The recent surge in artificial intelligence (AI) investments is diverting speculative capital away from cryptocurrencies, leading to muted returns in the crypto market, according to an economist. BIT Mining Chief Economist Youwei Yang stated that the stock market now perceives every AI development as bullish, resulting in a "fear of missing out" (FOMO) that has overshadowed the appeal of cryptocurrencies. "There is only a certain amount of hot money in the market, and it is now devoted to AI," Yang told The Block. "Until crypto can break out with a convincing narrative or constructive advancement, it will just be trading sideways, waiting for major market shocks."

Despite the current trend, some experts see a promising future at the intersection of AI and crypto. Juan Leon, Senior Crypto Research Analyst at Bitwise, suggests that the convergence of these two technologies could significantly impact the global economy, potentially adding up to $20 trillion by 2030. "The intersection of artificial intelligence and crypto is going to be even bigger than people imagine," Leon noted in a recent report. This forecast aligns with PricewaterhouseCoopers' (PwC) estimates, which project that AI could contribute $15.7 trillion and crypto $1.8 trillion to the global economy by 2030. The synergistic effect of their integration could push the combined value beyond $20 trillion.

The rapid advancement of AI has created an unprecedented demand for data centers, AI chips, and electricity—resources that bitcoin mining operations are uniquely equipped to provide. As AI companies seek these vital resources, some bitcoin miners are diversifying their operations to capitalize on this trend. For instance, AI cloud provider CoreWeave recently offered $1.6 billion to acquire bitcoin miner Core Scientific, representing a 55% premium above its market price. Although the bid was rejected, it followed a significant 12-year, $3.5 billion partnership between the two firms, enabling CoreWeave to utilize Core Scientific’s data centers for AI-related services. Other mining firms, such as Hut 8 and IREN, have also pursued AI diversification strategies, especially after April’s bitcoin halving, which reduced miners' block subsidy rewards by 50%.

Artificial intelligence is also revolutionizing decentralized finance (DeFi) trading. High-frequency traders are leveraging AI to execute trades within milliseconds, significantly impacting DeFi and decentralized autonomous organizations (DAOs). "High-frequency traders are using AI to execute trades within milliseconds, which is being adopted in the DeFi market," said Nuklai Head of Ecosystem Jochem Herber. 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 and improve DAO operations while maintaining transparency," Herber added.

As speculative investment flows towards AI, the cryptocurrency market faces a period of stagnation. However, the potential synergy between AI and crypto presents an opportunity for significant economic impact in the future. With bitcoin miners diversifying into AI and AI transforming DeFi trading, the convergence of these technologies could shape the financial landscape in the coming years.