(Any views expressed in the below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)
I won’t question your genius especially when you say you won’t be in the field I just got off of the trucking plantation and decided to become DENMARK VESSY THE ONLY THING IM NOT BURNING ANYTHING OR KILLING ANYBODY IM JUST TRYING TO CATCH ON AND I WILL NEVER CATCHUP Heaven if I did I would have invested in Bitcoin in 2009 Well Catching on 2023 Have any tips for a novice that being in Catching on Layman’s street or for a ex modern day slave
It doesn't invalidate your point, but note that, per the late Julian Simon, terrestrial resources, gold included, are not finite in any meaningful sense.
“Terrestrial”, per Simon. Yes, also abundant once we leave the earth. It will be interesting to discover when and how asteroid mining becomes more economical than earthbound mining. I hope I live to see it.
Thanks for sharing this. Not sure I agree with the argument that electricity sets the price of bitcoin though. The difficulty adjustment invalidates that I would have thought.
It very much does set the baseline price of bitcoin. The difficulty adjustment only determines if you have to use more or less electricity to produce bitcoin. The market establishes the premium over that baseline price.
It costs about $17-18K to produce one BTC right now, on average for a modern ASIC. It was about $16-17K last November. The difficulty adjustment has gone way up since then, hence the rise in production cost. Also, it was not a coincidence that $16K was the cycle bottom. The concept of energy gravity really does a great job of explaining it. I realized I didn't understand anything about the price of bitcoin until I understood energy gravity.
Lovely price estimate matrix, but you gotta juice those numbers Arthur!
Give us a "fiat money printed" multiplier so we can proselytize more people!
If Papa Powell needs to print his way into the history books, some of those freshly minted monies will find a home in Bitcoin, so give us a random multiplier for that to make us feel extra good!
Of course there is no official base price. What I'm saying is the cost of production sets the general baseline price in practice. This is how it works out in the market. The price never strays very far below the current cost of production. The last three bear bottoms for BTC are right around what the cost of production was. For example, last November the price bottomed at 15800 and stayed right around 16-17K for weeks; the cost of production at that time- 16-17K. Same scenario in 2018 and 2014. Why it works out that way- I imagine after complete seller capitulation the only sellers left are miners, and they're not going to sell for less than it costs to make a bitcoin. So the price stabilizes around the breakeven. That's just my guess, but what is a fact from the price history is that after a crash bitcoin will rebound around that cost of production. That's why I say it basically forms a baseline price more or less. And since the cost of production is essentially the cost of the electricity it takes to mine a coin, that's why I say the price is related to the cost of electricity. And since people most of the time are paying more than the cost of production in the market, that's why I say they are basically paying a premium that represents the value of the network itself.
Bitcoin NEVER strays very far below the cost of production. If that isn't forming some kind of baseline in practice, than what would you call that? After the halving next year, it will cost around 35K to mine a bitcoin, I'm guessing. Therefore we will not see the price of BTC stay under 35K for much longer. A year from now if we're still under 30K then go ahead and call me an idiot. But I'll bet I'm right. This is why the price of bitcoin continues to increase. Along with the conviction of HODLers who refuse to sell.
If we proceed from the fact that the main emission of bitcoins is controlled by US citizens, the most advanced AIs are controlled by US corporations, and bitcoin was admitted to the US exchanges, then the assumption of why the author campaigns for bitcoin in the article is understandable. It is not clear why US corporations that control AI and earn dollars that are problem-free for them will need bitcoin with its crazy and unpredictable volatility.
He's postulating that eventually AI will control its own financial decisions and so will not be earning money for some corporation but earning money for itself. And bitcoin would logically be the currency of choice for such AI.
AI does not have its own intentions and is not an intelligent creature, like humans. Why should the owners of AI endow it with intentions to earn money, if they already create AI to earn money and control the income from the use of AI by users themselves? Childhood fantasies about the rise of the machines - is this the only reason to justify the possible hype on bitcoin with the current hype on the topic of AI?
Well, he's also saying it doesn't really matter if that scenario ever plays out as long as he can get people to believe it possibly could happen, and therefore promote bitcoin in the process.
Bitcoin doesn't need any AI hype to inflate another bubble. Another parabolic bull run is coming soon, definitely within the next 18 months but probably much sooner. Over $100K and then will crash back down to probably under $40K in 2026.
The price of bitcoin is expressed relative to fiat currencies and changes only due to the imbalance of supply and demand in the moment. The price of bitcoin is not related to electricity. No one can guarantee the possibility of buying electricity or anything. Any AI is a dead algorithm that can simulate signs of life, but cannot be alive.
