Bitwise CIO "Hold Both Bitcoin (BTC) and Artificial Intelligence (AI) Stocks"

▲ Bitcoin (BTC), Artificial Intelligence (AI)/AI Generated Image

Matt Hougan, Chief Investment Officer (CIO) of Bitwise, argued that both Artificial Intelligence (AI) stocks and Bitcoin (BTC) should be held together amidst the US's $40 trillion debt crisis.

According to U.Today on September 1 (local time), Hougan presented an investment strategy by dividing US Treasury Secretary Scott Bessent's financial strategy into two scenarios. Bessent faces the challenge of reducing the fiscal deficit while maintaining a Gross Domestic Product (GDP) growth rate of over 3%. Hougan predicted that AI stocks would benefit if the US overcomes its debt burden through AI-driven productivity improvements. Conversely, he saw Bitcoin acting as a defensive asset if the growth strategy fails and inflation is used to reduce the value of debt.

The first scenario is one where AI dramatically boosts productivity, leading to higher economic growth. Hougan stated, “If Bessent is right and solves the debt problem through growth, you absolutely must hold AI stocks.” This year, Micron Technology (MU) surged 224.97%, and AMD rose 108.80%. On the other hand, Broadcom (AVGO) fell 25.84% over the last three months, and CrowdStrike (CRWD) dropped 7.24% in the last week. Hougan assessed these short-term adjustments as profit-taking processes.

The second scenario is one where economic growth is not sufficiently high. The analysis suggests that the Treasury Department might move towards reducing the real value of debt through high inflation. Hougan viewed Bitcoin as a key defensive measure in such an environment. He said, “If Bessent is wrong and solves the debt problem through inflation, you must hold Bitcoin.”

Bitcoin experienced a significant correction in the first half of this year amid tight monetary policies. In July, its year-to-date decline widened to 33%. Subsequently, as bond market volatility increased in August, it staged a V-shaped rebound, reducing its year-to-date decline to 10.91%. Hougan explained that while Bitcoin showed weakness during the summer, the rise in semiconductor stocks supported investment performance, and in August, Bitcoin's rebound offset losses while AI-related stocks underwent correction.

Hougan emphasized that the strategy of choosing between the two assets is inherently flawed. He said, “If you want to win in any scenario, hold both.” Hougan's argument is that if the US reduces its debt burden through increased productivity, AI stocks will benefit, and if inflation is used as a means of debt adjustment, Bitcoin will become a responsive asset.

[Key Summary of the Article]

-Matt Hougan argued that to address the US's $40 trillion debt problem, both AI stocks and Bitcoin should be held together.

-He predicted that AI stocks would benefit if the US grows through AI-driven productivity improvements, and Bitcoin would benefit if inflation is used to reduce the debt burden.

-Bitcoin fell by as much as 33% year-to-date in July but rebounded in August, reducing its year-to-date decline to 10.91%.

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