Up 44% in 7 Days, Is This Cryptocurrency for AI a Buy With $500?

Most investors hear "cryptocurrency for AI" and their eyes glaze over, but there's opportunity in store for those whose ears perk up instead. Bittensor (CRYPTO: TAO) is one of the more substantive projects in the segment. It's a decentralized network for buying and selling AI-related goods and services like computing power. Its price is up by about 44% in the last seven days (as of March 14), and that's happening right when the crypto sector's footprint of AI agents is growing rapidly.

Is this coin a buy with $500, or is it too risky (or too hyped) to bother touching?

Image source: Getty Images.

What Bittensor actually does

Think of Bittensor as a marketplace for the things people need to operate the infrastructure for artificial intelligence.

In that market, independent contributors build and evaluate machine learning outputs, earning TAO, the native token of the Bittensor blockchain, for useful work. The network organizes contributors into specialized subnetworks, with each focused on a specific AI task like text generation, compute provisioning, or deepfake detection. At roughly $270 per coin, it has a market cap of about $2.6 billion, making it the largest asset in the expanding AI crypto sector.

Importantly, the coin's supply mechanics mirror Bitcoin's. It has the same maximum supply of 21 million coins, and it also follows a four-year halving cycle that sharply reduces new coin issuance created by mining. Therefore, if demand for AI services on the network holds steady, that perpetual supply squeeze could support higher prices over time. And much as with Bitcoin, there doesn't necessarily need to be a huge amount of consistent demand over the long term for the supply contraction to keep the price rising.

So the core investment thesis here is that Bittensor is creating an ecosystem that's plausibly going to be in plenty of demand as AI usage increases, and its supply situation won't be getting any more favorable for later buyers.

Another piece of the puzzle is that there might soon be exchange-traded funds (ETFs) that make it easier to purchase. Digital asset trading firm Grayscale filed paperwork with the Securities and Exchange Commission (SEC) in December to convert its currently traded Bittensor Trust into an ETF, which would be the first U.S.-listed product offering direct TAO exposure. If that plays out, it will be a meaningful catalyst and it might generate a long-term tailwind too.

Don't bet the farm on this one

The bullish narrative writes itself here. Demand for anything related to AI is practically insatiable right now, the coin's supply growth is slowing, and some of its subnets are reportedly producing outputs that appear to be competitive with the best available.

But this coin is quite volatile. Its all-time high was more than $757, just two years ago, and buyers from that era are still sitting on heavy losses.

Furthermore, competition in its segment is relentless, and only increasing. Centralized AI services companies command immensely more computing resources. A slew of crypto-native direct competitors also all chase the same finite supply of developer attention and investable capital, not to mention capital held by potential customers. It's presently unclear whether Bittensor has any competitive advantages that would allow it to outperform despite those rivals.

Thus, for most investors, especially those who haven't yet built a diversified crypto portfolio, it's probably best to avoid buying Bittensor with $500 right now. Safer investments should take priority.

On the other hand, if you're already comfortable with investing in other highly risky altcoin investments, and if you can stomach holding onto Bittensor for at least five years to see if its thesis plays out, throwing $500 at it isn't a terrible idea. It's not overhyped or overpriced at the moment, and it has an engine for driving demand that could make it into a profitable investment over the long run, assuming it continues to offer services that AI developers actually need.

Alex Carchidi has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and Bittensor. The Motley Fool has a disclosure policy.