When most investors think of big catalysts capable of pushing Bitcoin (BTC 0.40%) to new stratospheric highs, they typically focus on events such as the rollout of the new spot Bitcoin exchange-traded funds (ETFs) or the halving event in April.
But there’s one unstoppable tech trend that might end up having a much greater impact on the future price of Bitcoin: the convergence of artificial intelligence (AI) and crypto.
Bitcoin as the currency of AI
Back in October, Cathie Wood of Ark Invest hosted a fascinating podcast titled “Why Bitcoin Is the Currency For AI.” One of the big takeaways was that Bitcoin possessed certain inherent properties as a digital currency that make it more suited to the emerging AI-powered economy than traditional fiat currencies like the U.S. dollar.
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For example, 1 Bitcoin consists of 100 million satoshis (much like $1 consists of 100 cents). It takes about 40 of them to equal $0.01. This makes Bitcoin useful for micropayments, and especially for the types of micropayments that AI bots might be making on your behalf. In addition, Bitcoin is a peer-to-peer currency, meaning that people can send Bitcoin to each other directly, without the need for any financial intermediary. That means no intermediaries taking a cut of each transaction.
Of course, people have been talking about Bitcoin and micropayments for nearly a decade now, and it simply hasn’t happened. One big factor is that Bitcoin transaction fees are non-negligible, and need to be taken into account. For very small transactions (such as those being carried out by AI bots), Bitcoin is still impractical. If a solution is not found for this problem, that might open up the door for other cryptocurrencies to become “the currency for AI.”
Bitcoin and chatbots
Just a couple of years ago, of course, any talk of an intersection between Bitcoin and AI would have sounded like science fiction. But that was before the rise of ChatGPT. Thus far, the trend has been from general, all-purpose AI chatbots to more customized chatbots that specialize in certain areas.
Consider the new ChatGPT Store that launched in January — it’s all about customized chatbots that have been trained on specific types of data and can be used for specific tasks. The most popular chatbots right now are those that can help you write better, design better products, and stay better informed on the latest scientific research.
And now, according to Sam Altman of OpenAI (the company behind ChatGPT), the next wave of innovation will be autonomous AI agents. Think of these as tiny pieces of software that can perform duties, tasks, and other functions on your behalf. Many of these autonomous AI agents will be productivity bots, helping you to become more productive in your home or office life. They will be able to carry just about any web-based task, even those requiring some form of payment.
And that’s where Bitcoin comes into the picture. At some point, to complete certain tasks and functions (such as booking a flight or ordering a product online), autonomous AI agents will need access to some form of currency. And, some analysts speculate that Bitcoin is in the driver’s seat right now when it comes to being the “currency for AI.”
The emerging bot economy
In short, Bitcoin could help to power the emerging AI economy. When AI bots need to pay for data, computing power, or anything else, they will use Bitcoin. If that’s the case, then that could be yet another catalyst to send Bitcoin soaring.
That’s a powerful idea because, right now, most people don’t use Bitcoin for payments. When they want to pay for a product or service, they still use dollars. And granted, that has always been one knock on Bitcoin — people keep talking about all of its various use cases, but most of these are based around the idea of buying and holding Bitcoin for the long haul.
So, while the human economy might not prioritize Bitcoin as a form of payment, perhaps the bot economy will. Imagine armies of personal bots, working 24/7 on your behalf, tirelessly making and accepting microscopically small payments using Bitcoin. If that’s the case, then that could dramatically boost demand for Bitcoin in ways that are hard to imagine right now. Unless, of course, you happen to be someone like Altman, Bill Gates, or Elon Musk.
Convergence of AI and crypto
As Ark Invest pointed out in its latest “Big Ideas” report, the convergence of AI and crypto is a big idea. Both AI and crypto are huge market opportunities, and when you combine them, you get the potential for an even larger market opportunity.
As for me, I’m keeping a close eye on which cryptocurrencies have the best chances of becoming the “currency for AI.” If Bitcoin is ever able to capitalize on this opportunity, it could soar in value even more than it already has in 2024.
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