Bitwise CIO Matt Hougan Says Bitcoin Could Rise Under All Three Economic Scenarios
Bitwise Chief Investment Officer Matt Hougan argues that Bitcoin could deliver long-term gains across three potential economic scenarios, ranging from an artificial intelligence-driven productivity boom to a recession triggered by an AI market crash. He also sees a path for Bitcoin to appreciate if the economy continues growing at a moderate pace, supported by institutional investment, exchange-traded fund demand and rising sovereign debt.
In his weekly CIO memo, Hougan said the number of possible economic outcomes makes forecasting difficult, but he believes Bitcoin's long-term prospects remain favorable across different paths. "There are a lot of different paths for the economy. All of them lead to Bitcoin," he said.
Why Hougan Sees Bitcoin Benefiting From an AI Boom
In a scenario where artificial intelligence substantially increases productivity and makes intelligence more widely available at lower cost, Hougan believes investors could place greater value on scarce assets such as gold and Bitcoin (BTC).
His argument is that an economy with abundant AI-driven capabilities could increase demand for assets whose supply is limited. Under that scenario, he expects Bitcoin to benefit even if technological progress transforms the broader economy.
Hougan summarized this outcome by saying, "So in this 'adventure,' Bitcoin wins."
An AI Market Crash Could Also Create a Bitcoin Bull Market
Hougan also considered a more negative scenario in which the AI market suffers a major collapse. He compared the potential consequences to the 2008 financial crisis, pointing to possible defaults involving data centers and bond insurers.
Bitcoin could initially decline alongside other risk assets during such a downturn. However, Hougan believes government intervention could eventually increase the money supply and create conditions favorable to the cryptocurrency.
"And because of the geopolitical importance of AI, the odds of a bailout strike me as nearly 100%. And here's what I see happening next: Money supply surges and Bitcoin rallies hard. This is exactly the environment Bitcoin was built for," he wrote.
This outlook depends on the assumption that policymakers would respond to a severe AI-related economic crisis with substantial support. The anticipated increase in liquidity, rather than the initial market shock, is central to Hougan's bullish case for Bitcoin under this scenario.
ETF Demand Could Support Bitcoin in a Moderate Economy
In Hougan's baseline scenario, the economy expands at 3% GDP growth while interest rates remain at 4%. He argues that Bitcoin would not need a major AI breakthrough to maintain its longer-term momentum.
Instead, he points to continued purchases through spot Bitcoin exchange-traded funds (ETFs), growing corporate treasury holdings and an uninterrupted increase in sovereign debt as potential sources of structural demand for BTC.
U.S. spot Bitcoin ETFs have made it easier for traditional investors to gain exposure to the cryptocurrency without directly holding Bitcoin or managing digital wallets. Corporate treasury strategies and possible sovereign adoption could also influence long-term demand.
However, these sources of demand are not guaranteed to increase continuously. ETF investors may withdraw capital during periods of market stress, while companies could reconsider their cryptocurrency holdings if prices fall or financing conditions deteriorate. Hougan's thesis assumes that long-term adoption will ultimately outweigh these risks.
Inflation and Federal Reserve Policy Add to the Debate
Hougan also sees potential for Bitcoin to appreciate under different Federal Reserve policy outcomes. If aggressive rate increases contribute to a recession, he expects government support could eventually help lift Bitcoin prices. If inflation remains elevated because policymakers are reluctant to tighten monetary policy sufficiently, he believes investors may seek exposure to Bitcoin.
Recent inflation data has added uncertainty to the outlook. September's Consumer Price Index rose 3.7% year over year, while core inflation increased 0.3% month over month. Both readings exceeded expectations, according to the report.
Following the data, traders raised the probability of a 0.25-percentage-point rate increase on October 28 to 41.5%, up from approximately 22% the previous day.
Bitwise Points to ETF Flows and Network Activity
Hougan has also cited signs of a broader cryptocurrency market recovery. He pointed to a strong third-quarter rebound and rising network activity as evidence that the market could be entering a new growth cycle.
Bitwise's large-cap cryptocurrency index gained 46.4% in the third quarter. Meanwhile, U.S. spot Bitcoin ETFs recorded $6 billion in net inflows, reversing earlier outflows and restoring positive year-to-date performance.
Market participants remain divided over whether the bear market has definitively ended. CryptoQuant declared a new Bitcoin bull run in September based on technical and on-chain data, while Bitget's Ryan Lee said further evidence was needed to establish a true cycle bottom.
Hougan's outlook is more optimistic, with ETF flows and active blockchain networks forming part of his case for a recovery. His central argument is that Bitcoin could benefit over time whether AI accelerates economic growth, a market downturn prompts government intervention, or more moderate conditions sustain existing sources of demand.
source: cryptopolitan
Writer: Ethan Collins
Crypto Journalist
Ethan Collins reports on developments across the cryptocurrency and blockchain sector. His work covers market movements, protocol updates, regulatory changes, and emerging trends in digital assets.
He focuses on presenting complex topics in a clear and accessible manner for a broad readership.
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