Bitwise Chief Investment Officer Matt Hougan argues that nearly every major economic outcome involving artificial intelligence leads to higher Bitcoin prices. Hougan outlined the argument in a note to investors published Wednesday. Hougan used the "Choose Your Own Adventure" books from Hougan's childhood to illustrate how different choices can lead to the same outcome.
Hougan said the range of economic outcomes facing investors is the widest Hougan has seen during Hougan's career. Hougan said pundits are divided between forecasts of AI doubling GDP and AI causing human extinction.
Hougan argued that AI-driven "superabundance" would sharply increase productivity and make intelligence-based work inexpensive. Hougan wrote that such abundance would benefit genuinely scarce assets as value moves toward things that cannot be reproduced, including waterfront land, gold and Bitcoin.
Hougan argued that an AI bubble collapse triggering a recession like 2008 would initially cause Bitcoin to fall alongside other risk assets. However, Hougan argued that a government bailout would follow, placing the probability at "nearly 100%". Hougan described the AI buildout as "the biggest infrastructure investment in the history of America" and argued that the resulting money creation would be enormous. Hougan wrote that this is precisely the environment Bitcoin was designed for.
Hougan's third scenario involves roughly 3% growth and 4% interest rates. Hougan argued that Bitcoin would continue attracting exchange-traded fund inflows, financial adviser adoption, and allocations to corporate and sovereign balance sheets as government debt increases.
BlackRock CEO Larry Fink warned this week that a halt to data center construction could push the United States into recession. The warning underscores how closely AI infrastructure and the broader economy have become connected.
Hougan stressed that Bitcoin would not rise continuously. Hougan noted that Bitcoin fell 50% within days during the 2020 COVID panic before rebounding roughly 20-fold. Hougan acknowledged that factors outside the broader economy could undermine the thesis, including a global government crackdown or the quantum-computing threat to older wallets. Quantum computing poses a growing risk even as researchers debate whether AI could break cryptocurrency encryption before quantum computers arrive. Hougan nevertheless concluded that major economic questions "matter less than most people think" for long-term investors because nearly every scenario still favors Bitcoin.