Coinbase has warned cryptocurrency investors to be cautious about AI-focused cryptocurrency tokens during this bull market.
Over the past two years, artificial intelligence (AI)-focused companies have become very popular around the world. The trading prices of most AI-linked stock assets have soared several times. A similar effect is seen in the cryptocurrency sector. Smaller AI-focused cryptocurrency tokens such as FET, WLD, and AKT also showed strong gains.
David Han, a research analyst at Nasdaq-listed U.S. cryptocurrency exchange Coinbase, pointed out that the recent rise in AI token prices may have been driven by hype rather than true utility or use.
AI cryptocurrency tokens are currently worth nearly $28.6 billion, according to available data from coin tracking platform Coingecko.
Noticeably, this 30% increase in valuation occurred in just one day, demonstrating a very large trend for AI tokens. Therefore, it is highly likely that all these tokens will face a very high level of correction when the market moves downwards at one point.
Coinbase’s report points out that all of these tokens are simultaneously leveraging bullish cryptocurrency sentiment and AI trends.
The report also points out that all such projects talk more about AI tools than they actually do. This means that AI cryptocurrency projects are currently overvalued projects.
These cryptocurrencies may lack sustainable demand drivers in the short to medium term, which could lead to a very significant downfall.
Recently, Ethereum co-founder Vitalik Buterin also shared his thoughts on the surge in popularity of AI-focused cryptocurrency projects.
Vitalik said AI technology can be used on the Ethereum blockchain to find code bugs, which is probably a very big challenge for Ethereum.
Also read: Legal clarity on XRP could help it hit $3.2 this year, says lawyer Bill Morgan.