AI token selloff a product of too much ‘excitement’

Galaxy Trading says that AI tokens need to demonstrate “blockchain-native” use cases to break out of “speculative” cycle

article-image

Novikov Aleksey/Shutterstock modified by Blockworks

share

This is a segment from the Empire newsletter. To read full editions, subscribe.


That’s one way to describe yesterday’s action both in crypto and outside of it. 

Galaxy Trading summed the action up to a “function of broader crypto market movements” while GSR’s Carlos Guzman said that the AI narrative dominated the day. 

Basically, DeepSeek — a Chinese AI company — was able to rival OpenAI’s very expensive model for much cheaper on older (and much less expensive) chips, hence the selloff in Nvidia. 

(Sidenote here: Decide AI’s Jesse Glass doesn’t think that the cheaper GPU story will last because DeepSeek will still need larger GPUs as it scales.)

What we then saw was folks scrambling to recalibrate how to approach the big AI plays, some of which, like OpenAI, now have multibillion-dollar valuations. 

For the crypto side of things, the narrative was much the same according to Guzman. The AI tokens caught up in the selloff were largely overvalued given the use cases currently out there. 

“I do think crypto and AI agents are a real thing, and we’ll eventually see a lot of real use cases of AI agents that use crypto … But, as often happens in crypto, the tech wasn’t quite there … The excitement got a little bit ahead of where the tech was,” he explained. 

Galaxy noted that AI tokens weren’t trading near all-time highs before the recent correction, which shows that some aren’t quite sold on how they fit into the space yet. And AI researchers, like Glass, will carry some skepticism until projects can integrate or emphasize edge computing in their projects, instead of just launching tokens.

“For AI-focused crypto projects to break out of speculative cycles, they must demonstrate clear blockchain-native advantages — whether through cost efficiencies, trustless execution, or new incentive mechanisms. Accessibility also remains a challenge, as memecoin trading is one of the few areas that has broken through mainstream barriers,” the Galaxy Trading team explained. 

So does yesterday’s action change a lot of the bullishness we’ve seen around the AI/crypto intersection and these tokens? Doesn’t seem like it. Guzman believes that more development and use cases will reopen the excitement around the tokens.

As for the current AI landscape, it’s honestly not looking too bad right now despite the sea of red. The thing is, as Guzman explained to me, in the long run, the DeepSeek saga might actually be healthy. 

The current crop of AI companies in the US can now use the compute and data to improve their own models, allowing them to replicate and build on what they learned from DeepSeek. 

I guess there really is always a silver lining.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Research Report Templates (19).png

Research

Suilend has grown into the top money market and liquid staking provider on Sui. STEAMM, Suilend’s Superfluid AMM, presents a compelling avenue for growing market share within Sui’s DEX landscape and revenue generation for the protocol. Suilend’s multi-product suite position it well for owning market share across key verticals. While current metrics across the Sui ecosystem are likely inflated due to Sui Foundation incentive programs, SEND trades at amongst the lowest multiples in the lend/borrow sector, suggesting that a bull case for continued growth in the ecosystem may be mispriced.

article-image

Silk Road founder Ulbricht made a triumphant return to the Bitcoin Conference, 10 years on from sentencing

article-image

A Blockworks Research report looked at who could take up some of the marketshare in the launchpad space

article-image

Business-to-business stablecoin payments are on the rise, per a report from Artemis, Dragonfly and Castle Island

article-image

Crypto continues to do its thing: incentivizing behavior

article-image

Kraken will soon offer Backed ‘xStocks’ as Solana tokens

article-image

In a unanimous decision, the US Court of International Trade has ruled that Trump’s IEEPA tariffs are unlawful