Today in Markets

Are AI Tokens Ready to Rip?

Investors are bringing AI fervor to crypto markets.
Jan 25, 20242 min read

Chip designer Nvidia is off to a strong start in 2024, posting gains of 27% and upping its market cap by $320B, an increase equivalent to one-fifth of the size of the total crypto market! What crypto play has given investors exposure to AI upside?

Bittensor (TAO) has been a top performer among AI tokens, up 47% on the week and 80% from its 2024 low.

$TAO via CoinStats

Traditional AI models created by private companies, like OpenAI and Google, are built using centralized computing resources. In this paradigm, work is disconnected and non-collaborative, and as closed-source models are unable to share work with each other, competition becomes zero-sum, favoring winner-take-all outcomes.

Bittensor flips this traditional model on its head by creating a decentralized marketplace for intelligence, where networks of nodes collectively train decentralized models that improve over time.

Demand for model training on Bittensor will increase the demand for TAO to pay fees on the network, boosting yields for stakers and further incentivizing actors to purchase TAO to stake and provide computations for a slice of the rewards.

While it will certainly be a challenge for Bittensor to compete with centralized competitors, creating a decentralized marketplace for model training may allow the network to tap net-new computing supply and model demand that would be restricted from accessing traditional systems.

Increasing demand for computation and the limited supply available from centralized providers could be a favorable tailwind for TAO, and while it's difficult to determine how much of the explosion in market cap is indicative of future promise, Bittensor is an undeniably ambitious product in a hot sector.

Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.

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