Ailea Bulletin - AI Agents Bottom? What You Need to Know
Agents Bottom?, State of Web2 AI, & More
At this point, every newsletter we put out each day has to address the market dump from the day before, or in today's case, the dump during today's Asia session. Just at the beginning of this week, $BTC dipped below $90K; now it has dipped to $78K, now sitting just barely above $80K ahead of U.S. market open after a disastrous precedent was set during yesterday’s U.S. trading hours.
Many tokens, $ETH included, have completely retraced all gains since the election. Since the inauguration, crypto has done horribly across the board price-wise, not to mention the crushing blow to memecoins that $TRUMP and subsequently $MELANIA dealt.
One of the biggest losers during this period has been AI agents, with many tokens otherwise thought of as majors seeing major retracements and overall sentiment has fallen off a cliff. This isn’t anything unique to agents; all of crypto has been dealt a bad hand, the decline that the agents space has experienced just seems worse as the sector was climbing so fast in Q4 and into January.
In today’s edition, we’ll step back a bit from covering individual agent news to discuss the place that agents have during this downward and uncertain market, and the changing direction of AI both in and outside of crypto…
Stay informed in the markets ⬇
State of AI Agents
The AI agents market is down so bad that Cookie.fun has the sector up 11%, with Base and Solana agents up ~40%. In all seriousness, this is likely due to a change in the way cookie tracks agent market cap. The agents market has declined along with the rest of the market, though it hasn't fared dramatically worse.
AI remains the dominant sector in all of crypto, larger than the next 3 narratives combined. However, focus seems to have shifted somewhat away from agents and more toward infrastructure protocols like Nillion, Bittensor, even chains like Story that are not inherently AI-related but that have rolled out agent initiatives. Agents live far out on the tail-end in crypto, as the most recent and perhaps the smallest sub-sector by marketcap.
Despite the absence of positive sentiment, the agents sector looks to have bottomed above its ATL earlier this week of $6B. Several names including $ZEREBRO, $AVA, and a few others are in the green this past week, while majors like $AI16Z and $ARC remain above their support levels. Still, given the current weakness from majors, taking a position in these tokens still looks like a risky bet at this time.
LLM Clone Wars
The current state of LLMs sees leading frontier labs constantly one-upping each other, with more models than most people can feasibly keep track of being pushed into production in a bid to win over users. Just while writing this, GPT-4.5 has officially been released, looking to provide a model with more EQ and less hallucinations. Still, these improvements don’t seem to be leaps and bounds ahead of the other players in this space.
The past week also provided more time to judge existing models by their merits. The overwhelming theme of this past week is that the incremental gains that can be squeezed from massive amounts of investment is starting to become less and less worth it, even for the most knowledgeable and well-capitalized organizations like Microsoft.
It’s becoming a mainstream talking point parroted on the likes of Bloomberg and other TradFi media channels, that these AI companies probably need to start focusing on building a moat via their application feature-set and begin generating revenues. Resources and attention shifting more from infrastructure toward productive uses of AI bodes well for the Crypto x AI sector and agents specifically. Just as the AI infrastructure boom may have seen overspending on compute and data centers, there will likely be overallocation and investment into the application layer of AI, with agent tokens currently being a primary recipient of any flows to liquid assets that represent the AI narrative.
Agents provide an in-depth, virtual interface with which users can interact with increasingly powerful AI models. Where AI can also be applied is the physical realm, in autonomous vehicles, drones, and other devices. We’re even beginning to see more crypto protocols emphasize the robotics part of their operations.
With the rollout of humanoid robots from various labs garnering more attention lately, it might not be a pipe dream to see agents integrated in some physical form sooner rather than later. Protocols like GEODNET and FrodoBots are placing an emphasis on developing robotics capabilities, even partnering with globally recognized robotics labs like Unitree.
All in all, we’ll be looking for more attention to shift toward agents, robotics, and other use cases for AI. Having every bit of manpower from leading AI labs focused on developing a model that is crowned king for a week is likely unsustainable, and not necessarily what investors or citizens want to see.
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