TL;DR:
- Savvy investors are moving their funds from cryptocurrencies to Artificial Intelligence (AI).
- Both AI and cryptocurrencies have experienced cycles of hype-driven market growth followed by declines.
- The current AI surge is fueled by advancements in machine learning, including ChatGPT and AI art generators.
- The value of investments in AI is growing rapidly, while the cryptocurrency market is being impacted negatively.
- Real-world impact and practical applications will determine the long-term value of AI and cryptocurrencies.
Main AI News:
In the fast-paced world of investing, staying ahead of emerging trends is crucial for those seeking substantial returns and a competitive edge. Savvy investors are now redirecting their funds from the once-hot cryptocurrency market to the flourishing domain of Artificial Intelligence (AI). This significant shift in investment preferences has prompted an intriguing dynamic, wherein one market rises while another wanes. To shed light on this trend, we turn to Brian Deshell, a prominent UAE-based cryptocurrency trader and analyst.
According to Deshell, the migration of capital from cryptocurrencies to AI stems from investors collectively recognizing the potential of the latter. “When investors together shift their money from an existing trend to a new trend, one market goes up and another goes down. This is what is happening to the once hot crypto and the now popular Artificial Intelligence (AI),” Deshell explains. Interestingly, market data reveals that both AI and crypto have experienced “booms and busts,” characterized by cycles of enthusiastic investor fervor followed by periods of decline.
The parallels between the current AI hype and the early excitement surrounding cryptocurrencies are not lost on industry experts. Noelle Acheson, former head of research at CoinDesk and Genesis Trading, compares the two phenomena, emphasizing the recurrence of hype-driven market fluctuations. “The hype we’re hearing around Artificial Intelligence (AI) now is reminiscent of the hype we heard around cryptocurrencies and blockchain years ago,” Acheson writes in her newsletter.
The current AI surge is attributed to advancements in machine learning, where algorithms are trained on massive datasets to derive rules independently. This departure from traditional hand-coded rules has catalyzed the growth of AI, with notable contributions from ChatGPT, a chatbot introduced in 2022, and AI art generators. However, investors must consider how these recurring cycles of “booms and busts” in AI and crypto markets may impact their investment’s future value.
Acheson highlights the crucial distinction between hype and real-world impact. While the potential of both cryptocurrencies and AI is undeniable, their true value lies in the underlying science and practical applications rather than speculative hype. “The real-world impact of crypto and blockchain will continue to evolve; it’s just not what some tried to sell the public in the early days. The same will happen with AI—the impact will be considerable, but the hype will always outrun real-world uses,” Acheson remarks.
As the tides of investment preferences continue to shift, the allure of Artificial Intelligence has captured the attention of wealthy investors and venture capitalists, leaving once red-hot crypto projects in search of funding. Deshell points out that the release of ChatGPT in November 2022 breathed new life into the AI realm, coinciding with a decline in the cryptocurrency market. This sudden surge in the excitement surrounding AI sparked a global frenzy among investors.
The scale of AI investments from wealthy individuals and venture capitalists has witnessed remarkable growth, skyrocketing from under $3 billion (Dh11 billion) in 2012 to nearly $75 billion (Dh275 billion) in 2020. The past year alone saw a 20% increase in AI-related investments. While this growth bodes well for the AI sector, it has had an adverse impact on the cryptocurrency market. Evan Cheng, the founder of Mysten Labs, a US-based crypto and blockchain infrastructure technology firm, observes that the surge in AI investments has diverted funding away from crypto ventures, leaving them in search of alternative sources.
Conclusion:
The shift of investment capital from cryptocurrencies to Artificial Intelligence signifies a significant trend in the market. Investors are recognizing the potential of AI and its growing influence on various industries. However, it is crucial to differentiate between hype and real-world impact, as the value of investments will ultimately depend on practical applications. The rise of AI presents both opportunities and challenges, and investors should carefully assess the underlying science and long-term prospects before making investment decisions. The cryptocurrency market, on the other hand, is experiencing a decline in funding as AI gains prominence.
