The Wall Street Journal: How is AI Trading Stealing the Limelight from Cryptocurrency?

Original Title: How the AI Trade Is Stealing Crypto's Thunder

Original Author: Vicky Ge Huang, WSJ

Translation: Chopper, Foresight News

Daniel Koss once made a large investment in Bitcoin, believing that cryptocurrency would reshape the financial industry. However, after the AI craze emerged, he shifted his investment focus. The 30-year-old investor believes that the rapid development of artificial intelligence technology has the potential to disrupt multiple industries, so he decisively entered the AI field. In August of last year, he liquidated his six-figure Bitcoin holdings and has since reallocated all his funds to the field of artificial intelligence.

“That feeling is like when primitive humans discovered fire.” Koss, based in Zug, Switzerland, said.

Koss's reallocation decision reflects the capital migration that has swept the entire market over the past year: individual investors and hedge funds have been selling off Bitcoin and various tokens, chasing after AI stocks. This asset rotation also explains Bitcoin's price stagnation: since reaching a historic high of over $126,000 in October of last year, Bitcoin has continued to face pressure, lingering around $60,000 for an extended period. At that time, the Trump administration threatened to impose new tariffs on China, triggering investors to sell off high-risk assets.

Meanwhile, chip manufacturers and other AI concept stocks have experienced a surge that was once only seen in the crypto market.

Bloomberg's Senior Commodity Strategist, Mike McGlone, stated: “The crypto market is undergoing a deep cleansing, and this is just the beginning.”

While the U.S. stock market has repeatedly hit new highs this year, Bitcoin has continued to weaken.

Koss currently has no plans to re-enter Bitcoin trading in the short term. In his view, crypto assets have matured, and the soaring exponential growth era is gone for good. He believes that Bitcoin will never again see a ten-fold increase within a year. “Bitcoin's market size is already so huge that even achieving a doubling would be considered extremely high returns.”

Even staunch crypto believers are reducing their crypto holdings and turning to highly volatile AI stocks.

Ryan Ho, founder of the social trading platform Legend, revealed that when the price of Bitcoin approached $120,000, he held a seven-figure Bitcoin position, and at that time, he was convinced that Bitcoin “would never drop below $100,000 again.”

But the market has its own plans. In December last year, he swapped a large amount of Bitcoin for altcoin positions, buying into chip companies and other AI-related stocks, including Intel. He still holds hundreds of thousands of dollars' worth of Bitcoin.

Ryan Ho

The 25-year-old entrepreneur stated that the core reason for reducing his cryptocurrency holdings was the structural weakness in the crypto market. In his view, since the sharp decline in October, the crypto market no longer exhibits the characteristics of a healthy risk asset: buying demand has dried up, and institutional funds continue to flow into the AI sector.

Subsequently, the crypto market decoupled from the US stock market, with stocks continuing to rise while the crypto market remained sluggish. Ryan Ho believes that retail investors are more optimistic about the growth prospects of AI, as artificial intelligence has numerous real-world applications such as ChatGPT and AI-assisted coding.

Another factor driving funds from crypto to AI is the introduction of AI stock derivatives on mainstream crypto exchanges like Hyperliquid.

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

Some crypto traders have also chosen to cash out and end the previous rally in Bitcoin and major altcoins.

Trader and digital artist Minh Le recently cashed out some of his crypto assets to purchase a Ferrari, while also allocating a significant portion of his profits to Japanese anime collectibles, including "One Piece" and Pokémon trading cards.

Minh Le

Minh Le accumulated his wealth through NFTs and meme coins. The Los Angeles-based trader entered the market in 2017, buying Litecoin with a credit card; during the pandemic, he increased his investments with the help of government stimulus checks.

Shortly after buying a meme coin issued by Trump, he cashed out on a large scale. The meme coin was launched on the eve of Trump's inauguration. "That was the fastest I've ever made money, and 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 use cases, such as stablecoins used for payments.

Le stated, "If digital gains on paper cannot be converted into real-world assets to improve lives and create meaningful experiences, then what is the point of making money?"

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