Hogan acknowledges that it is impossible to anticipate all possible economic scenarios, so he recommends examining each scenario and considering where they might lead.
Rapid advancements in AI can enable ultra-high-performance data centers, but Bitcoin will still be able to strengthen its position, believes Hogan. As AI becomes more accessible and affordable, investors will prefer scarce assets such as gold and Bitcoin, hopes the Bitwise executive.
Considering a negative scenario—the collapse of the AI market—Hogan suggested that high-growth assets would be forced into sell-offs, and the global economy could slip into recession. Data centers and AI-related insurance companies holding billions of dollars in bonds might default, replicating the scenario of the 2008 financial crisis, the investment director suggested.
Under this scenario, Bitcoin could decline alongside other risk assets. However, U.S. authorities will likely move quickly to intervene: Hogan forecasts lower interest rates, and the U.S. Federal Reserve will begin printing more money “to save the economy.” Investors will then seek to shift their capital into riskier assets, including cryptocurrencies, the executive suggested. If the key interest rate does not rise and inflation remains high, investors will likely still buy Bitcoin to preserve their savings.
"Given the geopolitical significance of AI, the likelihood of government support is close to 100%. And here’s what, in my view, will happen next: the money supply will surge sharply, and Bitcoin will climb rapidly," wrote Horgan.
If the U.S. gross domestic product grows at 3% annually with loan interest rates at 4% per year, Hogan believes Bitcoin will continue to rise gradually. Inflows of capital into cryptocurrency exchange-traded funds (ETFs), direct Bitcoin purchases by major corporations, and rising government debt should increase demand for the first cryptocurrency—something Hogan believes is possible even without a revolutionary breakthrough in AI.
There are many possible paths for the economy, and all of them lead to Bitcoin. One of three things will happen: 1) the money supply and credit volume grow faster than the real economy, benefiting assets with limited supply; 2) the economy becomes so productive that scarce assets begin to be valued more highly; or 3) no major changes occur, but Bitcoin continues to increase its market share,” said the investment director at Bitwise.
He clarified: Bitcoin doesn't have to rise in a straight line; sometimes, growth occurs in waves. At the beginning of 2020, amid panic over the COVID-19 coronavirus, Bitcoin dropped by 50% in just a few days, then recovered and rose approximately 20-fold.
According to Hogan, the onset of a bull market in cryptocurrency could accelerate due to asset tokenization and the use of blockchain in traditional finance. Investments in stocks of cryptocurrency companies may also contribute to the growth of the crypto market.