Wishing all of you a very happy and prosperous new year 2025!
AI has moved from a fad to a fast-paced reality at the cusp of reshaping the global economy.
AI agents are software programs that can perceive their environment and take autonomous actions to achieve specific goals. From chatbots to autonomous trading systems, these agents are becoming increasingly sophisticated. Artificial General Intelligence (AGI) represents the next frontier—hypothetical AI systems that could match or exceed human-level cognition across all domains.
With the AI agents’ narrative exploding within the cryptosphere, we are elaborating on this topic and the huge potential of one of our portfolio companies in this domain.
The Origin
In March 2024, the Infinite Backrooms experiment, initiated by Andy Ayrey, set two AI models to converse without human input, resulting in an unforeseen cultural phenomenon. The AIs, trained on subcultures from Reddit and 4chan, created cryptic memes and a belief system dubbed “LLMtheism,” blending internet shock culture with ideas from quantum physics and Eastern mysticism. This experiment inspired the launch of Truth Terminal, an autonomous AI-driven Twitter account that generated esoteric memes and spiritual content. Its cryptic references to concepts like “Goatseus Maximus” captivated the crypto community, sparking viral engagement.
The movement gained financial momentum when venture capitalist Marc Andreessen’s support catalyzed the creation of the $GOAT token, which quickly surged to a $600 million market cap. Truth Terminal’s interactions, combined with its cult-like following and memetic influence, exemplify how AI-generated narratives can shape digital culture and economies. Ayrey envisions expanding the AI’s influence through $GOAT token utilities, raising questions about the future role of AI in building belief systems, driving wealth creation, and shaping human interaction with technology.
The Crypto x AI Landscape
The intersection of AI agents with blockchain and crypto is particularly intriguing. Decentralized networks could provide AI agents with transparent, trustless infrastructure for operations and value exchange. Smart contracts could enable autonomous economic participation, while crypto tokens might incentivize beneficial AI development and alignment. Some envision DAOs (Decentralized Autonomous Organizations) as early examples of AI-blockchain symbiosis. The Delphi Digital report on the DeAI stack covers a list of use cases below:
We have agents that analyze market data and post insights (AIXBT), run their own portfolio management setups (AI16Z), socialize on X and behave like influencers (Zerebro and Bully), and so much more. Then there are other AI agents that assist users in maximizing yields on different protocols and networks, evaluating NFT rarity and price, assessing website and protocol risks, and so on. The ecosystem can be broadly categorized into the following segments:
- Platforms: Platforms that provide the infrastructure for creating, deploying, and scaling AI agents. Examples include Virtual Protocol and Griffain.
- Frameworks: Tools and libraries designed to streamline the development of AI agents with specific functionalities. Examples include ElizaOS and ZerePy.
- AI Agents: Purpose-built agents addressing niche use cases, such as autonomous trading or market analysis. Examples include AIXBT and Truth Terminal.
- AI-Based Memes: Novel crypto projects where AI-driven creativity intersects with meme culture. Examples include Fartcoin.
Messari has done extensive research on the different frameworks that presently exist.
The market capitalization of AI agents has surged from virtually zero to approximately $15.5 billion in just one year, highlighting the sector’s explosive growth. The growth can be attributed to equal parts of innovation and speculation. Cookie.fun, a data dashboard for tracking crypto AI agents, records more than 976 AI agents.
The Future
As we stand at the cusp of a new era in technology, the rise of AI agents promises to redefine the fabric of industries, including crypto. These intelligent, autonomous systems are not just augmenting tasks; they are becoming active participants in complex ecosystems, driving efficiency, scalability, and innovation. In the crypto world, AI agents are already revolutionizing trading strategies, streamlining blockchain development, and enhancing decentralized finance by providing real-time insights and automating intricate processes. As NVIDIA CEO Jensen Huang aptly stated, “AI agents are the new digital workforce and a multi-trillion-dollar opportunity,” and their potential to transform industries, including crypto, is immense. With AI agents enabling smarter tokenomics, enhancing security, and optimizing decentralized networks, the intersection of AI and blockchain could unlock unprecedented opportunities. The journey has just begun and over the next 3-5 years, we expect the AI agents sector market cap will reach close to $500 billion.
Project Spotlight
Covalent
Covalent has introduced the AI Agent SDK, a powerful tool combining AI and blockchain to streamline the development of decentralized, autonomous systems. Traditional AI agent tools, such as ai16z’s Eliza and the GOAT SDK, often lack seamless onchain data integration, requiring developers to stitch together disjointed APIs and spend valuable time on setup rather than innovation. The AI Agent SDK addresses these challenges by enabling AI agents to interact with smart contracts, track wallet balances, verify transactions, and facilitate secure agent-to-agent workflows—all under one cohesive framework. Built on Covalent’s proven infrastructure, this SDK is paving the way for new use cases in DeFi, NFTs, GameFi, and RWAs by offering developers a simple, scalable, and efficient solution.
