Excitement Around AI Tokens Is Waning: Artificial Intelligence Brings Losses To Tech Giants
AI tokens received their boost of popularity in early 2023, when the artificial intelligence technology gained its global reach thanks to a Chatbot from OpenAI. As a result, AI-based tokens saw a meteoric growth, but recent data suggests that the hype around AI tokens has fallen. Why is this happening?
A decline in the AI token market
Historically, October is a positive month for the cryptocurrency market. The last week was relatively quiet for the entire cryptocurrency market, yet the AI token sector experienced a decline. At the time of writing, the following losses were observed: The Graph (GRT) by 9.93%, Ocean Protocol (OCEAN) by 13.32%, SingularityNET (AGIX) by 9.6%, and Arkham Intelligence (ARKM) lost more than 20% of its value.
The drop in the value of AI tokens this week stood out amidst the calmness of the rest of the crypto market, but in fact the overall decline of this sector has been occurring since the beginning of the year. Analyst firm Kaiko said as recently as last month that AI token trading volume peaked at $7 billion in January 2023, and that figure has fallen 80% since then. Significant losses occurred in July, when the general enthusiasm of market participants for artificial intelligence subsided.
Why is interest waning?
The huge popularity of artificial intelligence came in late 2022 and early 2023, when OpenAI unveiled its new ChatGPT product. The hype around the new technology immediately spurred tech giants to build their AI-based products. The crypto space also joined the race. Very soon, market participants saw the emergence of a new type of digital asset, AI tokens. These are cryptocurrencies that use artificial intelligence to improve the user experience, scalability, and security of blockchain networks. But for a more complete understanding of this trend, we advise you to read our article. By the way, there you will also learn about promising AI-based crypto projects.
The hype around the technology caused an increased interest in AI tokens, and this sector of the cryptocurrency market grew significantly. At that time, artificial intelligence had not yet found its place in the market and covered several areas, including crypto space. Therefore, AI tokens initially performed well.
The current decline in AI tokens is due to a number of reasons. For example, a change in investors' attitude to risk amid general events in the crypto sector. But, perhaps, the main one has appeared even with the first appearance of AI tokens on the market. Instead of becoming something new, AI-based tokens followed the classic cryptocurrency model of "what goes up is bound to go down." And the imminent fall was expected, as these altcoins caught the attention of investors due to a new wrapper in the form of the name AI tokens.
But could these digital assets be something new if many experts agree that blockchain and AI are incompatible? And we know that market value is usually determined by speculation, not projects. We also know that in order to gain a foothold in the cryptocurrency market, you have to have a useful technology. But, as it turns out, this rule cannot be applied to most AI crypto projects. Experts believe that artificial intelligence cannot be used as a decision-making tool, as it will not be able to make better risk management decisions than a human-driven market. Together, these factors have led to the downfall of AI tokens.
Are tech companies' AI plans in jeopardy?
This is another issue for much discussion. The Wall Street Journal shared that Microsoft's plans to launch AI products may be in jeopardy. WSJ is confident that the tech giant is losing money. Right now, AI products bring the company between $20 and $80 per person, but as it turns out, Microsoft intends to set a much higher price for its next AI software update.
Is it related to the fall of AI tokens, since these events coincided in time? Paradoxically, despite the declining hype around AI tokens and the technology itself, experts from JPMorgan say there is a shift in focus from blockchain to artificial intelligence technology.