Here's how bitcoin's price rise could be fueled by job-stealing AI software
As the world continues to embrace artificial intelligence (AI), its impact on various sectors, including finance, is becoming increasingly evident. A recent analysis by NYDIG Research suggests that the future of bitcoin may depend less on technological advancements and more on the macroeconomic effects of AI, particularly concerning growth, employment, real interest rates, and central bank liquidity.
The Interplay Between AI and Bitcoin
According to Greg Cipolaro, the global head of research at NYDIG, the relationship between AI and bitcoin is primarily mediated through macroeconomic channels. The key factors influencing this relationship include:
- Economic Growth: AI has the potential to enhance productivity and stimulate economic growth.
- Employment: The introduction of AI may lead to job losses in certain sectors, affecting consumer demand.
- Real Interest Rates: Changes in productivity and employment can influence real interest rates, which have historically impacted bitcoin valuations.
- Liquidity: Central banks may inject liquidity into the economy in response to job losses, potentially benefiting bitcoin.
Potential Scenarios for Bitcoin’s Future
The future trajectory of bitcoin could unfold in various ways depending on how AI affects the labor market:
1. Job Losses and Economic Stabilization
If AI leads to significant job losses, policymakers may respond by lowering interest rates or increasing fiscal spending to stabilize the economy. This influx of liquidity could support bitcoin’s price, as it has historically tracked shifts in the global money supply.
2. Productivity Gains without Major Job Losses
Conversely, if AI boosts productivity and economic growth without causing substantial job losses, real interest rates may rise. In this scenario, central banks might maintain tight monetary policy, which could exert downward pressure on bitcoin valuations due to the increased opportunity cost of holding the asset.
Historical Context of Technological Disruption
The anxiety surrounding AI and job displacement echoes past technological disruptions. Historically, each wave of innovation has sparked fears of permanent job loss:
- The steam engine displaced manual labor in factories and agriculture.
- Electrification transformed entire industries.
- Computers and the internet automated clerical work and reshaped retail, media, and finance.
Despite these fears, aggregate demand did not collapse. Instead, productivity increased, and new industries emerged to absorb displaced workers, albeit with uneven transitions. For instance, cloud computing has created job opportunities that were unimaginable before the internet’s rise.
AI as a General-Purpose Technology
Cipolaro posits that AI, as a general-purpose technology, will require companies to redesign workflows and invest in complementary tools. Over time, this process is likely to expand productive capacity rather than diminish it. He notes:
“The implication is not that disruption will be painless, but that the equilibrium response to new technology has historically been integration, not obsolescence.”
This perspective suggests that society’s response to AI may mirror past technological shifts, ultimately leading to a net positive impact on economic growth.
The Role of Agentic Payments
Another potential driver for bitcoin adoption lies in the concept of agentic payments, where software autonomously conducts transactions without human intervention. This aligns with one of bitcoin’s original visions of enabling machine-to-machine payments. However, current incentives for widespread adoption are lacking, as traditional payment methods like credit cards offer rewards and short-term credit that stablecoins do not yet match.
Conclusion
In summary, the rise of AI presents both challenges and opportunities for bitcoin. The cryptocurrency’s future will largely depend on how society responds to the disruptions brought about by AI. If AI induces a deflationary shock that prompts central banks to increase liquidity, or if it drives productivity growth that raises real yields, bitcoin’s price will reflect those dynamics.
Frequently Asked Questions
AI impacts bitcoin’s price through macroeconomic channels, affecting growth, employment, real interest rates, and liquidity. Changes in these factors can either support or pressure bitcoin valuations.
Agentic payments refer to transactions conducted autonomously by software, allowing for machine-to-machine payments without human involvement. This concept aligns with bitcoin’s original vision.
Yes, AI has the potential to displace jobs in certain sectors. However, historical patterns suggest that while job losses may occur, new industries and opportunities often emerge, leading to overall economic growth.
Note: The relationship between AI and bitcoin is complex and multifaceted, requiring careful consideration of various economic factors.
