Bitcoin's role in crypto is being rewritten as AI and stablecoins take over

Original author: nikshep

Original source: Luffy, Foresight News

AI has stripped Bitcoin of its speculative risk profile, and USD-stablecoins have replaced Bitcoin as the universal circulating currency in the crypto market; the anchor that once quietly held together the fragmented crypto world is no longer Bitcoin. This is the most favorable structural shift in the crypto industry in years, yet very few understand the underlying logic.

This week, Bitcoin fell below $70,000, plunging approximately 45% from its October peak last year, leaving the market in despair. Spot Bitcoin ETFs experienced historic sustained outflows, marking the longest redemption period since their launch; while Bitcoin, touted as "digital gold," struggled, physical gold surged steadily upward.

But the market's regret is misdirected.

Even as Bitcoin continues its sluggish decline, an on-chain exchange unknown to most surpassed Coinbase in trading volume last year; a prediction market platform surged to a $20 billion valuation with annualized fee income reaching $365 million; privacy coins, once bearish targets, spiked 70% in a single week, outperforming Bitcoin during its sideways consolidation; and a long-overlooked underlying network now enables cross-chain private transfers, allowing users to move assets without even purchasing its native token.

The crypto industry has not declined with Bitcoin; crypto no longer needs Bitcoin.

At first glance, this may seem bearish, but it’s actually the opposite. Cryptocurrency is maturing, moving beyond its early wild phase where all assets were tied to Bitcoin’s price movements and driven by speculative trading, and evolving into a real-economy ecosystem denominated in U.S. dollars. Projects are now competing and thriving based on their fundamental strengths, while an entirely new layer of interconnected infrastructure is emerging to replace Bitcoin as the backbone connecting the entire crypto world.

This year, Bitcoin has lost its two core functions, which have been replaced by two new phenomena, creating vacant spaces in the existing ecosystem that are nurturing entirely new opportunities.

Bitcoin itself generates no cash flow, offers no profits, dividends, or interest, and its price movements are almost entirely driven by the volume of speculative capital—it is a classic liquidity reservoir: prices surge when liquidity is abundant and experience sharp corrections when capital tightens. In 2026, the AI sector emerged strongly, continuously diverting speculative funds that previously flowed into Bitcoin.

Global AI infrastructure investment is expected to reach $700 billion to $830 billion this year, roughly half the size of the entire U.S. investment-grade bond market, and could surge to $7 trillion by 2030. The AI industry contributes approximately 5% to U.S. GDP and has surpassed consumer spending as the primary driver of U.S. economic growth. Just NVIDIA alone accounts for 8% of the S&P 500’s market weight. AI is no longer just another sector—it has created a powerful capital magnet, reshaping the entire market’s capital pricing logic.

AI continuously drains Bitcoin across three key dimensions:

1) AI has captured the core narrative. Bitcoin’s former key selling point was “betting on an asymmetric opportunity for the future,” but AI boasts real revenue, continuously exploding market demand, and policy support from governments worldwide—allowing investors to gain exposure simply through index funds. Today, institutions classify Bitcoin alongside speculative stocks with no earnings fundamentals as the same category of risk assets. Within the same risk pool, one side offers tangible profit realization while the other relies purely on speculation; as a result, capital continuously flows out of Bitcoin, which is the root cause of the consecutive ETF redemptions.

2) AI requires funding. AI expansion relies heavily on debt financing, with major cloud providers issuing bonds at a scale exceeding last year’s total, and private credit directed at the AI industry surpassing $200 billion. The massive bond issuance by high-quality targets absorbs top-tier capital, leaving little available for higher-risk assets like Bitcoin.

3) AI is forcing a high-interest-rate environment. The AI industry has increased production costs for electricity, water, and storage chips, with price hikes across related categories generally ranging from 5% to double digits, pushing U.S. inflation to around 3.8%. The Federal Reserve is compelled to maintain a high benchmark interest rate of 3.50%–3.75%, leaving the market with virtually no expectation of rate cuts this year. AI not only competes with Bitcoin for capital but also locks in tight liquidity conditions at the macro level.

