- During its time at all-time highs, the cryptocurrency was unable to maintain momentum.
- Instead, most investor attention seems to be focused on AI.
- But AI hasn't necessarily siphoned off huge amounts of money from cryptocurrencies.
When ETF frenzy propelled Bitcoin to new all-time highs in early March, it seemed like the top cryptocurrency would quickly reach six-figure levels.
Instead, momentum faded and the cryptocurrency market trended sideways, with Bitcoin hovering between $56,500 and $73,000 for the past four months.
According to Ram Ahluwalia, CEO of crypto investment advisory firm Lumida Wealth, this could be due to Wall Street's fascination with artificial intelligence.
“Crypto is a momentum asset,” Ahluwalia wrote on X, but for now, “Nvidia and AI themes dominate the zeitgeist.”
“Money that would normally go into cryptocurrencies is now flowing into Nvidia, a leading supplier of semiconductors used in AI,” he added.
Comparing it to the GameStop frenzy of 2021, Ahluwalia noted that every time GameStop spikes, Bitcoin stabilizes.
He's not the only one to point out the similarities between AI and cryptocurrencies.
Cryptocurrency is “the biggest economic movement of my lifetime and is comparable to AI in terms of technology,” ARK Invest CEO Cathie Wood said at the State of Crypto Summit on June 13.
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“But the institutional world hasn't yet fully grasped that this move is as big as that one,” Wood said. “It'll probably die down at some point.”
Brian Armstrong, CEO of cryptocurrency exchange Coinbase, also spoke at the event about the seasonality of the two industries.
“Crypto and AI have both experienced their summers and winters, and I remain hopeful that one day we'll see a summer where AI and crypto are in harmony at the same time,” he said.
By the numbers
While AI investment is certainly surging, it seems to be taking more of the spotlight away from fintech than crypto.
This is according to Elliot Cheung, a partner at Architect Partners, a firm that advises cryptocurrency companies on fundraising strategies.
Chun said. DLNews The AI sector is set to close $41 billion in venture deals in the second quarter of 2024 alone, while fintech will make $14 billion and cryptocurrency will make $3 billion.
By comparison, AI transaction volume in the first quarter of 2022 was just $21 billion, compared to $40 billion in fintech transactions and $12 billion in cryptocurrency transactions.
“So, are crypto and AI intertwined? Probably not as much as we think,” Chung said.
Robert Le, senior analyst at private market data provider PitchBook, agreed.
“AI has really captured everyone's attention over the last 18 months,” Le said. DLNews.
The best of both worlds
Chung and Le also noted that certain areas of crypto are benefiting from the AI boom, including projects at the intersection of the two sectors, such as bitcoin miners that have begun to launch AI fleets.
Brian Rudick, senior analyst at cryptocurrency trading firm GSR, said: DLNews Crypto AI projects fared surprisingly well in a year that produced mixed results.
“One could argue that the AI boom has led to more investment and activity in cryptocurrencies than would have otherwise occurred,” Rudick said.
“The negative sentiment is largely due to a lack of new killer apps.” [and airdrops that lose value] “Not because the alternative technologies are more attractive, but because the alternative technologies are more attractive,” Rudich added.
Tom Carreras is DL News' Markets Correspondent. Have a tip about AI and cryptocurrency? Contact him at tcarreras@dlnews.com.
