Farewell, Bitcoin: The Underlying Logic of the Crypto World Has Been Rewritten

Original author: nikshep

Original compilation: Luffy, Foresight News

AI has taken away Bitcoin's risk speculation attributes, while USD stablecoins have replaced Bitcoin as the universal currency of the crypto market; the anchor that once silently held together the fragmented crypto world is no longer Bitcoin. This is the most favorable structural change the crypto industry has seen in years, yet very few understand the logic behind it.

This week, Bitcoin fell below $70,000, plunging approximately 45% from its October high, triggering widespread market lament. Spot ETFs have experienced historic and substantial capital outflows, marking the longest redemption cycle since the product's launch. Bitcoin, hailed as "digital gold," is performing poorly, while physical gold continues its strong rally.

But the market's regret is misplaced.

While Bitcoin has been steadily declining, a little-known on-chain exchange surpassed Coinbase in trading volume last year. A prediction market platform saw its valuation surge to $20 billion, generating annualized fee revenue as high as $365 million. A privacy coin, once viewed bearishly by the market, surged 70% in a single week, charting its own course while Bitcoin remained range-bound. Additionally, a long-underestimated underlying network achieved cross-chain private transfers, allowing users to move assets without even needing to purchase its native token.

The crypto industry has not sunk along with Bitcoin; crypto no longer needs Bitcoin.

This statement may sound bearish at first glance, but the reality is the complete opposite. Crypto is maturing, moving past the primitive era where all tokens were tied to Bitcoin's price fluctuations and driven by speculative trading. It is evolving into a USD-denominated real-world economy. Individual projects now thrive or fail based on their own fundamentals, and a new underlying interconnected infrastructure is replacing Bitcoin as the backbone linking the entire crypto world.

This year, Bitcoin has lost two core functions, replaced by two new phenomena, and the resulting vacuum is creating fresh opportunities.

AI Has Captured Bitcoin's Speculative Capital

Bitcoin itself generates no cash flow; it has no earnings, dividends, or interest. Its price is almost entirely determined by the influx and outflow of speculative capital, making it a classic capital reservoir: prices soar when liquidity is abundant and correct sharply when money tightens. In 2026, the AI sector has risen strongly, continuously diverting speculative hot money that once flowed into Bitcoin.

Global AI infrastructure investment is expected to reach between $700 billion and $830 billion this year, roughly equivalent to half the size of the US investment-grade bond market, and is projected to hit $7 trillion by 2030. The AI industry contributes about 5% to US GDP, with its incremental contribution to the US economy surpassing that of household consumption. Nvidia alone accounts for 8% of the S&P 500 index weight. AI is no longer just another sector; it has become a powerful gravitational field for capital, reshaping the pricing logic of capital markets globally.

AI is draining capital from Bitcoin in three major dimensions:

1) AI has captured the core narrative. Bitcoin's past central selling point was "betting on future asymmetric opportunities." However, AI boasts tangible revenue, continuously exploding market demand, and policy support from various countries. Investors can easily gain exposure through index funds. Now, institutions classify Bitcoin alongside speculative, profitless story stocks in the same risk category. Within the same risk pool, one side has actual earnings to show, while the other relies purely on expectations. Consequently, capital naturally continues to flow out of Bitcoin, which is the root cause of the consecutive ETF redemptions.

2) AI requires capital. AI expansion relies heavily on debt financing. The bond issuance by cloud giants has already exceeded last year's total, and private credit directed towards the AI industry has surpassed $200 billion. High-quality entities are issuing massive amounts of debt, absorbing top-tier capital, and leaving less money to flow into high-risk assets like Bitcoin, which gets intercepted at multiple levels.

3) AI is forcing a high-interest-rate environment. The AI industry is driving up production costs for utilities, memory chips, and other components. Price increases for related categories generally range from 5% to double digits, anchoring US inflation around 3.8%. The Federal Reserve is forced to maintain a high benchmark interest rate of 3.50%–3.75%, and the market has almost no expectation of rate cuts for the year. AI not only competes with Bitcoin for capital but also locks in tight liquidity from a macroeconomic perspective.

