AI is a strange beast. On one side, it produces deflation through reducing the costs of access to services, labor and as a result, goods. On the other side, it generates abundance through the same mechanism and the improved productivity.
I bet not many people would associate deflation with abundance. I mean, not if they studied a little bit of history.
I'm not sure how this apparent contradiction would be resolved, and it's not the only one.
Many agree, with the coming to scene of AIs, GDP no longer captures the real growth or decline of a country, but they don't know what it should be replaced with either. Many say GDP will actually shrink as AIs becomes an important part of the economy, given its impact on prices and disruptive effect on many industries. Others (like Cathy Wood) say the effect won't be felt as other profit-producing sectors will emerge from activities we spend significant time now doing without getting paid (like shopping as a necessity not for pleasure, looking for accommodations/flights/vacations and the best prices/availability, doing house/garden chores, etc.).
Another theory I've heard recently was that deflation negates one of the best potential qualities of scares assets: store of value. This theory was put forth by Anthony Pompiliano recently, referring to the deflationary effects of AI and bitcoin price, in particular. If dollar appreciates as a result of deflation (we've seen what happened last few days when USD appreciated as a result of Kevin Warsh's nomination as the next Fed chair), why would anyone hold BTC as a store of value? the theory says. I'm actually looking for counterarguments to that, and I'd appreciate if you had some too.
But we need to see all this in context too, because it's not all black or white.
When the dollar was devaluing only a couple of days ago (and Trump liked it because the US economy was more competitive), the move only partially went to other currencies or the stock markets. Where else did the capital go? To metals. It has been a wider move globally to move from fiat (mainly dollar) to metals. For the time being the bubble may have burst, but the Chinese metal market still offers a significant premium for silver, and many central banks around the world started to pile up on gold again.
Could Bitcoin benefit of this context too? I don't know. Let's the bear market end first, and we'll see.
This year will be hard for many. We've seen the waves Google and Anthropic created in just one week by disrupting the gaming and legal software industries, respectively. Only a few days before that, an open-source tool called initially Clawd Bot (they had to change the name because they obviously wanted to take advantage of the notoriety of Claude name) was launched by someone and took the world by storm. It works locally, remembers everything, has access to everything, so be careful... I haven't used it and won't until I'll buy a separate machine for it.
This is only the beginning... Lots of investments being repositioned, the market is almost paranoid right now, and blows any potential signal out of proportions. Stay safe!
