Recently, AMBCrypto covered how the Nvidia earnings report affected the AI crypto sector. The company’s increasing revenue assured investors, but failed to lead the NVDA stock or the wider market higher. It did not have any positive impact on crypto tokens either.
A look at the AI crypto sector market cap showed a downtrend since September. The AI tokens’ combined market cap peaked at $40.91 billion in May. However, while Bitcoin [BTC] and Ethereum [ETH] rallied in June and July, the AI sector was simply unable to keep up.
The downturn in momentum in October solidified the slump the sector was already in. Since 20 September, the AI crypto market cap has been cut by 49.37%. Should investors expect another 50% correction?
AI crypto token investor hype is far from 2024 levels
Source: Alternative.me
The Fear and Greed Index was at extreme fear levels with a reading of 23, at the time of writing. This was similar to the drop in March and April. The burning question is, will we see a similar rebound?
Nobody has an answer, but the consensus leans towards “no” right now.
Source: TOTAL3 on TradingView
The total altcoin market cap (excluding Ethereum) has been slashed by 24.9% since 07 October. As pointed out earlier, the AI crypto sector shed nearly twice this amount, making it one of the weaker-performing sectors.
AMBCrypto also compared the weekly RSI readings of the three leading AI sector tokens. These were, namely, Bittensor [TAO], NEAR Protocol [NEAR], and Internet Computer [ICP]. Their weekly RSI readings were, respectively, 43, 41, and 44.4. They showed bearish momentum, but nothing extreme.
We have established that the sentiment was lukewarm at best, and bearish conditions were strong. The underperforming AI crypto sector is likely to suffer disproportionately compared to the altcoin market as a whole.
For these reasons, it remains highly likely that a deeper correction is likely for this sector. There is one more factor to consider here. There is no hype among investors and no social media engagement capable of driving FOMO and attracting capital flows right now.
Nearly two weeks ago, it was reported that soaring valuations in the AI sector in traditional finance sparked fears of an AI bubble. If this scenario leads to widening cracks in the AI narrative in the stock market, it could potentially tank the opinion of AI crypto tokens and lead to further sell-offs.
Final Thoughts
- The crypto market, as a whole, and especially the AI token sector, has seen worrying sell pressure over the past two months.
- With a 50% correction since 07 October under its belt already, the AI crypto sector will be likely to plunge lower than to recover in the coming weeks.