In addition, the hashpower sector is undergoing a disruption. Bitcoin mining and AI computing both convert electricity into computational power, competing for the same electrical resources, yet NVIDIA servers deliver far greater economic efficiency per unit of electricity than mining rigs. Last quarter, the combined cost for top publicly traded mining companies to mine one bitcoin was approximately $80,000, while the market price of bitcoin stood at just $70,000, resulting in a loss of $19,000 per coin. As a result, numerous mining companies are transitioning to AI computing: the industry has collectively signed over $70 billion in AI supercomputing contracts, with leading miners projecting AI revenue to account for up to 70% of total revenue by year-end. Core Scientific invested $10.2 billion to convert a 300-megawatt Bitcoin mining facility into an AI data center; Riot sold its Bitcoin holdings and leased its land to AMD. These entities, once the backbone securing the Bitcoin network, are now collectively exiting the space.

Compared to the quantum computing risks that many fear, AI brings about permanent structural change. Even if quantum computers in the future can break Bitcoin’s cryptographic algorithms, the industry can patch the protocol through post-quantum cryptographic standards and soft fork upgrades; but AI’s takeover of narratives, capital, and electricity resources is irreversible—no protocol upgrade can undo it. Bitcoin’s first core value has been completely undermined.

This is the most overlooked key change. Throughout the history of cryptocurrency development, Bitcoin has long served as the industry’s reserve asset and the primary intermediary for fiat on-ramps and off-ramps: fiat currency was first converted into Bitcoin, then exchanged for various altcoins, with all assets priced in BTC. External capital entering the market always began by purchasing Bitcoin—this was the root cause of the synchronized price movements across all assets in the market.

Stablecoins have severed this link. USDC transaction volume has surpassed USDT for the first time since 2019, with global stablecoin annual trading volume exceeding $30 trillion. Today, users’ deposit pathways have shifted to: fiat → USDC → various assets, with Bitcoin entirely removed from the circulation chain. This year, Polymarket relaunched with a native USD stablecoin pegged 1:1 to USDC reserves, and Hyperliquid now settles all platform transactions in USD. As the industry summarizes: stablecoins have become the foundational universal reserve currency for applications, with platforms simply adding their own branding on top.

Therefore, as market risk-off sentiment intensifies, the dominance chart shows Bitcoin’s share declining while stablecoins’ share rises. Funds are not leaving the crypto market; they are simply shifting within the industry toward dollar-denominated assets. Investors seeking exposure to the crypto sector no longer need to hold Bitcoin—dollar-stablecoins have taken over this role. All on-chain transactions operate in dollars, and on-chain capital flows can no longer generate buying pressure for Bitcoin. Bitcoin’s second core function has officially come to an end.

Leaving Bitcoin aside, today’s deployed products are no longer speculative assets tied to coin prices, but commercial projects with real cash flow.

The existence of Hyperliquid alone disproves the notion that "cryptocurrency is dying." This on-chain spot derivatives exchange matches the depth and speed of top centralized exchanges while allowing users to self-custody their assets. In the past year, its total trading volume reached $2.6 trillion—exceeding Coinbase’s $1.4 trillion—with annualized revenue of $800 million to $1.3 billion. The platform allocates 97% of its fees to repurchasing and burning the native HYPE token, resulting in annual buybacks of approximately $1.3 billion, equivalent to 7% of the token’s total market cap. The burn rate is 4–5 times that of Ethereum and 14 times that of Solana. The project received no venture funding; instead, it achieves a value loop through community airdrops and fee-based buybacks. Trading volume fluctuates solely based on trader demand, with no correlation to Bitcoin’s price movements—yet Hyperliquid’s scale grew even during Bitcoin’s bear market.

Another key player is Polymarket, the leading prediction market, valued at $20 billion, with annual trading volume of $250–300 billion, annualized fee revenue of $365 million, and daily active users that have grown 2.5 times over five months; it issues a USD-backed stablecoin, and its native token is set to launch soon. Polymarket’s platform enables betting on major elections, sporting events, and global occurrences, with demand independent of Bitcoin’s price movements.

Projects like these now apply traditional corporate valuation logic—revenue, user base, and valuation multiples—marking the industry’s maturation.

If Bitcoin’s transparent and monitored ledger was the default of the past, then privacy is the new upgrade. This is money with self-sovereignty and untraceability that can only be achieved on-chain. But the way to acquire this currency is fundamentally different—and it’s precisely this difference that matters.

