Dubai: If you are an investor who considers himself wise, invest in compelling stories that can give you early returns in the form of potential future gains and keep you abreast of upcoming new trends. I will follow you eagerly. .
“As investors together move their money from existing trends to new trends, one market goes up and the other goes down. ),” explained Brian Deschel, a UAE-based cryptocurrency trader and analyst.
“When it comes to how the market reacts to the hype, interestingly, historical chart data shows that AI, like cryptocurrencies, is experiencing ‘booms and busts. This is a recurring period in which investor enthusiasm drives market growth, followed by a period of consistent decline. “
How the “boom-bust cycle” works and examples
When it comes to market investments, since 1861 the oil market has had periods of ‘boom and bust’. In the gold industry, the ‘boom-bust cycle’ lasts an average of 10 years.
The dot-com boom and bust lasted from 1995 to 2000, when investors poured money into internet-based startups, while cryptocurrencies saw their prices spike and fall since 2017.
How The AI, Crypto-Driven Market Hype Has Played Out In The Past
“The hype we hear about artificial intelligence (AI) now reminds me of the hype we heard about cryptocurrencies and blockchain years ago,” said cryptocurrency issuer CoinDesk and exchange Genesis. Trading’s former head of research Noel Acheson said in a newsletter. .
The current AI hype is due to the machine learning boom. This is in contrast to the old days when you had to manually code the rules, train the algorithm on a huge dataset and the algorithm will find the rules for you automatically. The current AI boom is driven by his ChatGPT and AI art generator, a chatbot released in 2022.
But how will this “boom-bust cycle” of AI and cryptocurrencies affect the future value of investments? Like most other investments such as real estate, gold, and oil, The future value of cryptocurrencies and AI will ultimately depend on the science behind the investment, not how the hype will rate it.
“The impact of cryptocurrencies and blockchain on the real world will continue to evolve. will be substantial, but the hype will always outweigh real-world use,” Acheson added.
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Investors are now shifting money from cryptocurrencies to AI
“Artificial intelligence is a shiny new thing that is being funded by wealthy investors and venture capitalists, and once red-hot cryptocurrency projects were struggling to raise money,” he added.
“In November 2022, when the beleaguered cryptocurrency exchange FTX collapsed and cryptocurrency winter reached its trough, the release of ChatGPT suddenly revitalized the world of AI. , it captivated the imagination of the investment community.The excitement exploded.”
Global annual AI investments by wealthy investors and venture capitalists (VCs) will dramatically increase from less than $3 billion (AED 11 billion) in 2012 to nearly $75 billion (AED 275 billion) in 2020 increased to The amount of investment increased by 20% last year. 1 person. However, this has had a negative impact on cryptocurrencies.
Evan Chen, founder of US-based cryptocurrency and blockchain infrastructure technology Mysten Labs, said the recent surge in AI-related investments has had a negative impact on funding cryptocurrency investments, and AI startups It recently warned that it received its share of the currency from VC funds.
The hype we hear about artificial intelligence (AI) today is reminiscent of the hype we heard about cryptocurrencies and blockchain years ago.
– Noelle Acheson, former head of research at CoinDesk
important point
AI is getting a lot of attention due to its increasing relevance to our daily lives. As the latest trends show, as the capabilities of AI continue to expand, investors are trying to determine how best to make the most of this major growth industry.
“For investors holding existing cryptocurrencies, it would be a logical move to shift investment to an equally nascent industry like AI, but one market went down and another went up. There is no need to panic sometimes, all markets are cyclical,” added Deschel. .
“As history has shown, either AI or cryptocurrencies will continue to shift the interest of the wider investor. It’s about concentrating our investments on the science that’s in place, and that’s what drives the industry forward.”
So rather than backing hot start-ups or rushing into high-value AI-themed businesses that are likely to fail, we’re likely to benefit from long-term trends that already exist. We need to back proven technology companies. But keep in mind that it’s still too early to narrow down AI use cases.