Furthermore, the computing power sector is facing disruption. Bitcoin mining and AI computing power are essentially both about converting electricity into computational power, competing for the same energy resources. However, Nvidia's servers generate far higher economic value per unit of electricity than mining rigs. Last quarter, the average all-in cost for top public mining companies to mine one Bitcoin was around $80,000, but the market price was only $70,000, resulting in a loss of $19,000 per coin. A large number of mining companies are pivoting to AI computing: the industry has collectively signed over $70 billion in AI supercomputing cooperation orders. Top miners could see AI business revenue account for up to 70% of their total by year-end. Core Scientific is spending $10.2 billion to convert a 300-megawatt Bitcoin mining facility into an AI data center. Riot is selling its Bitcoin reserves and subleasing land to AMD. These entities, which once secured the Bitcoin network's hashrate, are collectively fleeing.

Compared to the quantum computing risks many fear, AI represents a permanent structural change. Even if future quantum computers could crack Bitcoin's cryptographic algorithms, the industry could patch the protocol through post-quantum cryptography standards and soft forks. However, AI's capture of narrative, capital, and energy resources is irreversible, and no protocol upgrade can reclaim it. Bitcoin's first core value is decisively lost.

USD Stablecoins Replace Bitcoin as the Base Currency of the Crypto Market

This is the most easily overlooked yet crucial change. Throughout crypto's history, Bitcoin has long served as the industry's reserve asset and the intermediary for fiat on/off ramps: fiat was first exchanged for Bitcoin, which was then used to trade other altcoins. All tokens were priced in BTC, and off-chain capital had to buy Bitcoin first to enter the market. This was the root cause of the synchronized price movements across all tokens in the past.

Stablecoins have severed this link. USDC's trading volume has surpassed USDT's for the first time since 2019, with global stablecoin annual transaction volume exceeding $30 trillion. The current user entry path is now: Fiat → USDC → Various Assets. Bitcoin has been completely removed from the circulation loop. Polymarket recently upgraded to launch its native platform USD stablecoin (pegged 1:1 to USDC reserves), and Hyperliquid settles entirely in USD across its platform. As the industry summarizes: stablecoins have become the universal reserve currency for application layers, with various platforms simply placing their own labels on top.

Consequently, when risk-off sentiment rises, the dominance chart shows Bitcoin's share decreasing while stablecoins' share increases. Capital is not leaving the crypto market; it's simply shifting within the industry into USD-denominated assets. Investors wanting exposure to the crypto sector no longer need to hold Bitcoin; USD stablecoins have taken over this function. All on-chain transactions operate on USD, and on-chain capital flows no longer generate buying pressure for Bitcoin. Bitcoin's second core function has officially ended.

The Crypto Economy Thrives Independent of Bitcoin

Setting Bitcoin aside, the products launching today are no longer speculative tokens tied to coin prices, but commercial projects with real cash flows.

Hyperliquid's existence alone is enough to debunk the narrative that "cryptocurrency is dying." This on-chain spot and derivatives exchange boasts matching depth and transaction speeds comparable to top-tier CEXs, with users maintaining self-custody of their assets. Its total trading volume last year was $2.6 trillion, higher than Coinbase's $1.4 trillion, generating annualized revenue of $800 million to $1.3 billion. The platform uses 97% of its fees to buy back and burn its native token, HYPE, on the secondary market, with an annual buyback volume of approximately $1.3 billion, representing 7% of the token's total market cap. Its burn rate is 4-5 times that of Ethereum and 14 times that of Solana. The project has no venture capital funding, achieving value capture through community airdrops and fee-based buybacks. Its trading volume depends entirely on trader demand, unrelated to Bitcoin's price. The platform's scale grew against the trend during the recent Bitcoin bear market.

Another key player is prediction market leader Polymarket, valued at $20 billion. It handles an annual trading volume of $250-300 billion, generates $365 million in annualized fees, and saw its daily active users increase 2.5 times in five months. It has issued its platform USD stablecoin, with a token launch imminent. Polymarket's products center around betting on elections, sports events, and global events, with demand entirely unrelated to Bitcoin's price fluctuations.

These projects are now evaluated using traditional corporate valuation logic: revenue, user base, valuation multiples. This marks a sign of industry maturation.

