especially as industry giants like Nvidia have tasted new highs in revenue and profit driven by the growing demand for AI computing power. It is reported that Nvidia earned $22.1 billion in the fourth quarter of 2023, far exceeding the company's expectations. The AI boom that began at the end of 2023 is widely regarded as a catalyst for driving its performance to new heights, also spawning widespread enthusiasm in the cryptocurrency market for AI tokens.

Are AI Token Valuations Reasonable?

Although AI technology has made significant advancements, the field is still largely in its infancy. So, is the valuation of these AI tokens, which reaches $40 billion, reasonable or purely speculative?

Calanthia Mei, co-founder of the blockchain platform Masa Network that aggregates AI developer resources, believes that the current AI token market exhibits a coexistence of real potential and speculation:

"I suggest that anyone looking to enter this market ask themselves a key question: Does this project really need a token, and does decentralization play a crucial role at its core? Additionally, where will this token ultimately accumulate value in the long run?"

While the current market valuation is filled with speculative hype, Mei believes that AI technology has immense long-term value and potential, and that AI tokens will continue to exist in the crypto market in the long term.

Kevin Heng, Chief Strategy Officer and co-founder of Thai cryptocurrency exchange Bitazza, told Cointelegraph that this growth signifies not just a fleeting market enthusiasm but highlights the overall shift of AI towards a decentralized role. Heng pointed out that while the AI market is still in its early stages, he believes this valuation is realistic. AI can drive a hundredfold growth in blockchain, and vice versa.

Others, however, remain skeptical about the intrinsic value of AI tokens.

David Han, an analyst at Coinbase, noted in a recent report that, at least in the short term, the value growth of AI-related tokens is more driven by speculation than actual value. While he acknowledges that some crypto 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, has been even more critical of the market, likening the AI token craze to past financial bubbles: every bubble has a compelling story. The current optimistic views on AI tokens suggest that AI models have a hand in driving corporate profit growth, thereby indirectly validating the current valuations. However, these inferences are not credible to those of us who experienced the "tech" bubble of the late 1990s.

Both Hype and Viable AI Use Cases Exist

While market data indicates that there is a significant amount of user investment behavior in the AI token space, many market observers point out that there are substantial driving factors behind the frenzy surrounding AI tokens.

Mei believes that the market is surging because AI is a foundational technological trend defining our generation. It is estimated that by 2030, the value created by AI companies will exceed $1 trillion. While there is certainly hype in the AI industry, ultimately, the projects that can truly deliver value and achieve widespread adoption will thrive, while overhyped projects will gradually fade away. Potential investors should carefully assess whether the AI tokens they favor are genuinely useful.

Toufi Saliba, CEO of AI blockchain infrastructure HyperCycle, repeatedly emphasizes that the sustained rise of AI tokens should focus on advancing technological development, pointing out that the adoption rate, awareness, and breakthroughs in research related to AI technology could be key market drivers.

He added that 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 develop and deliver value to businesses and consumers.

The Future of AI Tokens

As the AI boom continues to permeate the global tech landscape, the surge of AI concept cryptocurrencies reveals the future potential of this new asset class.

Industry experts, including Markus Levin, co-founder of blockchain data storage company XYO Network, believe that AI tokens can play a crucial role in addressing some of the key challenges currently faced by the industry, such as privacy issues and the growing demand for computing power. As AI systems and blockchain continue to evolve, we will see more and more integration cases emerging between the two fields.

Furthermore, investment management firm VanEck believes that AI + crypto tokens can play a key role in solving issues related to digital ownership and data verification, thereby ensuring the completeness and traceability of AI-generated content. This is particularly important for the sustainable development of the AI industry, as it becomes increasingly difficult to distinguish between AI outputs and human-created works.

As the technology sector matures, these tokens will bring new possibilities to the AI + Crypto space and reshape the industry. Whether through the development of decentralized AI markets, secure data verification platforms, or incentive mechanisms involving computing power aggregation, these AI concept tokens undoubtedly offer a glimpse into the endless future of innovation in this field.