Is Slow, Expensive, Partially Anonymous Bitcoin the Only Crypto Suitable for AI? Arthur, are you serious?
Anything that is inflatable like fiat it is unsuitable like fiat. That leaves you with one viable option, Bitcoin. Doesn't even matter if anyone likes it or not.
There are dozens of cryptocurrency projects that work faster and cheaper than bitcoin with crutches in the form of a lightning network. It is beneficial for Arthur to advertise bitcoin, which is not only worse, but also takes away electricity that can be used to run AI. Arthur's arguments look pathetic and unreasonable. The only justification for his article is that he knows something about the future bitcoin pump and is trying to give a hint to his readers with very strange justifications for this pump.
The price of BTC is totally related to the price of electricity. The market only determines the premium to that baseline price. Google energy gravity, if you want to learn. Otherwise you're just making statements from a position of a lack of knowledge.
And he's stating it's the only crypto suitable because it's the only crypto that's truly decentralized, truly censorship resistant AND still totally secure. All three of those things go together. If those things are paramount to an AI, then they will pick BTC. Of course, we can't know if those criteria would be super important to an AI, Hayes is just hypothesizing.
From 2021-2022, the price of bitcoin has fallen by 77%. Have we on the planet at this time so the price of electricity fluctuated? :) The 77% dump is all you need to know about the relationship of prices with electricity and the price of bitcoin. :)
Bitcoin is decentralized, but all its decentralization completely ends when you exchange any tokens for fiat money through a centralized exchange. Exchanges are also running out of censorship resistance. You tell about security to those people from whom bitcoin was stolen by hackers or they lost tokens due to errors, or because of a crypto-exchange scam. There are no such irreversible problems when working with banks. AI itself will never choose anything, and large corporations that own AI need fiat to pay for the same electricity.
Dumps like that 77% happen every cycle because the market price gets too far ahead of the price of producing a bitcoin. The premium people are willing to pay in a euphoric market gets all out of whack and comes crashing back down toward the price of production. In November of last year it cost about $16-17K to produce a bitcoin- where did the price eventually settle at the bottom? Not $10K or $5K like many people were calling for who think price is wholly dependent on the market. After a parabolic bull run the price will always eventually crash back down toward the price of production- it will happen again this cycle. Then the market will reset. The price of electricity can remain relatively stable, but the cost of production will continue to increase as long as the difficulty continues to increase. The constant increase in difficulty will continue to drive the price up over time because even if the price of electricity doesn't change, miners have to use more and more electricity to produce a bitcoin. Once you understand this, then you understand when to buy bitcoin and when to sell it.
No, it does not depend only on speculative demand. The baseline price of a bitcoin depends on the cost of electricity to mine it, which is the rate times the amount, the amount being of more importance because it is the variable that changes more over time, as the network difficulty increases over time. Speculative demand determines the premium over the baseline price. Right now, it costs about $18k to mine a bitcoin, and at this minute speculation is adding $11500 to that. Both components determine the price. Cost of production plus speculation on how much the network is worth, which nobody knows yet, hence the constant price discovery.
Jason, there is no base price for a BTC/USD pair. It does not exist in nature. If you know how miners place orders in the order book, tell us about the base price for BTC/USD for the next 30 days. :) If you don't know, then filling orders in the glass for an outside observer is an absolutely random process, which is regulated by speculative demand.
But why would an AI (based by pure logic) choose a system that directly competes to their “food” (in your words)? Your explanation on “AIs Gotta Eat” is the only debunk needed for "Bitcoin being their choice."
You say that: “An AI requires two critical resources to exist and persist: data and compute power.”
While you deliberately ignore the simple true that BTC, not only requires the same two critical resources to exist, persist and become better; but that Bitcoin's game theory create predatory incentives against any other system competing for the same resources (AI).
AI's choosing Bitcoin as their currency would be a self-destructive choice.
It would be something similar to a human being lost in the forest picking the biggest predator in this forest to be their companion. While knowing that this huge predator has all the incentives (by its pure nature/instinct) to eat the human being when he is sleeping.
That said. I say that you are also deliberately ignoring other Censorship Resistant and Scarce decentralized digital money; that don't directly compete to AI, because they have a more efficient use of data + energy - by being more data/energy efficient than Bitcoin itself.
BTC doesn't exists in a vacuum. You should check on Nano (XNO), for example.
Censorship resistant + Scarce + Energy/Data efficient. The true win.
