Crypto - AI: When investor enthusiasm precedes the fall!

Artificial intelligence (AI)-related cryptos have seen a significant decline, as Google Trends data reveals a spike in interest from retail investors. This trend highlights a common phenomenon in markets: interest spikes often coincide with market highs, reminiscent of Warren Buffet's investment strategy of buying in panic and selling in euphoria.

The collapse of AI-related tokens!

According to recent reports, major AI-associated cryptos such as FET, RNDR, TAO, and GRT saw their market value drop by more than 20% in seven days. This drop comes as Google Trends indicates that interest in AI has peaked! With a score of 100, representing the maximum popularity for the search query during the given time period.

The CoinDesk 20 Index (CD20), which measures the broader crypto market, lost 6%. While the market leader, bitcoin (BTC), only fell 2.8% over the same period. This could indicate that AI-related cryptocurrencies are more volatile and responsive to changes in market interest and sentiment.

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Follow trends to invest in crypto?

The Google Trends tool is widely used to gauge general or individual investor interest in trending topics. The value for the search query “AI” over the past 12 months peaked last week. This suggests that a growing number of current and potential crypto investors are seeking information on this topic.

However, it is crucial to note that interest spikes are not always reliable indicators of future crypto market movements. For example, bitcoin, known for having a strong positive correlation with Nasdaq-listed chipmaker Nvidia (NVDA), bottomed out with tech stocks in late 2022 after the launch of ChatGPT, which raised public awareness of 'AI.

Although interest in AI is at its peak, investors should remain vigilant and not get caught up in the excitement of the moment. Crypto markets are notoriously unpredictable, and history has shown that spikes in interest can often precede significant corrections.

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