Impact of AI on Capital Markets

The dynamic in the capital markets is you can think of Bitcoin as like risk capital squared.

So normally, things that are good for risk are really good for Bitcoin,

like if interest rates drop suddenly,

and things that are bad for risk are really bad for Bitcoin.

The difference between equity capital and digital capital

is right now the equity capital markets are bifurcating into the winners, the AI companies,

the SpaceXs, the Googles, the open AIs, the Anthropics, the Microsoft,

companies that are digital monopolies with a distribution channel of a billion people that

have that tech, and they're like trillion-dollar companies, right?

So if you look at the S&P, it's like, well, you've got like those trillion-dollar companies,

and then you've got the have-nots, which are hotel chains, and airlines, and retailers,

and traditional cash cows, and even software companies, traditional software-as-a-service

companies. Investors are looking at those and saying, well,

those are all not growth businesses or their targets.

And so there's an AI bubble and we're living right now

in the summer of the AI bubble or AI boom.

$500 billion of capital is being slurped

into the AI complex right now.

Google's raising 80 billion, SpaceX has got the,

the SpaceX IPO is the biggest IPO

in the history of the world.

It's actually happening right now as we speak.

Yeah.

And so, and so when you have SpaceX saying,

we want 80 billion and Anthropic wants 80 billion

and OpenAI wants 80 billion and Google wants 80 billion

and all of a sudden Amazon's like, yeah,

well we want 20, 30 billion and then Meta's like,

well, you know, we think we may want 30, 40 billion.

That's the public stuff in the equity market.

And then behind the scenes, they're all pulling

in hundreds of billions of dollars

of private credit to fund these data centers.

So what you have is a AI driven black hole.

It's orbiting through the capital solar system, massive gravitational pull, it's pulling credit money, it's pulling equity money.

It turns out that it has pulled 10, 15, 20 billion dollars of capital out of the crypto economy.

You know, institutional investors have sold 5 to 10 billion dollars of ETFs and things like that.

So it's pulling some capital, but of course Bitcoin is not funding all of this, Bitcoin is like 2% or 3% of the capital.

That capital is being pulled into these hot deals.

Every banker on Wall Street is out marketing the SpaceX deal, marketing the Anthropic deal.

And so then the capital investors think, well, I'll take my mature money that's been invested in the same business idea for 3 years, 5 years.

Let's roll it into this hot new deal, let's get in on it, I know I'm going to get a 10 or 20% pop.

Because the bankers, you know, if they're going to do the deal, they're going to have

to make the deal pop 10 or 20 percent.

So I'm going to get in on the deal, and then I'll get out again.

And so I think capital is being pulled into all these hot deals.

They're all competing for capital.

When we get through, you know, IPO summer or AI summer, I think a lot of that hot money

will come back into Bitcoin because Bitcoin is now undervalued.

If you want to look at Bitcoin, you can look at the premium or discount to the 200 week

moving average, which is kind of like the book value of Bitcoin.

You look at the realized price and what you can see is when the market's hot, it trades

at 100 percent to 200 percent premium.

And then when the market chills and the leverage comes out, it trades at that number or maybe

at a slight discount.

And so what you're seeing right now is this capital cycle.

The more Bitcoin, you know, has capital drain out of it, the more compelling the price is,

the better the value.

At some point.

Those capital investors, they're not maximalist in anything and they're not religious ideologues.

They can be excited about this deal this week and they'll be excited about another asset

next week and they're all looking at relative value.

So I think that equity markets have been performing well because they've been juiced by Nvidia

and Google and some of the AI story and Bitcoin hasn't been getting that lift.

But I think that after these deals flow and after capital settles, I think that a lot

of the capital will flow back into the Bitcoin and Bitcoin-related securities, probably the

And I think by the fourth quarter, things will be normalizing to our benefit.