Crypto Fans Pile Into ‘Faddish’ AI Tokens as ChatGPT Mania Grows | Tech News

Crypto Fans Pile Into ‘Faddish’ AI Tokens as ChatGPT Mania Grows

Count on crypto fans to jump on any burgeoning trend as fast as they can.

By:BLOOMBERG
| Updated on: Feb 10 2023, 06:47 IST
Cryptocurrency
Nearly all the tokens classified under the AI category by CoinGecko have posted at least double-digit moves over the past week. (REUTERS)

Count on crypto fans to jump on any burgeoning trend as fast as they can.

Digital assets focused on artificial intelligence have been skyrocketing since OpenAI's chatbot known as ChatGPT became an internet phenomenon and spurred buzz about its future potential.

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Nearly all the tokens classified under the AI category by CoinGecko have posted at least double-digit moves over the past week. SingularityDAO jumped 138% over a seven-day period. SingularityNET was 126% higher over that stretch while Artificial Liquid Intelligence rose 87%.

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For market-watchers with long memories, it's reminiscent of other obsessions in the sector. This includes the phase when initial coin offerings were hot, or when a bunch of companies in 2018 jumped on the “blockchain” bandwagon by reinventing themselves — at least on paper — into crypto-adjacent firms.

“People are just riding the ChatGPT wave,” said Wilfred Daye, the former chief executive officer of Securitize Capital, a digital-asset management firm. “The phenomenon can last as long as the sentiment is around.”

ChatGPT has recently shown its prowess in everything from writing poems in the style of Shakespeare to creating stock portfolios. There's even an exchange-traded fund planned around the concept. And while tech behemoth Microsoft Corp. is investing billions in OpenAI, Google owner Alphabet Inc. has demonstrated its new artificial intelligence chatbot Bard after coming under pressure from ChatGPT's popularity. But even for crypto standards, where wild price swings are de rigueur, the surges in AI-linked tokens are eye-popping.

The phenomenon saw an extreme when the price of ARPA, the token of privacy-focused network also called ARPA, jumped by more than 10% over one hour on Tuesday. The specific reason behind the price pump remains unknown. But Crypto Twitter pointed out that the sudden price appreciation only happened after Felix Xu, the co-founder of ARPA, shared — in a now-deleted tweet on Tuesday — a two-year-old news release on the project's collaboration on machine learning with a group led by Alibaba Group Holding Ltd.

“It is all pure nonsense,” said Michael O'Rourke, chief market strategist at JonesTrading. The stock market is rife with instances of what O'Rourke considers “speculative” behavior, he said.

“We have seen it repeatedly throughout history from adding .com to your name, or more recently employing a variation of Bitcoin or crypto,” he said. “The cryptocurrency space was upended last year, as the most respected player in the space failed along with many sizable others. Now to combine the fad tactics of the equity market with already uber-speculative crypto market is a recipe for disaster for those speculating.”

Trends come and go, warn analysts who have seen this play out before. The initial-coin-offering boom in the late 2010s burst in a spectacular way that left deep scars for many years. The repercussions of the crypto bubble popping during the pandemic are also still being felt across the industry.

“Like most things in crypto — other than Bitcoin — they turn out to be fads,” said Troy Gayeski, chief market strategist at FS Investments. “The promise of the blockchain is definitely real from a transaction standpoint. But in terms of how do you make money from that, it's such a cyclical asset.”

To be sure, the resurgence in crypto prices so far in 2023 could be bringing about new capital and interest from certain investors, as the industry shows some signs of improvement after the collapse of crypto exchange FTX.

“It does sound faddish,” Noelle Acheson, author of the “Crypto Is Macro Now” newsletter, said about the surge in AI tokens. “Then again, the fact that they exist and are now attracting attention says a lot about the improvement in market sentiment — investors are looking for new ideas, the new hype thing that could deliver returns.”

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First Published Date: 10 Feb, 06:46 IST
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