With artificial intelligence (AI)-powered chatbots such as OpenAI’s ChatGPT, Google Bard, and Microsoft Bing recently taking the Internet by storm, the AI theme has become hot currency in the crypto world and this has boosted the interest in AI and big data cryptos.

Already, over 150 AI cryptos have mushroomed, with cumulative market value of over $4.2 billion and over the last 3-6 months they have seen sharp surge in volume and price. But, true to label, the ugly side of these virtual digital assets (VDAs) can be seen in their short-term price movements with top AI cryptos witnessing 7-day drop ranging from 18 per cent to 45 per cent on Indian local crypto platforms. This should serve as a stark reminder to investors that crypto remains unregulated and is extremely volatile.

What are AI cryptos

Simplyt put, AI VDAs are the convergence of artificial intelligence and cryptocurrency ecosystem. AI cryptos are marketed as digital assets that help users get access to AI tech. Some AI tokens help create a virtual platform to buy and sell AI algorithms. Some perform particular applications such as making predictions and parsing big data on the blockchain. At over $4 billion market value, the major spike in AI tokens and many AI-based projects has called attention to the functions of AI in crypto platforms among investors, including millennials from India.

AI crypto assets are getting great buzz in this space. In terms of market capitalisation, The Graph (GRT), Render Token (RNDR), SingularityNET (AGIX), Oasis Network (ROSE), Fetch.ai (FET), Injective (INJ) and Ocean Protocol (OCEAN) are probably the most popular AI crypto assets. With AI latest trends catching up, all this has set off a buying frenzy for such AI tokens. Some AI crypto traded in Indian crypto platforms assets have seen volumes rise by 100-200 per cent in recent times.

Some of the top AI crypto assets currently trending in the market are Verasity (VRA), Phoenix (PHB), AllianceBlock (ALBT), Sentinel Protocol (UPP) and Numeraire (NMR). Of late, AI-based cryptos that support various AI projects such as decentralised marketplaces, market prediction tech, portfolio management, and governance rights for token holders, have been attracting investor interest. With AI tools helping ease the human effort and reducing manual effort, the confluence of AI and crypto is providing a new way to scale up the development of decentralised applications.

Challenges galore

While AI tokens and cryptos have been received with gusto, the larger crypto world’s challenges remain relevant for AI crypto assets as well. First and foremost, uncertain regulations are a big dampener. Just like other crypto assets, AI cryptos have no clear and concise regulation framework. This leads to narrow usability in the future.

Secondly, AI cryptos suffer from lack of awareness. While the emergence of ChatGPT and other AI chatbots has grabbed the attention of many people, there is great confusion and many do not understand the integration of AI in crypto space. This could prevent people from investing in such AI projects, reducing the growth potential of AI crypto assets.

Be aware
The wild swings in AI cryptos, just like elsewhere in the crypto world, make these assets extremely volatile

Thirdly, the mushrooming of AI cryptos leads to high competition. Both blockchain networks and AI face severe competition as separate domains. This makes it harder for an individual project to get requisite traffic and subsequent investment. Apart from this, crypto tokens often used as a way to raise funds for projects in initial coin offerings (ICOs) can be scams/frauds. So, be sure to do your research on the team or company offering any AI token.

Fourth, the safety of AI cryptos is an extremely important parameter for investments. It is difficult to say how they will behave in the future. Also, the wild swings in AI cryptos, just like elsewhere in the crypto world, make AI-related crypto assets extremely volatile. Global prices of GRT, the largest AI asset in this space, skyrocketed from mere 12 cents to two dollars during January-February 2021, before dropping back to 11-12 cents over the next one year. The concentration of AI cryptos in a few hands also makes them susceptible to quick depreciation when large volumes are sold off.

Fifth, AI crypto assets, like other cryptos, are now being brought under money laundering provisions. The Indian Finance Ministry has notified transactions involving the exchange, transfer and safekeeping of crypto assets under the Prevention of Money-laundering Act (PMLA). The government already brought in a tax for cryptocurrencies in the Budget last year. Such moves are set to weed out players and participants who have been hitherto using cryptos to launder money and carry on nefarious activities and this can, at least in the short term, lead to more volatility and oversupply of such assets in the trading marketplaces. The last one week’s decline in AI cryptos could be an indicator of this trend.