The New Sector Opportunity: Privacy Becomes a Scarce Resource

If Bitcoin's transparent and surveilled ledger was the default option of the past, then privacy is the new premium option. This is a sovereign, non-traceable currency available only on-chain. But the way to acquire this currency is fundamentally different, and it is this difference that holds the key.

**Self-Custodial Privacy.** Zcash (ZEC) soared 70% in a single week, pushing its market cap towards $10 billion, a gain of over 45x from its 2024 low, charting an independent path during Bitcoin's consolidation. Its fundamentals are solid: the circulation of private transactions has risen from 11% last year to 30%. Most privacy assets are not converted back to the public chain, leading to a shrinking circulating supply coupled with rising demand. The regulatory pressure that once suppressed privacy is paradoxically helping realize the value of privacy coins: Robinhood listed ZEC spot, and Grayscale filed for the industry's first privacy coin spot ETF. Privacy is evolving from a single-use case to a long-term investment thesis. However, ZEC requires users to purchase the token separately and switch to its specific blockchain for use.

**Universal Cross-Chain Privacy.** NEAR eliminates the need to buy a specific privacy token or bridge assets. Leveraging on-chain signature technology, a single NEAR account can directly control native assets on Bitcoin, Ethereum, and Solana—without wrapped tokens or cross-chain bridge risks, relying on a decentralized multi-party computation network for key custody. Combined with confidential intent protocols, users can privately transfer assets on any public chain, with transaction counterparties and routing information remaining hidden throughout, executed via privacy shards. Users' assets stay on their original blockchain, making privacy an add-on, universal underlying service.

Compared to single privacy coins, this model is far more disruptive. Users don't need to hold ZEC; they don't need to leave the Ethereum or Bitcoin native ecosystems. Privacy transforms from a proprietary asset feature into a built-in function for all types of transactions.

The Multi-Chain Coordination Layer Replaces Bitcoin's Hub Role

Looking at the entire crypto landscape: the industry is no longer converging but operating across multiple blockchains in parallel, with the ecosystem continuously expanding. USD stablecoins have become the underlying universal currency, and AI agents acting as self-sovereign entities holding credentials, calling interfaces, and transferring funds have emerged as new market participants.

This vast multi-chain + agent ecosystem urgently needs an interoperability infrastructure. For the past decade, Bitcoin played this role. Now, this gap is being filled by a new coordination and privacy layer: cross-chain signing, USD settlement, private transactions, and automated execution for agents.

NEAR is targeting this sector. It supports AI agents settling payments privately in USDC, uses hardware secure enclaves for confidential computing, and positions its signature network as the key management hub for the agent economy, providing cross-chain and privacy services for both users and bots without being tied to a specific public chain.

Another product in this space is Venice. It focuses on a privacy-first AI application, attracting a large number of native Web2 users. Staking its platform token, VVV, allows users to share in AI inference revenue. The project has burned over 40% of its token's circulating supply through product buybacks. Demand is driven by AI usage, decoupling the token's price movements from Bitcoin.

The new industry focus has crystallized: it's no longer about a single token, but about underlying infrastructure. Real-world projects leverage this infrastructure to create tangible value.

Conclusion

Putting it all together: USD is the industry's operational cash. Tokens like HYPE, POLY, ZEC, NEAR, and VVV represent corporate equity. The privacy cross-chain layer is the industry-wide infrastructure. Bitcoin is merely one sector within this ecosystem. Squeezed from three sides—AI capturing macro speculative capital, physical gold absorbing safe-haven demand, and stablecoins monopolizing the reserve currency function—Bitcoin's former glory has faded.

For the past decade, the entire industry fixated on Bitcoin's price, with all altcoins following its lead. That era is definitively over. Evaluating a project today now aligns with traditional business standards: does it have real revenue, active users, and a token that captures the project's growth value?

Stop using Bitcoin's price to gauge the health of the crypto industry. **Focus instead on project revenue, user growth, and the underlying infrastructure connecting all chains: the cross-chain infrastructure enabling universal private transfers, USD settlement, and functionality for both humans and machines.**

AI has taken away macro speculative capital. The USD has taken away the reserve currency status. A new underlying protocol has taken over the crucial task of connecting the entire industry. Bitcoin falling below $70,000 is not the end of the crypto industry, but a historic inflection point where crypto finally breaks free from its dependence on Bitcoin.