Bitwise CIO Matt Hougan outlined three macroeconomic paths in an October 14 memo, arguing that nearly all lead to higher Bitcoin prices. Each scenario assumes AI abundance, instability, or monetary expansion ultimately increases demand for the asset.
Two days earlier, the Bank for International Settlements published a working paper modeling a fourth possibility: AI automates work and boosts output, but consumer demand thins as investment absorbs a larger economic share, eventually causing growth to fade.
The Demand Bottleneck Scenario
The BIS paper, by economist Phurichai Rungcharoenkitkul, models a situation where productivity gains shift capital allocation away from consumption. In this calibrated scenario, consumption's share of output falls from about 69% to 62.1%, while long-run sustainable growth drops from a 2% pre-AI baseline to about 1.6%.
The model estimates labor's share of tasks falling from 60% to between 15% and 50% over three decades. Under these conditions, real wages settle approximately 15% below what they would have been without such automation—though the paper acknowledges this result depends on fixed labor supply assumptions.
Output growth would peak just under 2.4% about 15 years into the AI era and remain above 2% for roughly 35 years as businesses accumulate machinery while innovation becomes less profitable.
Early Economic Signals
Recent data offers mixed evidence. The Federal Reserve's October 14 Beige Book reported that businesses in 5 of 12 districts reduced headcount through attrition or delayed hiring in anticipation of AI productivity gains. Consumer spending remained broadly flat, with higher-income households driving most of it.
The U.S. trade deficit widened to $105.6 billion in August, driven by strong imports of AI hardware. Economist Dean Maki estimates approximately 70% of AI-related capital spending went to imports, meaning foreign suppliers captured a significant share of equipment demand.
Implications for Bitcoin
Bitcoin's fixed supply means its price depends on investor demand, purchasing power, and market liquidity. The distribution of AI wealth becomes critical to its outlook.
If AI gains concentrate among wealthy investors with a high propensity to hold Bitcoin while worker incomes stagnate, demand could remain resilient despite weakening household consumption. Conversely, if productivity improves alongside broad wage growth and consumption maintains its economic share, Bitcoin's scarcity thesis would rest on stronger foundations.
If productivity rises while wages weaken and consumption's share continues declining, an investment boom could mask a narrowing demand base. Stalling exchange-traded fund flows while AI spending continues would be early market evidence of this dynamic.
The October 27-28 Federal Reserve meeting may shape the near-term rate path, though the multi-decade growth mechanism remains uncertain. Bitcoin's demand ultimately depends on how AI distributes wealth, reshapes consumption, and influences financial conditions.
