Artificial Intelligence (AI) tokens, with their billion-dollar market caps and vast capital pools, were recently overshadowed by a leaner, more efficient team. During Monday’s Asia morning trading hours, the AI category, as tracked on CoinGecko, took a 9% dive, underperforming the broader crypto index, CoinDesk 20, which saw a 5% drop.
Investors, both in traditional finance and crypto, are processing the implications of DeepSeek, a new AI model that’s taken the industry by storm. According to data from DeepSeek, hosted on Hugging Face, this model outperforms OpenAI despite being built on a modest $6 million budget and using far fewer Graphics Processing Units (GPUs) compared to OpenAI’s massive setup, which recently closed a $6.6 billion funding round, reaching a valuation of $157 billion.
Perhaps the most striking factor is that DeepSeek is so efficient that it can run on a smartphone, which raises concerns for GPU-focused investors. Tokens heavily invested in GPUs have borne the brunt of this shift. Nodes.AI, a small-cap crypto project facilitating GPU access, has seen a 20% drop, while Aethir, with a larger market cap, has only dipped by 6%, a drop slightly higher than the overall CoinDesk 20 index.
Drawing lessons from the crypto gaming sector, which has faced similar challenges, the success of DeepSeek may send shockwaves through the AI sector, as it highlights the difference between massive capital investment and truly innovative results. Despite significant funding, AI crypto projects haven’t yet created anything as transformative or efficient as DeepSeek.
The crypto gaming sector, valued at $19 billion by CoinGecko, has seen its major projects like Sandbox, GALA, and Decentraland rise in stature, but they still lag behind traditional gaming giants. Blockchain gaming struggled in 2024, with investment falling to its lowest since 2020 at $1.8 billion, marking a 38% decline from the previous year, according to DappRadar.
Although blockchain gaming experienced a significant 421% increase in daily unique active wallets last year, its dominance in the broader crypto space has fluctuated between 26% and 29%, with DeFi maintaining the lead. Still, traditional gaming platforms like Steam continue to have a larger user base, and older, less popular games from smaller companies often boast more followers than the latest crypto-based offerings.
This reflects the ongoing challenge for crypto in expanding beyond finance into areas like gaming and AI. Despite having ample capital and resources, crypto projects in these sectors still struggle to achieve the same level of user engagement and sustainability as their traditional counterparts.
