- Coinbase research warns AI tokens’ surge driven by hype, faces competition, and tech hurdles, questioning long-term viability.
- The availability of open-source AI models like Hugging Face’s 530,000 may limit demand for crypto-based solutions.
- Kaiko data reveals that Coinbase’s U.S. Bitcoin market share rose from 47% to 60% post-ETF approval.
A recent report by Coinbase research suggests that the current boom in AI tokens might be driven more by hype than actual utility. The report authored by analyst David Han emphasizes the stiff competition and technical hurdles faced by AI projects which is potentially hindering their long-term viability.
It has raised doubts about the feasibility of crypto-based platforms to disrupt the established AI industry despite their bold claims. The report highlights the increasing cost-effectiveness of smaller models and the open-source nature of AI development as factors that could hinder the adoption of blockchain-based solutions.
It is showcased that the prevalence of open-source AI models readily available for researchers and users could limit the demand for some crypto-based solutions. It also suggests that established tech companies are more likely to continue integrating AI into their existing platforms, potentially overshadowing new crypto-based entrants.
As an example, Han explains the use case of Hugging Face which is a central hub for these open-source AI models. Over 530,000 models are currently available on Hugging Face covering various functionalities like text generation and image creation. The existence of these free, high-quality models could reduce the need for some crypto-based AI solutions.
The industry’s focus on smaller and more efficient models that can be run locally could further diminish the need for some blockchain-based solutions. Moreover the rapidly evolving AI landscape and potential regulations could pose significant challenges for crypto-based projects as given the uncertain regulatory landscape.
While the report acknowledges the potential for synergies between crypto and AI in the long term, it cautions investors about the current hype surrounding AI tokens. It emphasizes the need for a more measured approach, focusing on projects that offer clear value propositions and can navigate the competitive landscape.
Despite the cautionary tone of the Coinbase report, AI tokens have seen significant gains recently. They have outperformed both bitcoin and ether as well as major AI equities like Nvidia and Microsoft since the fourth quarter of 2023.
However, the report highlights a key concern: the lack of clear metrics for long-term adoption of these tokens. The current surge may be fueled by speculation, and it remains to be seen if the utility of these tokens will justify their current prices.
In a separate development, crypto research firm Kaiko reported that Coinbase has gained significant market share in U.S. Bitcoin trading since the approval of Bitcoin ETFs. Over the past three months, Coinbase’s market share has grown from 47% to 60%. The image shared by Kaiko shows this trend visually.