An AI supporting Bitcoin practically guarantees that humans will endeavor to continue producing electricity, which would also be used to sustain the AI. For an AI to continue expanding, it will necessarily require more electricity, which can be bolstered by an expanding and energy-hungry system like bitcoin.
Your argument is akin to suggesting that humans eat all cows and chickens on earth, because they are food and humans need food. The reason we don't eat all cows and chickens on earth is because we require *more* food over time, and cows and chickens reproduce to provide that for us. Same idea with an AI: It requires more energy and Bitcoin is a system used to produce more energy over time.
Nano guys can’t see the forest for the trees! It’s hard for them to wrap their heads around all the ways Bitcoin incentives the investment and the development of abundant, renewable energy resources around the world.
The currency has to maintain its purchasing power in energy terms. XNO hasn’t even kept up with inflation, let alone the price of energy. The AI would be bleeding purchasing power by using something like XNO.
Well said. The price of BTC keeps rising over time because the amount and cost of electricity to produce it keeps rising. It's what drives the price up. I'm not sure a lot of people understand that. A coin designed to use less energy provides a lot less incentive for its value to increase, it kind of defeats the purpose, it seems to me.
AI & Bitcoin necessitate the same resources and that is exactly why they will co-exist, regardless of their livelihood or consciousness. I’ve heard of bitcoin mining as a viable alternative for heating a home in cold countries. Baseline price of BTC is probably around 20k now, speculation price is ever increasing with the large entities colluding and the halving coming soon. Different consensus mechanisms will be available for AI data transactions, but the truly universal one would be Bitcoin for many reasons. Until quantum computing or distributed ledger technology catch an extra scent of disruptive innovation, I believe Bitcoin will add lots of value and use cases to society. It comes at a cost. Energy. So let’s spend it wisely !
I won’t question your genius especially when you say you won’t be in the field I just got off of the trucking plantation and decided to become DENMARK VESSY THE ONLY THING IM NOT BURNING ANYTHING OR KILLING ANYBODY IM JUST TRYING TO CATCH ON AND I WILL NEVER CATCHUP Heaven if I did I would have invested in Bitcoin in 2009 Well Catching on 2023 Have any tips for a novice that being in Catching on Layman’s street or for a ex modern day slave
Insightful essay - thanks for posting.
It doesn't invalidate your point, but note that, per the late Julian Simon, terrestrial resources, gold included, are not finite in any meaningful sense.
He said that in the article. Gold may be scarce on earth, but it’s abundant in the universe.
“Terrestrial”, per Simon. Yes, also abundant once we leave the earth. It will be interesting to discover when and how asteroid mining becomes more economical than earthbound mining. I hope I live to see it.
substack and really not practical to translate with the google extension I'm really fed up I don't understand why you left medium
poor guy, hope you get that figured out!
Medium kept censoring his posts
then he should use mirror.xyz it's much better than substack and besides it's crypto
Thanks for sharing this. Not sure I agree with the argument that electricity sets the price of bitcoin though. The difficulty adjustment invalidates that I would have thought.
It very much does set the baseline price of bitcoin. The difficulty adjustment only determines if you have to use more or less electricity to produce bitcoin. The market establishes the premium over that baseline price.
It costs about $17-18K to produce one BTC right now, on average for a modern ASIC. It was about $16-17K last November. The difficulty adjustment has gone way up since then, hence the rise in production cost. Also, it was not a coincidence that $16K was the cycle bottom. The concept of energy gravity really does a great job of explaining it. I realized I didn't understand anything about the price of bitcoin until I understood energy gravity.
But aside from that it seems like a fascinating topic to think about
Very interesting narrative, I think this needs to be explored more broadly
Substance !
Lovely price estimate matrix, but you gotta juice those numbers Arthur!
Give us a "fiat money printed" multiplier so we can proselytize more people!
If Papa Powell needs to print his way into the history books, some of those freshly minted monies will find a home in Bitcoin, so give us a random multiplier for that to make us feel extra good!
Of course there is no official base price. What I'm saying is the cost of production sets the general baseline price in practice. This is how it works out in the market. The price never strays very far below the current cost of production. The last three bear bottoms for BTC are right around what the cost of production was. For example, last November the price bottomed at 15800 and stayed right around 16-17K for weeks; the cost of production at that time- 16-17K. Same scenario in 2018 and 2014. Why it works out that way- I imagine after complete seller capitulation the only sellers left are miners, and they're not going to sell for less than it costs to make a bitcoin. So the price stabilizes around the breakeven. That's just my guess, but what is a fact from the price history is that after a crash bitcoin will rebound around that cost of production. That's why I say it basically forms a baseline price more or less. And since the cost of production is essentially the cost of the electricity it takes to mine a coin, that's why I say the price is related to the cost of electricity. And since people most of the time are paying more than the cost of production in the market, that's why I say they are basically paying a premium that represents the value of the network itself.
