Coinbase’s AI token caution amid market surge
Coinbase, a leading cryptocurrency exchange, has issued a cautionary statement about the recent surge in artificial intelligence (AI) token values, suggesting that the market may be driven more by hype than by actual utility. In a research report, Coinbase analyst David Han pointed out the stiff competition and technical challenges that could hinder the long-term viability of AI projects. Despite the AI crypto market reaching a valuation of $26 billion, with significant gains in the past week, Coinbase remains skeptical about the transformative claims made by crypto-focused platforms in the AI space.
The report comes as Wall Street giant Goldman Sachs upgrades its rating on Coinbase from “Sell” to “Neutral,” setting a new price target of $282 for the exchange’s stock. This upgrade reflects the bullish momentum in the cryptocurrency market, with Coinbase’s market share in the U.S. increasing to 60% following the SEC’s approval of new Bitcoin ETFs. The crypto sector’s rally has led to a substantial increase in daily trading volumes on Coinbase, with record-breaking figures reported on March 6.
Coinbase’s report highlights the rapid evolution of AI technology and the uncertainty it creates for the future of AI crypto projects. Han emphasized the challenges faced by these projects, including the uphill battle against broader market and regulatory forces, as well as the technical difficulties associated with decentralized networks. Despite recent outperformance of AI tokens like Akash and Render compared to Bitcoin, the report questions the long-term sustainability of these projects.
The research also points to specific issues faced by projects such as Akash Network, which incentivizes users to repurpose computing power for decentralized cloud computing. Supply and demand imbalances have diluted user fees, suggesting that token distribution structures may need revision. Coinbase suggests that nuanced use cases will be crucial for the success of crypto AI projects as they compete with established centralized platforms.
While the crypto AI narrative could grow stronger amid the positive market sentiment, Coinbase advises that driving meaningful adoption will require more than just decentralizing AI components. The AI ecosystem, still in its infancy, must provide a viable alternative to today’s crypto assets to sustain investor interest. Meanwhile, Ethereum co-founder Vitalik Buterin has expressed optimism about using AI to fix blockchain bugs, indicating potential areas where AI could contribute to the crypto industry’s development.