Are AI-linked cryptocurrencies overvalued? That's the opinion of a Coinbase analyst

While cryptocurrencies linked to AI continue to perform exceptionally well on the market, a recent report from Coinbase suggests that the trend is overvalued. According to the analysts, a number of challenges are likely to hold back the development of projects in the long term.

Artificial intelligence, a seductive narrative

In the space of just a few months, artificial intelligence has completely transformed our daily lives. Catapulted into the public eye with the arrival of ChatGPT, advances in the field known as "AI" are nothing short of astounding, and suggest unimaginable potential for the future. Naturally, this dazzling success has been reflected in the cryptocurrency market, with an overall outperformance of AI-related project tokens. Over the past year, the capitalization of this asset class has risen from $1.75 billion to $25 billion. The leading exponent of this category is Bittensor, whose native cryptocurrency TAO has returned more than 2,000% over the past 12 months, making it almost the 30th most capitalized digital asset.

A trend with an uncertain future?

Despite this, David Han, research analyst at Coinbase, believes that this recent performance is out of step with the long-term viability of individual projects. According to his report published on March 6, 2024 and dubbed "The mirage of AI in the cryptocurrency sector", many challenges still lie ahead for crypto projects in the artificial intelligence sector. We can read that the impact of blockchain on AI is felt at 3 major levels: 1) data collection, storage and processing, 2) model training and 3) validation of model results. In each case, the main advantage put forward by AI-related cryptocurrency projects is decentralization. However, David Han has some concerns on this point:

A decentralized AI future, as currently envisioned by many in the crypto industry, is not guaranteed - in fact, the future of the AI industry itself is still largely undetermined

In his view, cryptocurrency and AI projects will find it hard to compete with the fierce competition from centralized players, not least because there is no guarantee that they will deliver real improvements in performance or cost. He adds that the AI industry is not yet ready to embrace decentralization.