Bitcoin NEVER strays very far below the cost of production. If that isn't forming some kind of baseline in practice, than what would you call that? After the halving next year, it will cost around 35K to mine a bitcoin, I'm guessing. Therefore we will not see the price of BTC stay under 35K for much longer. A year from now if we're still under 30K then go ahead and call me an idiot. But I'll bet I'm right. This is why the price of bitcoin continues to increase. Along with the conviction of HODLers who refuse to sell.
If we proceed from the fact that the main emission of bitcoins is controlled by US citizens, the most advanced AIs are controlled by US corporations, and bitcoin was admitted to the US exchanges, then the assumption of why the author campaigns for bitcoin in the article is understandable. It is not clear why US corporations that control AI and earn dollars that are problem-free for them will need bitcoin with its crazy and unpredictable volatility.
He's postulating that eventually AI will control its own financial decisions and so will not be earning money for some corporation but earning money for itself. And bitcoin would logically be the currency of choice for such AI.
AI does not have its own intentions and is not an intelligent creature, like humans. Why should the owners of AI endow it with intentions to earn money, if they already create AI to earn money and control the income from the use of AI by users themselves? Childhood fantasies about the rise of the machines - is this the only reason to justify the possible hype on bitcoin with the current hype on the topic of AI?
Well, he's also saying it doesn't really matter if that scenario ever plays out as long as he can get people to believe it possibly could happen, and therefore promote bitcoin in the process.
I bet that AI hype will not be able to be used to inflate another bubble in the crypt. :)
Bitcoin doesn't need any AI hype to inflate another bubble. Another parabolic bull run is coming soon, definitely within the next 18 months but probably much sooner. Over $100K and then will crash back down to probably under $40K in 2026.
The price of bitcoin is expressed relative to fiat currencies and changes only due to the imbalance of supply and demand in the moment. The price of bitcoin is not related to electricity. No one can guarantee the possibility of buying electricity or anything. Any AI is a dead algorithm that can simulate signs of life, but cannot be alive.
Is Slow, Expensive, Partially Anonymous Bitcoin the Only Crypto Suitable for AI? Arthur, are you serious?
Anything that is inflatable like fiat it is unsuitable like fiat. That leaves you with one viable option, Bitcoin. Doesn't even matter if anyone likes it or not.
You need to learn more about the lightning network then. What Arthur describes in the article is already happening as proof of concept.
See here
https://twitter.com/documentingbtc/status/1677402198458679296?s=61&t=YZDbj0ACzq_AFqRsx404cw
There are dozens of cryptocurrency projects that work faster and cheaper than bitcoin with crutches in the form of a lightning network. It is beneficial for Arthur to advertise bitcoin, which is not only worse, but also takes away electricity that can be used to run AI. Arthur's arguments look pathetic and unreasonable. The only justification for his article is that he knows something about the future bitcoin pump and is trying to give a hint to his readers with very strange justifications for this pump.
The price of BTC is totally related to the price of electricity. The market only determines the premium to that baseline price. Google energy gravity, if you want to learn. Otherwise you're just making statements from a position of a lack of knowledge.
And he's stating it's the only crypto suitable because it's the only crypto that's truly decentralized, truly censorship resistant AND still totally secure. All three of those things go together. If those things are paramount to an AI, then they will pick BTC. Of course, we can't know if those criteria would be super important to an AI, Hayes is just hypothesizing.
From 2021-2022, the price of bitcoin has fallen by 77%. Have we on the planet at this time so the price of electricity fluctuated? :) The 77% dump is all you need to know about the relationship of prices with electricity and the price of bitcoin. :)
Bitcoin is decentralized, but all its decentralization completely ends when you exchange any tokens for fiat money through a centralized exchange. Exchanges are also running out of censorship resistance. You tell about security to those people from whom bitcoin was stolen by hackers or they lost tokens due to errors, or because of a crypto-exchange scam. There are no such irreversible problems when working with banks. AI itself will never choose anything, and large corporations that own AI need fiat to pay for the same electricity.
