Despite the hype, crypto AI tokens have been languishing

The AI-inspired token category, including Fetch.ai and Worldcoin, has seen its market cap grow from $170 million to $60 million in just a few months.

Even artificial intelligence sometimes fails to make decisions. The industry has generated a lot of hype, but crypto tokens pegged to the technology have not seen huge gains.

Crypto data provider Kaiko writes that despite billions of dollars being poured into AI startups, interest in AI-related tokens remains flat.

Overall, Kaiko writes, interest has declined, although at first glance the numbers appear to be a mixed picture.

Kaiko analyst Dessislava Ianeva said total interest in the five top AI tokens (referring to FET, GRT, RNDR, OCEAN and ROSE) plummeted from $170 million earlier this year to $60 million in August.

According to Kaiko, although the controversial and highly anticipated launch of Worldcoin caused a momentary surge of interest, it quickly fizzled out. The research center wrote that its WLD token has lagged behind Bitcoin and most altcoins, with a maximum drop of more than 50%.

Ianeva said the drop in AI tokens was due to a shift in global risk appetite.

She said the decline was largely driven by concerns about China, which has sparked concerns over its alleged economic slowdown.

“China is influencing risk sentiment,” Ianeva explained, especially given the lack of narrative in the cryptocurrency market. The analyst noted that despite Nvidia reporting record high revenue, “it failed to generate enthusiasm,” which she said indicated generally low interest across sectors.

Kaiko reports that some projects have indeed gained traction, notably Fetch.ai (FET) and Ocean Protocol, with the former’s open interest surging by nearly 90% in the last month.

Despite the recent sharp decline in open interest, weekly trading volumes for AI-related tokens increased significantly in August. Kaiko revealed that after falling to a yearly low of $570 million at the end of July, it jumped to $870 million last month.

These somewhat optimistic figures point to “increased competition for capital within the market,” Ineva said. Only the “most innovative projects will attract capital” given the current macroeconomic situation, which she described as “challenging”.

Still, Ineva remains optimistic about the immediate future.

She told reporters that “October is historically one of the best months for crypto” and that as the market looks forward, traders will “start positioning for the Bitcoin halving and spot Bitcoin ETFs.”

As for the macro environment, she concludes, “With the Fed’s rate peak now behind us, this could also provide greater support for risk assets.”