Right now, Bitcoin is getting all the attention in the crypto market. And for good reason. Bitcoin soared by nearly 40% in the aftermath of the U.S. presidential election, and is now up 128% for the year. Moreover, it's within striking distance of the psychologically important $100,000 price level.
But that doesn't mean other cryptocurrencies are not also soaring in value. The one that's on my radar right now is Bittensor (TAO -2.11%), an artificial intelligence (AI) crypto token. It's up 30% over the past 30 days, and 137% for the year, so it's running neck and neck with Bitcoin right now. So should it be in your portfolio in 2025?
What is Bittensor?
Bittensor is an open source protocol for the creation of decentralized machine learning networks. The Bittensor token -- known as TAO -- is used to buy and sell digital commodities within the Bittensor ecosystem. These digital commodities are all AI-related, and include things like computing power, data, and machine learning models.
There's obviously a lot to unpack here. The easiest way to think about Bittensor is that it's a digital currency used to buy AI products and services. Instead of being priced in dollars, these goods and services are priced in TAO. If you want to buy these goods and services, you need some TAO.
This currency becomes more valuable as the total value of the Bittensor AI ecosystem grows. And that helps to explain why Bittensor has skyrocketed in value over the past 18 months. In March 2023, the value of a TAO token was only $100. Today, it's worth over $650, for a staggering gain of 550%. You can thank the rapid growth of AI for that.
The convergence of AI and crypto
Bittensor represents the convergence of AI and crypto. This is a powerful concept, and one that Cathie Wood of Ark Invest outlined in her "Big Ideas" report for 2024. As she points out, blockchain technology and artificial intelligence are two of the five most important technologies in the world right now, and any convergence of the two is going to lead to enormous increases in economic value.
In fact, Cathie Wood even thinks the technological convergence of AI and blockchain might lead to the types of "tectonic macroeconomic shifts" that occurred during the first and second industrial revolutions. So you can understand why crypto investors are so excited about Bittensor right now. The convergence of AI and crypto could send its value soaring.
Bitcoin for AI?
Recently, some crypto traders have begun talking about Bittensor as "Bitcoin for AI." This suggests that Bittensor could eventually become the premier digital currency used to power the AI economy.
Image source: Getty Images.
The idea of creating a digital currency for AI is something that Cathie Wood has also explored. As she pointed out last year, it's not efficient to use dollars to pay for AI-based goods and services. There needs to be a digital currency that AI bots can use and trade. She thinks Bitcoin will be that currency.
Admittedly, it's easy to scoff at the notion of Bittensor being "Bitcoin for AI." It sounds like the type of marketing fluff that often comes out of Silicon Valley, where start-ups are trying to attract the money of venture capitalists. Oh yes, we're "the Netflix for X." Or, we're "the Airbnb for Y."
But here's the thing -- Bittensor actually does share some characteristics with Bitcoin. Like Bitcoin, it's mined using computing power and electricity. And, just like Bitcoin, Bittensor has a limited lifetime supply of 21 million coins. That introduces inherent scarcity, especially when you consider that many cryptocurrencies have coin supplies measured in the billions or even trillions of coins.
Over time, this scarcity will theoretically help push Bittensor's price higher. As the Bittensor ecosystem grows, it will lead to greater demand for TAO tokens. As long as demand outpaces supply, the price should move upward over time.
Is Bittensor really the best AI crypto token?
When it comes to investing in AI crypto tokens, investors have choices. If you look at the top 100 cryptocurrencies as ranked by market cap, there are 10 different AI crypto tokens worthy of consideration. So it's not like Bittensor is the only way to play the "convergence of AI and crypto" investment thesis.
Moreover, there's no easy way to invest in Bittensor. Unlike Bitcoin, there's no spot crypto exchange-traded fund (ETF) you can buy and sell. You'll need to enter the spot cryptocurrency market yourself, and invest in it directly. And, even then, you might have a hard time buying it. It's not currently available for trading on Coinbase Global, for example.
Bittensor is not for everyone. It should be considered a highly speculative investment only. Its upside potential is tied to the fortunes of AI, so if the AI investment trend stalls out, then the value of Bittensor will likely decline. That being said, I'm putting this cryptocurrency on my investment radar for 2025.
