Distributed Ledger: Has AI stolen the thunder of cryptocurrencies?

But as crypto trading volume stands relatively muted compared to historical levels, while global regulators increase their oversight of the digital asset industry, some investors seem to have shifted their attention to other areas, such as artificial intelligence. 

I caught up with Matt Hougan, chief investment officer at Bitwise Asset Management, to ask his thoughts on it.

Find me on Twitter at @FrancesYue_ to share any thoughts on crypto, this newsletter, or your personal stories with digital assets.

Crypto vs. AI

In the venture capital space, the buzz word seems to have also shifted from blockchain to AI, though the two concepts are not mutually exclusive. 

“It’s definitely true that AI is in the hot spot right now,” said Hougan. “To that extent, it could steal some of the next round of venture capital from crypto,” Hougan said. 

“Crypto soaked up a huge amount of venture capital from the 2019 to 2021 bull cycle. And it’s definitely the case that some of the VCs who were on the edges of crypto probably are now migrating over to AI,” Hougan said in a call. “So I expect the impact is slightly lower levels of VC activity in the next cycle for crypto.”

Even within the crypto space, artificial intelligence-related cryptocurrencies have outperformed bitcoin and other types of tokens so far this year, after the launch of ChatGPT in late 2022 fueled investors’ interests in the field, according to Kaiko Research. 

Decentralized machine learning platform SingularityNet’s token AGIX soared over 580% so far this year, and the Render Network, which provides 3D graphics rendering, saw its token RNDR climb more than 450% year-to-date, according to data from CoinMarketCap. 

In contrast, bitcoin
BTCUSD,
+1.15%
gained more than 76% so far this year, according to CoinDesk data. 

The trading volume of AI-themed tokens have also gone up, noted Kaiko. The combined daily volume for AI-related tokens GRT, AGIX, FET, RNDR, and OCEAN topped $1 billion in February, a two-year high. Despite a decline in March, trading volumes of such tokens now still stays above the long-term average, noted Kaiko. 

To be sure, AI and crypto are “two different animals”, said Paul Karger, co-founder and managing partner at TwinFocus. AI investors could be different from those interested in crypto, noted Karger.

“Both of these could be the fundamental blocks of the future of technology,” Karger said.

“Crypto is still the best performing asset in the world this year. So people who are following the money are going to look at it,” Hougan said. 

A meme coin comeback?

Several meme coins have recently rallied. Pepe Coin, a token inspired by the Internet meme Pepe the Frog, soared over 600% over the past seven days.

Some other meme tokens, such as Wall Street Baby and POOH also surged for the past few days.

Does it mean that meme coins, which staged spectacular rallies in 2020 and 2021, are making a comeback?

There’s the possibility that making money off of bitcoin’s recent price increase has led to investing in more higher-risk assets in hopes of a greater return, Kyle Doane, trader at Arca, told MarketWatch’s Anushree Dave.

Still, “liquidity remains depressed, increasing the likelihood of large, sharp price movements,” he said. “These types of fast money traders seem to have a short memory from the losses of last year and YTD some of the large meme coin moves have held up and haven’t had that disastrous correction yet this year. Traders will continue to take shots until this strategy stops working.”

Read more here.

Crypto in a snap

Bitcoin inched up 0.1% in the past week and was trading near $29,000 on Thursday, according to CoinDesk data. Ether gained 0.3% in the same period to close to $1,900.

Must-reads

• Coinbase launches offshore crypto exchange among ongoing regulatory woes in the U.S. (MarketWatch)

• Crypto Exchange Coinbase to Stop New Loans Via Borrow Service (Bloomberg)