Dumps like that 77% happen every cycle because the market price gets too far ahead of the price of producing a bitcoin. The premium people are willing to pay in a euphoric market gets all out of whack and comes crashing back down toward the price of production. In November of last year it cost about $16-17K to produce a bitcoin- where did the price eventually settle at the bottom? Not $10K or $5K like many people were calling for who think price is wholly dependent on the market. After a parabolic bull run the price will always eventually crash back down toward the price of production- it will happen again this cycle. Then the market will reset. The price of electricity can remain relatively stable, but the cost of production will continue to increase as long as the difficulty continues to increase. The constant increase in difficulty will continue to drive the price up over time because even if the price of electricity doesn't change, miners have to use more and more electricity to produce a bitcoin. Once you understand this, then you understand when to buy bitcoin and when to sell it.
The price of bitcoin against fiat currencies depends only on speculative demand, and not on electricity prices.
No, it does not depend only on speculative demand. The baseline price of a bitcoin depends on the cost of electricity to mine it, which is the rate times the amount, the amount being of more importance because it is the variable that changes more over time, as the network difficulty increases over time. Speculative demand determines the premium over the baseline price. Right now, it costs about $18k to mine a bitcoin, and at this minute speculation is adding $11500 to that. Both components determine the price. Cost of production plus speculation on how much the network is worth, which nobody knows yet, hence the constant price discovery.
Jason, there is no base price for a BTC/USD pair. It does not exist in nature. If you know how miners place orders in the order book, tell us about the base price for BTC/USD for the next 30 days. :) If you don't know, then filling orders in the glass for an outside observer is an absolutely random process, which is regulated by speculative demand.
Great exercise! Thanks!
Censorship resistance: checks!
Scarcity: checks!
But why would an AI (based by pure logic) choose a system that directly competes to their “food” (in your words)? Your explanation on “AIs Gotta Eat” is the only debunk needed for "Bitcoin being their choice."
You say that: “An AI requires two critical resources to exist and persist: data and compute power.”
While you deliberately ignore the simple true that BTC, not only requires the same two critical resources to exist, persist and become better; but that Bitcoin's game theory create predatory incentives against any other system competing for the same resources (AI).
AI's choosing Bitcoin as their currency would be a self-destructive choice.
It would be something similar to a human being lost in the forest picking the biggest predator in this forest to be their companion. While knowing that this huge predator has all the incentives (by its pure nature/instinct) to eat the human being when he is sleeping.
That said. I say that you are also deliberately ignoring other Censorship Resistant and Scarce decentralized digital money; that don't directly compete to AI, because they have a more efficient use of data + energy - by being more data/energy efficient than Bitcoin itself.
BTC doesn't exists in a vacuum. You should check on Nano (XNO), for example.
Censorship resistant + Scarce + Energy/Data efficient. The true win.
But there are others.
An AI supporting Bitcoin practically guarantees that humans will endeavor to continue producing electricity, which would also be used to sustain the AI. For an AI to continue expanding, it will necessarily require more electricity, which can be bolstered by an expanding and energy-hungry system like bitcoin.
Your argument is akin to suggesting that humans eat all cows and chickens on earth, because they are food and humans need food. The reason we don't eat all cows and chickens on earth is because we require *more* food over time, and cows and chickens reproduce to provide that for us. Same idea with an AI: It requires more energy and Bitcoin is a system used to produce more energy over time.
Nano guys can’t see the forest for the trees! It’s hard for them to wrap their heads around all the ways Bitcoin incentives the investment and the development of abundant, renewable energy resources around the world.
Excellent rebuttal. So many people don't understand the relationship between bitcoin and electricity.
The currency has to maintain its purchasing power in energy terms. XNO hasn’t even kept up with inflation, let alone the price of energy. The AI would be bleeding purchasing power by using something like XNO.
Well said. The price of BTC keeps rising over time because the amount and cost of electricity to produce it keeps rising. It's what drives the price up. I'm not sure a lot of people understand that. A coin designed to use less energy provides a lot less incentive for its value to increase, it kind of defeats the purpose, it seems to me.
AI & Bitcoin necessitate the same resources and that is exactly why they will co-exist, regardless of their livelihood or consciousness. I’ve heard of bitcoin mining as a viable alternative for heating a home in cold countries. Baseline price of BTC is probably around 20k now, speculation price is ever increasing with the large entities colluding and the halving coming soon. Different consensus mechanisms will be available for AI data transactions, but the truly universal one would be Bitcoin for many reasons. Until quantum computing or distributed ledger technology catch an extra scent of disruptive innovation, I believe Bitcoin will add lots of value and use cases to society. It comes at a cost. Energy. So let’s spend it wisely !