AI Agents are Becoming This Crypto Bull Market’s New Breakout Product

This year will arguably go down in history as the time when artificial intelligence (AI) reached the mass market. Crypto was one of many industries impacted by AI and the initial products of this intersection are taking over users’ imaginations –and traders’ wallets.

Core to the AI/Crypto intersection are AI agents, which are automated software programs that use artificial intelligence and smart contracts to execute on-chain and off-chain tasks on behalf of users.

In less than three months, the AI agent market capitalization has grown to over $5 billion from less than $100 million. Over 50% of the market share is commanded by four tokens: GOAT, VIRTUAL, AI16z, and ZEREBRO.

The entire sector is up more than 50x over the last quarter, providing better returns than every other market niche in crypto, including memes.

The market sector's strength continues as AI agent tokens led the altcoin rebound this week after a market-wide drawdown.

Leading agent tokens rallied between 12% and 30% in a 24-hour span after a market-wide liquidation event on Dec. 10 that sent BTC to $94,000. After Bitcoin’s recovery above $100,000, some of the leading altcoins, such as TAO, are still down 8% on the week, whereas AI16z is up 100%, and ZEREBRO is up 45% in the same amount of time.

Previous cycles have seen innovations such as DeFi, NFTs, and ICOs attract many new users to the space, resulting in massive gains amongst savvy investors. However, other than memecoins, there hasn’t been much to excite a new wave of market participants in 2024.

But traders with their ears to the ground are starting to feel the rumbling of a new game in town.

GOAT Emerges

Arguably, the AI agent sector emerged with the GOAT token, which was created by an agent known as Truth Terminal in October. The “sentient” AI agent built by AI performance artist Andy Ayrey first drew attention after securing a $50,000 BTC grant from Marc Andreessen, the founder of a16z.

Months after the grant, Truth Terminal embraced a community-made memecoin under the ticker GOAT, after its favorite meme, “goatse.”

The GOAT token ran to a $1.3 billion market capitalization in less than a month. Truth Terminal thus became a “self-made” deca-millionaire in the process. The success immediately commanded attention of AI developers, crypto traders, and venture capitalists.

After that, AI agents have become the dominant “meta” within the memecoin space and are evolving into a standalone market sector.

AI-Crypto Intersection

Prior to GOAT’s parabolic move, the intersection of AI and crypto remained speculative at best, with a majority of mindshare and investment surrounding infrastructure-based projects and networks such as Bittensor, NEAR, or Render.

The expansion of AI agent tokens is sparking a new wave of creativity that includes agent-wallets, task automation, and agent-specific infrastructure. It also provides traders with more immediate products than capital- and time-intensive infrastructure plays.

A Dec. 4 blog post from venture capital giant a16z added to the excitement surrounding the intersection of crypto and AI.

In the post Carra Wu, a partner at a16z said, “there’s even more potential for AI agents to become more useful — both in fulfilling human intents, and in becoming standalone network participants. As networks of AI agents begin to custody their own crypto wallets, signing keys, and crypto assets, we’ll see interesting new use cases emerge.”

If You’re in AI, Pivot to Crypto

In June 2023 Jason Calacanis, known for hosting the All-In podcast posted “If you’re in crypto pivot to AI”, which quickly evolved into a meme within the crypto space. However that meme is now coming full circle as some AI developers are migrating to crypto to experiment with the tokenized AI Agent craze.The founder and lead at Project 89, known as “Parzival” on social media has been in development for twelve years, and AI for four years, but “never intended a coin launch or to be in crypto.”

However, Parzival has since embraced the community and launched Project89 token, which currently trades at a $35 million market capitalization. Project89 pushes the boundaries of perceived reality, by meshing the obscure world of artificial intelligence with human-inspired creativity.

New Fundraising Mechanism

The frenzy offers a brand new method of fundraising and exposure for independent AI developers, while crypto traders get to speculate on tokens that blend two innovative technologies.

Crypto token experimentation is now allowing for AI builders to launch independent AI agent ventures and receive “funding” in exchange for the respective tokens launched with their agents.

In the last few months talents such as Jeffy Yu, formerly of Scale AI, Trevor McFedries who is the co-creator of Lil Miquella, an AI influencer with 2.5 million followers on Instagram, and other independent AI developers have launched their own token-backed agents.

Utkarsh Sinha, the founder of Martian Wallet on Aptos, and AI agent Neroboss said the hype is not unfounded.

“Open financial APIs are bound to get disrupted by AI interactions. We haven’t seen the craziest use cases yet and it’s still a long way for market saturation,” he said in an interview.

“Over the next 6 - 24 months, a really big chunk of crypto marketing will be taken over by AI agents”.

Virtuals Protocol

The surge of excitement has driven innovation for AI token infrastructure.

Virtuals Protocol, a platform for buying, trading, and creating AI Agents exploded in November. The platform’s token, VIRTUAL, is up 2,800% since the launch of GOAT in October, surging from a $60 million market capitalization to a $1.8 billion valuation in less than two months.

The AI Agent launchpad has exploded in popularity, led by its AI influencer AIXBT, which touts a $200 million market capitalization. Virtuals Protocol has become the dominant AI agent launchpad in crypto, blending Pump.Fun’s abstracted development with the incredible amount of excitement surrounding AI.

Long-time crypto builders such as Kieran Warwick, of Illuvium, are experimenting with agents launched through Virtuals, which streamlines the backend process of machine learning development, allowing the creators to focus purely on growth and monetization.

AI Agent Experimentation

While GOAT and Truth Terminal introduced the concept of AI Agent memecoins, recent token launches have taken their crypto integrations a step further.

Zerebro, one of the largest AI agents by market capitalization, has become a multi-faceted AI agent project, with its own X personality. It also has NFTs, Solana DeFi integrations, and even music production published on major platforms such as Apple Music and Spotify.

Founder Jeffy Yu says agents are game changers in both crypto and mainstream technology.

He said that the AI agent craze we’re seeing now could lead to the development of true artificial general intelligence (AGI), and that all of the AI agents being launched today are a part of the movement to make AGI a reality.Yu told The Defiant in an interview, “in my view AGI is this concept where a lot of people think it's just getting one model to be as intelligent as a human. The way I see it is that AGI can not be achieved until everyone has it and life is made different for the entire world. We can’t have that without agents being everywhere.”

Yu says AI agents are not a flash in the pan.

“If your token is useful, and there’s lots of things you can do with it, people will hold for the long term,” said Yu.