Self-custodial privacy. Zcash (ZEC) surged 70% in a single week, with its total market cap nearing $10 billion—a more than 45-fold increase from its 2024 low—outperforming the market during Bitcoin’s consolidation phase. Strong fundamentals underpin this rally: the volume of private transactions has risen from 11% last November to 30%, and most privacy assets are not returned to the public chain, leading to a continuously shrinking circulating supply amid rising demand. Regulatory pressures once seen as a setback have instead validated the value of privacy coins: Robinhood has launched ZEC spot trading, and Grayscale has filed the industry’s first privacy coin spot ETF. Privacy has evolved from a niche use case into a long-term investment thesis. However, acquiring ZEC requires purchasing the token separately and switching to its native blockchain.

Universal cross-chain privacy. With NEAR, users don’t need to purchase privacy coins or migrate assets across chains. Leveraging on-chain signature technology, a single NEAR account can directly control native assets on Bitcoin, Ethereum, and Solana—without wrapped tokens or cross-chain bridge risks—powered by a decentralized multi-party computation network for key custody. Combined with the Confidential Intent Protocol, users can privately transfer assets on any public chain, with full concealment of counterparties and routing information, executed via privacy sharding. User assets remain on their original public chains, while privacy becomes a modular, universal foundational service.

This model is more disruptive than single privacy coins—users don’t need to hold ZEC or leave the native Ethereum or Bitcoin ecosystems; privacy becomes an inherent feature of all transactions, not just a property of dedicated assets.

Looking across the entire crypto landscape: the industry is no longer converging but instead embracing multi-chain coexistence with continuously expanding ecosystems; USD stablecoins have become the foundational universal currency, and AI agents are emerging as new participants that autonomously hold assets, invoke APIs, and transfer funds.

The vast multi-chain and agent ecosystem urgently requires interconnected infrastructure; for the past decade, this role was fulfilled by Bitcoin; today, it is being filled by a new coordination and privacy layer: cross-chain signing, USD settlement, private transactions, and autonomous agent execution.

NEAR is targeting this space. It enables AI agents to settle transactions in USDC with privacy, leveraging hardware security zones for confidential computation, and transforming its signature network into the key management hub for the agent economy, providing users and bots with chain-agnostic, privacy-preserving services.

Another product in the same space is Venice, which focuses on privacy-centric AI applications and has attracted a large base of native Web2 users. Staking the platform’s token, VVV, allows users to share in AI inference revenues. The project has burned over 40% of the token’s circulating supply through product buybacks, with demand driven by AI usage. The token’s price movement is uncorrelated with Bitcoin.

The new industry focus has clearly taken shape: it is no longer about individual cryptocurrencies, but about underlying infrastructure, with various real-world projects building on this infrastructure to create tangible value.

Put them together: The dollar is the industry-wide circulating cash, while project tokens like HYPE, POLY, ZEC, NEAR, and VVV represent equity stakes in their respective companies; the privacy-focused cross-chain layer serves as the foundational infrastructure connecting the entire industry, and Bitcoin is merely one segment within this ecosystem. AI is capturing macro speculative capital, physical gold is absorbing safe-haven demand, and stablecoins dominate the role of reserve currency—under this triple pressure, Bitcoin has lost its former shine.

Over the past decade, the entire industry focused solely on Bitcoin’s price movements, with all altcoins following its trajectory—this era has come to an end. Today, evaluating projects follows the same standards as traditional real-world companies: whether they generate real revenue, have active users, and whether their tokens can capture the project’s growth value.

Stop using Bitcoin’s price fluctuations to judge the crypto industry’s health. Focus instead on project revenues, user growth, and foundational infrastructure that connects entire chains: infrastructure enabling privacy-preserving cross-chain transfers, USD settlements, and human-machine interoperable cross-chain solutions.

AI has drawn away macro speculative capital, the dollar has taken over the reserve currency status, and a brand-new underlying protocol has taken on the critical responsibility of industry-wide interoperability. Bitcoin falling below $70,000 is not the end of the crypto industry—it’s a historic turning point where crypto fully breaks free from Bitcoin’s constraints.