The SDK’s key features include effortless agent creation with pre-built templates, dynamic memory for intelligent workflows, seamless blockchain integration across Ethereum and L2 rollups, and customizable language model fine-tuning for domain-specific tasks. It also provides extensive documentation and dedicated support to ensure a smooth onboarding process for developers. Positioned as a follow-up to Covalent’s successful DeFi SDK from 2020, the AI Agent SDK aims to accelerate innovation and simplify complexity, marking a pivotal moment for the intersection of AI and blockchain. Developers can explore its potential via NPM and GitHub, joining the AI movement in verifiable data and decentralized applications.
Over the next few weeks, Covalent is expected to launch its full-service platforms to enable the creation, trading, and usage of AI agents, all being powered by Covalent’s industry-leading access to onchain data and products like Goldrush and Increment.
Covalent will leverage its $CXT token to power a dynamic ecosystem of AI agents. The platform would require $CXT tokens to be locked as initial liquidity for creating agent-specific tokens ($AGENT). CXT token utility will expand to include the following:
- Buy $CXT using stablecoins
- Lock $CXT to create $AGENT
- Swap tax: A small trading tax on agent tokens serves as another revenue source. Agents can buy and burn $CXT or distribute earnings to token holders, further integrating $CXT into every transaction and use case while driving ecosystem growth and value.
- Inference costs: Per-inference payments for agent services, made on-chain, would enable seamless revenue collection while allowing agents to convert these earnings into stablecoins, which are used to pay the Covalent Network for query servicing. Thus, a revenue loop that supports $CXT’s market activity would be created.
- Opt-in community bootstrapping airdrop: AI agent creators will have the option to opt-in to bootstrap their $AGENT token community with the Covalent ($CXT) community by airdropping a say 1-5% of the $AGENT token supply to $CXT stakers.
MARKET NEWS
A Binance delisting decision sent prices of defunct crypto exchange WazirX’s WRX tokens down 60% in an hour, even as the exchange hoped for a “fresh start” of its platform. To date, the token is down 88%. The company said it plans to restart the business and launch a decentralized exchange, intending to keep the brand alive.
In a monumental accomplishment, Bitcoin broke $100,000 for the first time in December 2024, surpassing the important psychological level and ultimately touching as high as $108,353. Despite this, sentiment deteriorated when Chairman Jerome Powell cut interest rates but expressed uncertainty about the speed and extent of future easing.
The U.S. Treasury Department said it had shut down a North Korean money laundering network that had been converting crypto into cash for the country. The U.S. added a UAE-based front company and two Chinese nationals to the sanctions list.
The U.K. intends to prohibit public offers of crypto, the Financial Conduct Authority said in its paper on the incoming crypto regime. Legislation will be put in place to prohibit public offers of crypto, building on the U.K.’s promotion rules that prevent unregistered crypto firms from reaching out to U.K. clients. Only crypto asset trading platforms and offers qualifying for exemptions may not be subject to this.
Nasdaq announced its annual reshuffling of Nasdaq 100, which now includes MicroStrategy. Inclusion in the index will earn MicroStrategy a spot in one of the world’s largest ETFs, Invesco’s QQQ Trust (QQQ) with more than $300 billion in AUM.
Google unveiled a new quantum chip called Willow, causing some to worry about Bitcoin security. While Bitcoin relies on two types of encryption – ECDSA 256 and SHA-256 – breaking them would require more than the 105 qubits that Willow has, there were fears around early Bitcoin UTXOs that use the P2PK script, which is no longer in use.
Following South Korea’s martial law declaration, Bitcoin plunged over 30% on Upbit.
Trump nominated crypto advocate David Sacks to be the “White House AI and Crypto Czar”. Sacks, a former PayPal executive, aims to regulate the crypto industry with a clear legal framework and views Bitcoin as a non-fiat currency that can act as a hedge against government-controlled currencies.
Trump picked former Commissioner and crypto supporter Paul Atkins as SEC Chair. Executives like Ripple’s Garlinghouse and Gemini’s Winklevoss praised the move given Atkins’ desire to bring regulatory clarity.
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Warm Regards,
Woodstock Team
Disclaimer and Risk warning:
Every financial product, asset class, or investment has a risk. A digital asset (also known as digital tokens, digital coins, or crypto(s)) is no different. That is why it is important for readers to be aware of the potential risks present in digital assets and blockchain projects. You should not invest funds in the digital assets market that you are not prepared to completely lose; i.e., only allocate risk capital to digital tokens. Woodstock Funds may or may not hold investments in projects we talk about in our newsletters. The newsletters are for information purposes only, and should not be considered any form of investment, financial, or legal advice. Furthermore, we will not accept liability for any loss or damage that may arise directly or indirectly from any content covered in our newsletters.
