In the month of June, tokens related to artificial intelligence (AI) experienced a decline in value of up to 25%, as the excitement surrounding the sector subsided following the impressive quarterly performance of chip-maker Nvidia (NVDA).
Throughout the year 2023, the value of AI-based cryptocurrencies has been on a significant upward trend, driven by the increasing integration of this technology into mainstream applications such as OpenAI’s ChatGPT. Towards the end of May, the announcement by chip manufacturer Nvidia (NVDA) regarding its optimistic sales forecast for AI-related products led to a temporary surge in the value of certain AI tokens.
However, within a span of two weeks, the enthusiasm surrounding AI-based cryptocurrencies has dwindled. As per Lewis Harland, who serves as the portfolio manager at Decentral Park Capital, the sub-sector has experienced a decline of 16.7% over the last seven days, which is significantly higher than the 6.9% reduction observed in the broader cryptocurrency market.
According to information obtained from CoinGecko, SingularityNE (AGIX), which is currently the second-largest AI token in terms of market capitalization, has experienced a decline of 19% in its value over the course of the previous week. Furthermore, an analysis conducted by CoinDesk Indices has revealed that Fetch.ai (FET) and The Graph (GRT) have both witnessed a reduction of nearly 25% in their value since the beginning of June.
Disassociating from Nvidia
According to Lewis Harland, Render (RNDR) and other AI-based cryptocurrency tokens have exhibited a stronger correlation with Nvidia shares in comparison to the broader cryptocurrency market. However, the lawsuits filed by the U.S. Securities and Exchange Commission against Binance and oinbase">Coinbase (COIN) have disrupted this association. Harland suggests that the enforcement-led regulation has instilled concerns throughout the cryptocurrency industry, which have yet to impact the AI sector.
TradingView data indicates that Nvidia shares have observed a growth of approximately 7% over the past week. In contrast, the top ten AI tokens, as monitored by the CoinGecko information platform, have experienced an average decline of nearly 14% in their value.
Render is an anomaly
According to Harland, there is a distinct token in the AI category known as the Render token, which has been identified as a significant project. This token has deviated from other AI-related initiatives since the beginning of the second quarter. The Render Network’s objective is to decentralize graphics processing unit (GPU) rendering, which is a form of computationally intensive image processing that is crucial to creative industries, virtual reality, and generative AI tools such as Midjourney.
Harland suggests that the Render token’s uniqueness is possibly due to its association with Nvidia, as both entities concentrate on GPU-based computing. In essence, Nvidia represents the supply/production layer, while Render serves as the distribution layer, and Midjourney operates as the application layer.
There has been conjecture regarding Render’s potential use by Apple, a prominent consumer hardware company. During an event last week where Apple unveiled its virtual reality headset and other products, the company made reference to Octane, a rendering tool created by the team responsible for Render. This mention has sparked speculation that Render may be utilized in Apple’s VR headset.
The path forward
The present decline in value does not signify that all hope is lost, as initiatives still have a considerable amount of time to create use cases and evolve.
According to Jason Mountford, a market trend analyst at AI investment platform Q.ai, although the hype surrounding AI-related tokens has diminished, it does not imply that projects with genuine usefulness will not regain prominence in due course. However, any resurgence is expected to be gradual and based on actual utility rather than hype. Nonetheless, Mountford believes that AI-related tokens will face challenges in the near future unless there is a significant announcement regarding AI technology in general, which could trigger another brief surge in the market.
