TL;DR
- Matt Hougan believes Bitcoin could benefit from both an AI-driven economic boom and the bursting of an artificial intelligence investment bubble.
- If AI investments trigger a financial crisis, Hougan expects monetary stimulus and interest rate cuts to support Bitcoin’s recovery after an initial selloff.
- Under a moderate-growth scenario, institutional demand, ETFs, and corporate purchases could continue supporting BTC.
Matt Hougan, Chief Investment Officer at Bitwise, believes Bitcoin could rise over the long term regardless of how the artificial intelligence (AI) boom unfolds, even if investments in the technology ultimately trigger a financial crisis.
In a note to clients, Hougan examined different economic scenarios and their potential implications for BTC, ranging from a sharp increase in productivity to a recession caused by AI-related debt.
Hougan warned that Bitcoin could experience substantial declines during a crisis, although he believes government and central bank responses would ultimately support its recovery.
Bitcoin Could Recover After an AI Bubble Bursts
In the worst-case scenario, Hougan suggests that companies involved in data center development could default on their debt, causing losses for insurers exposed to AI-related bonds.
A crisis of that magnitude could trigger a recession comparable to the one in 2008. However, he estimates that the probability of a government bailout would be close to 100%, given the strategic importance of AI.
According to his analysis, Bitcoin could initially fall before staging a strong recovery as the money supply expands and interest rates potentially decline.
He also considers a scenario in which the Federal Reserve maintains an accommodative monetary policy and inflation rises, prompting more investors to turn to BTC as a store of value.
Economic Growth Could Also Benefit BTC
Hougan believes successful AI development could substantially increase productivity and reduce the cost of numerous services.
In that scenario, scarce assets such as gold and Bitcoin could appreciate even as other goods and services become cheaper.
He also examined an economy experiencing 3% growth and 4% interest rates, without a major financial crisis.
Under those conditions, demand for BTC could remain supported by ETF inflows, institutional adoption, and purchases by companies and governments.
Hougan acknowledged that his analysis faces certain risks, including advances in quantum computing, a coordinated regulatory crackdown, or fiscal austerity policies.
He also recalled that Bitcoin lost approximately 50% of its value in just a few days during the March 2020 crisis, meaning a favorable long-term outlook does not rule out periods of steep declines.