Here’s Why Artificial Intelligence Focused Cryptocurrencies Are Vastly Outperforming Bitcoin

The tokens of AI-based upstarts like Image Generation AI (IMGNAI) have more than tripled over a two-week period. The protocol allows users to generate artwork using text disruptions on social platforms such as Discord.

BDP has surged 2,100% in the past week, CoinGecko data shows, while MDT has jumped 150%. Both protocols use their tokens to commoditize data, allowing providers and buyers to exchange data securely and anonymously.

Crypto majors such as bitcoin and ether have paled in comparison, rising just 30% each in the past month despite fundamental catalysts. However, the market capitalization of major tokens is upward of $300 billion, meaning they require significant amounts of investment and public interest for prices to surge multifold within a few weeks.

Much of the recent surge in AI tokens emerged after the public launch of chatbot ChatGPT and image generation software Dall E in mid-2022. Both are traditional software that do not use cryptocurrencies or blockchain and were launched by OpenAI, which recently raised $10 billion from Microsoft at a $29 billion valuation.

“The growth opportunity around the AI and Web3 space combines early interest, potential and hype,” states Ravindra Kumar, founder of crypto wallet Frontier. “While it’s true that there may be some hype surrounding AI intervention in the crypto space, we are seeing the emergence of innovative and compelling use cases.’

Aditya Khanduri, head of marketing at Biconomy, takes a milder approach: “I believe that the current AI trend is still pretty speculative, leading to a jump for tokens like OCEAN, ALI, AGIX. Some of the tokens with more buzz and followings have pumped and it’s less about the actual tech behind it.”

“Say an AI tool gets to 250 million users. Then what will its infra look like? How will people use it? How will the data be trained? Where does the token fit in? Can you even have a way to reward people for their data if you used it to train your models?” he said.

“Once the market starts livening up a bit, all sorts of new trends come out of the woodwork. And they are not all as solid as they might look,” financial market consultant Valentina Drofa told CoinDesk.

“There is a risk that this whole ‘new trend’ is going to end up in an empty hype, as there are many speculators that would seek to make use of short-term price pumps,” Drofa added, referring to the recent multifold gains put up by some tokens.