Bitwise CIO argues bitcoin will benefit whether AI booms or busts
Bitwise Chief Investment Officer Matt Hougan said bitcoin (BTC) could ultimately benefit whether AI drives an economic boom, its investment bubble bursts, or growth remains modest.In a Wednesday note to clients, Hougan described what an AI crash might look like. In that scenario, data-center borrowers would default, insurance companies holding billions in AI-linked bonds would come under pressure, and the economy would enter a recession reminiscent of 2008, he said. Hougan put the odds of a subsequent government bailout in that scenario at "nearly 100%," given the geopolitical importance of AI, and would expect bitcoin to recover after an initial selloff to "rally hard" as money supply surges."Because the AI buildout is the biggest infrastructure investment in the history of America, the resulting bailout is the biggest as well," he wrote.Hougan sees a similar outcome if the Fed raises rates enough to cause a recession. If it doesn't hike and inflation rises instead, he expects more investors to turn to bitcoin as a store of value.What if the AI boom continues?Hougan used the term "superabundance" for a world where AI sends productivity and GDP soaring. Software, legal work, design, pharmaceuticals, and diagnostics would all become much cheaper, he said. Waterfront land, great art, gold, and bitcoin would still be scarce, however, and Hougan expects their value to rise.He also outlined a third scenario in which the economy "muddles along" with 3% growth and 4% interest rates, AI-linked debt is serviced, and the economy experiences "something approaching a soft landing." In this outcome, bitcoin's existing sources of demand, including more ETF flows, more adoption from advisors, and more corporate and sovereign balance sheet allocations, would still be in place, he said. "Bitcoin wins by showing up."A 'contrarian bet'In June, Hougan called crypto a "contrarian bet" while investors favored AI stocks, with Bitwise Senior Investment Strategist Juan Leon telling The Block in July that bitcoin's price floor was rising despite the AI boom and regulatory delays."For bitcoin investors, what happens with AI doesn't matter over the long term," Hougan said on Wednesday. "As I see it, every path ultimately ends with bitcoin higher."However, bitcoin would not necessarily rise in a straight line, he warned, citing its 50% decline in a matter of days during the COVID panic in early 2020, and some of his scenarios involve a difficult stretch before a recovery. Quantum computing threats, a coordinated government crackdown, or Western governments returning to fiscal austerity could also undermine his thesis."I think those are unlikely, but they're not impossible," he wrote.