Why Are Cryptocurrency Believers Throwing Their Coins into AI?

Author: Vicky Ge Huang, The Wall Street Journal

Compiled by: Chopper, Foresight News

Daniel Koss once heavily invested in Bitcoin, firmly believing that cryptocurrency would reshape the financial industry. However, with the rise of artificial intelligence, he shifted his investment focus. The 30-year-old investor believes that the rapidly advancing AI technology has the potential to disrupt multiple industries, prompting him to jump in. Last August, he liquidated a six-figure Bitcoin position and has since invested all his funds into the AI sector.

"It felt like early humans discovering fire," Koss said from Zug, Switzerland.

Koss's decision reflects a significant capital migration that has swept the market over the past year: individual investors and hedge funds have been selling off Bitcoin and various tokens in pursuit of AI stocks. This asset rotation also explains the price dilemma of Bitcoin: after hitting a historic high of over $126,000 last October, Bitcoin has faced continuous pressure, lingering around $60,000. At that time, the Trump administration threatened to impose new tariffs on China, prompting investors to sell high-risk assets.

Meanwhile, chip manufacturers and other AI-related stocks have experienced the kind of explosive growth previously seen only in the cryptocurrency market.

Mike McGlone, a senior commodity strategist at Bloomberg Intelligence, stated, "The crypto market is undergoing a deep clearing, and this is just the beginning."

While the U.S. stock market continues to reach new highs this year, Bitcoin has been on a downward trend.

Koss has no plans to trade Bitcoin again in the short term. He believes that crypto assets have matured, and the era of exponential growth is over. He thinks Bitcoin will never see a tenfold increase within a year again. "Bitcoin's market cap is so large now that even doubling would be considered a high return."

Even staunch cryptocurrency believers are reducing their crypto positions and turning to volatile AI stocks.

Ryan Ho, founder of the social trading platform Legend, revealed that when Bitcoin was close to $120,000, he held a seven-figure Bitcoin position, convinced that Bitcoin "would never drop below $100,000."

However, the market did not go as he expected. Last December, he swapped a large amount of Bitcoin and altcoin positions for AI-related stocks, including chip companies like Intel. He still holds several hundred thousand dollars worth of Bitcoin.

Ryan Ho

The 25-year-old entrepreneur stated that the core reason for reducing his crypto assets is the structural weakening of the crypto market. He believes that since the crash in October, the crypto market no longer exhibits the characteristics of a healthy risk asset: buying demand has dried up, and institutional funds are continuously flowing into the AI sector.

The crypto market subsequently decoupled from the U.S. stock market, which continued to rise while the crypto market stagnated. Ryan Ho believes that ordinary investors are more optimistic about AI's growth prospects, as artificial intelligence has numerous real-world applications, such as ChatGPT and AI-assisted programming.

Another driver of the shift of funds from crypto to AI is the launch of AI stock derivatives on mainstream crypto trading platforms like Hyperliquid.

"In the past few months, many crypto traders have started trading AI stocks, and the core reason is that the relevant trading channels have been opened up," Ryan Ho said.

Some crypto traders have also chosen to cash out, ending a previous round of significant gains in Bitcoin and major tokens.

Trader and digital artist Minh Le recently liquidated part of his crypto assets to purchase a Ferrari, while also allocating a significant amount of profits to Japanese anime collectibles, including One Piece and Pokémon trading cards.

Minh Le

Minh Le accumulated wealth through NFTs and meme coins. The trader, who resides in Los Angeles, entered the market in 2017, using a credit card to buy the then-popular Litecoin; during the pandemic, he continued to increase his investments with government relief checks.

Shortly after buying a meme coin issued by Trump, he cashed out significantly. This meme coin was launched just before Trump took office. "That was the fastest I ever made money; I knew it was time to exit."

After months of observation, Minh Le has re-entered the cryptocurrency space, but his strategy has become more conservative, focusing only on assets with real-world applications, such as stablecoins used for payments.

Le stated, "If the digital gains cannot be converted into real money to improve life and create good experiences, then what’s the point of making money?"

This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.