Is Artificial Intelligence Stealing Cryptocurrency's Thunder?

Author: Tom Carreras  Source: DL News Translation: Shan Ouba, Golden Finance

Summary

• As cryptocurrency hovered near its all-time high, it failed to maintain the momentum.

• Instead, most investors’ attention seemed to be focused on artificial intelligence.

• Artificial intelligence doesn’t necessarily suck a lot of money out of cryptocurrencies.

When ETF hype pushed Bitcoin to an all-time high in early March, it seemed like the top cryptocurrency would soon reach a six-figure price. Instead, momentum petered out and the cryptocurrency market went sideways, with Bitcoin's price hovering between $56,500 and $73,000 for four months.

This could be because of Wall Street's fascination with artificial intelligence, said Ram Ahluwalia, CEO of crypto investment advisory firm Lumida Wealth.

"Crypto is a momentum asset," Ahluwalia posted on X.

But for now, the Nvidia and AI themes are dominating. Fast money capital that would normally flow into crypto is now flowing into Nvidia.

Ahluwalia compared it to the GameStop mania of 2021 -- noting that almost every time GameStop surged, Bitcoin consolidated. He's not the only one comparing AI to crypto.

Cryptocurrency “is the biggest economic movement in my lifetime, and it’s comparable to artificial intelligence from a technology perspective,” ARK Invest CEO Cathie Wood said at the Crypto Summit on June 13.

But it’s not entirely understood in the institutional world that this movement is as big as that one. At some point in time, convergence may occur. Brian Armstrong, CEO of cryptocurrency exchange Coinbase, also pointed out the seasonality of the two industries at the same event.

“Both crypto and AI go through summers and winters, and I’ve always hoped that one day we’d have a coordinated summer for both AI and crypto at the same time,” he said.

Looking at the numbers

While AI investments have indeed soared, it seems that there’s more attention paid to fintech than to crypto. That’s according to Elliot Chun, a partner at Architect Partners, a firm that advises cryptocurrency companies on financing strategies.

In the second quarter of 2024 alone, $41 billion in venture capital deals were signed in the AI ​​sector, while fintech netted $14 billion and cryptocurrencies $3 billion. In contrast, in the first quarter of 2022, AI deals were worth just $21 billion, while fintech deals were worth $40 billion and cryptocurrencies were worth $12 billion.

So are crypto and AI intertwined? Probably not as much as we think.

Robert Le, senior analyst at private market data provider PitchBook, agrees. AI has really stolen everyone's thunder over the past 18 months.

The best of both worlds

Chun and Le also noted that specific areas of crypto have benefited from the AI ​​hype. These include projects at the intersection of the two fields, as well as bitcoin miners who have begun to build AI teams.

Brian Rudick, senior analyst at crypto trading firm GSR, told DL News that crypto AI projects have performed very well throughout the year, with a lot of mixed results.

"One could even argue that the AI ​​craze has sparked greater investment and activity in the crypto space than it would otherwise have," Rudick said. "The negative sentiment is more due to a lack of new killer applications (and airdrops losing value) than because alternative technologies are more attractive."