Crypto returns will remain muted as investors chase AI gains, economist says

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The Block2024/06/17 18:22

By:Brian McGleenon

Crypto is “losing its charm” among risk-asset investors, as market FOMO focuses on AI-related stocks, an economist said.However, the integration of AI and crypto could add $20 trillion to global GDP by 2030, an analyst said.

The diversion of speculative investor hot money into artificial intelligence-related stocks is to the detriment of the cryptocurrency market, an economist has said.

According to BIT Mining Chief Economist Youwei Yang, the stock market now regards every piece of AI news as bullish, and in light of the resulting FOMO, "crypto has lost its charm."

"There is only a certain amount of hot money in the market and it is devoted to AI now, until crypto can breakout some convincing narrative or constructive advancement, in the meantime crypto will just be trading sideways waiting for major market shocks," Yang told The Block.

AI-crypto mega-trend could add $20 trillion to global GDP

However, Bitwise Senior Crypto Research Analyst Juan Leon sees the intersection between AI and crypto as forming a mega-trend that could add as much as $20 trillion to the global economy.

"The intersection of artificial intelligence and crypto is going to be even bigger than people imagine, as the two industries could add a collective $20 trillion to global GDP by 2030," Leon said in a recent report .

The forecast aligns with a PricewaterhouseCoopers (PwC) estimate that AI and crypto could add $15.7 trillion and $1.8 trillion, respectively, to the global economy by 2030. While this totals $17.5 trillion, the synergistic effect of their integration could drive the combined value to $20 trillion or more.

Bitcoin miners diversifying into AI

The race for AI supremacy is causing an unprecedented shortage of data centers, AI chips, and electricity. Bitcoin mining operations are specifically designed to process and store massive amounts of data, possessing the very resources—powerful chips, state-of-the-art cooling systems, and essential infrastructure—that AI companies desperately need.

Artificial intelligence cloud provider CoreWeave offered to acquire bitcoin miner Core Scientific for $1.6 billion earlier this month — a 55% premium above its market price, though the bid was rejected. That followed a 12-year, $3.5 billion partnership deal between the two firms, enabling CoreWeave to host its AI-related services in Core Scientific’s data centers.

Other mining firms, such as Hut 8 and IREN, have also pursued similar AI diversification initiatives in recent months, seeking to expand their revenues following April’s bitcoin halving . This cut miners' block subsidy rewards by 50%, reducing the average new daily supply of bitcoin from 900 to 450.

Leveraging AI for DeFi trading

High-frequency traders are now leveraging artificial intelligence to execute decentralized finance (DeFi) trades in milliseconds. According to Nuklai Head of Ecosystem Jochem Herber, this automation will significantly impact DeFi and DAO operations over the next decade.

"High-frequency traders are using AI to execute trades within milliseconds. This approach is being adopted in the decentralized finance (DeFi) market," Herber told The Block.

AI automates complex trading strategies and predictive analytics models to forecast market trends and optimize trading without human interference. "Over the next decade, AI will integrate into DeFi, improve DAO operations, while maintaining transparency," Herber told The Block.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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