Bitcoin's decline is precisely the transformation of Crypto

Author: nikshep

Translation: Luffy, Foresight News

AI has taken over Bitcoin's risk speculation attributes, with US dollar stablecoins replacing Bitcoin as the common circulating currency in the crypto market; the once silently maintained anchor point of the fragmented crypto world is no longer Bitcoin. This is the most favorable structural change in the crypto industry in years, yet few understand the underlying logic.

This week, Bitcoin fell below $70k, a drop of about 45% from its peak in October last year, and the market is filled with lamentation. Spot ETFs are experiencing unprecedented large outflows, setting the longest redemption cycle since their launch; the so-called "digital gold" Bitcoin is languishing, while physical gold continues to soar.

But the market's regret is looking in the wrong direction.

As Bitcoin continues to decline, a majority of people have not heard of an on-chain exchange that surpassed Coinbase in trading volume last year; a prediction market platform's valuation soared to $20 billion, with annualized fee income reaching $365 million; a previously bearish privacy coin surged 70% in a single week, establishing an independent trend during Bitcoin's sideways movement; there is also a long-underestimated underlying network that enables cross-chain private transfers, allowing users to transfer assets without even purchasing its native tokens.

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

This statement may seem bearish at first glance, but in fact, it is entirely the opposite. Cryptocurrency is maturing, bidding farewell to the wild phase where all tokens' prices were tied to Bitcoin's fluctuations and speculation based on market movements, evolving into an ecosystem of real-world assets valued in USD. Projects are competing based on their fundamentals, and a new underlying interconnection infrastructure is replacing Bitcoin, linking the entire crypto world.

This year, Bitcoin has lost two core functions, replaced by two emerging entities, creating new opportunities in the vacant ecosystem.

AI has taken over Bitcoin's risk speculation funds

Bitcoin itself does not generate cash flow, with no profits, dividends, or interest; its price fluctuations are almost entirely driven by speculative capital, making it a typical liquidity pool: when liquidity is abundant, prices surge; when liquidity tightens, prices sharply retreat. By 2026, the AI track is expected to rise strongly, continuously diverting speculative hot money that previously flowed into Bitcoin.

Global AI infrastructure investment is projected to be between $700 billion and $830 billion this year, roughly half of the entire US investment-grade bond market, and could reach $7 trillion by 2030; the AI industry contributes about 5% to US GDP, with its impact on economic growth surpassing household consumption. Nvidia alone accounts for 8% of the S&P 500 index's weight. AI has long ceased to be just an ordinary sector; it now forms a powerful capital attraction field, reshaping the entire market's valuation logic.

AI continues to drain Bitcoin from three major dimensions:

1. AI captures the core narrative. Bitcoin's past main selling point was "betting on asymmetric future opportunities," but AI has real revenue, sustained market demand, and policy support from various countries, allowing investors to gain exposure through index funds. Now, institutions classify Bitcoin and unprofitable speculative stocks as the same risk asset. Within this risk pool, some assets generate profits, others rely solely on expectations; funds naturally withdraw from Bitcoin, which explains the continuous ETF redemptions.

2. AI needs capital. AI expansion heavily depends on debt financing; debt issuance by cloud giants has surpassed last year's total, with private credit for AI industry exceeding $200 billion. High-quality targets issue massive bonds to absorb top-tier capital, but funds flowing into high-risk assets like Bitcoin are increasingly blocked at various levels.

3. AI pushes up high-interest-rate environments. AI industry drives up costs for power, storage chips, and related components, with price increases generally in the 5% to double-digit range, anchoring US inflation around 3.8%. The Federal Reserve is forced to maintain high benchmark rates of 3.50%-3.75%, with little expectation of rate cuts this year. AI not only competes with Bitcoin for funds but also locks in loose liquidity from a macro perspective.

Additionally, the computing power sector is undergoing disruption. Bitcoin mining and AI computing are both power-consuming, competing for the same electricity resources, but Nvidia servers are far more cost-effective per unit of power than mining rigs. Last quarter, the total cost for leading listed mining companies to produce one Bitcoin was about $80k, while the market price was only $70k, resulting in a loss of $19k per coin. Many mining companies are shifting to AI computing: the industry has signed over $70 billion in AI supercomputing contracts, with top miners' AI revenue potentially accounting for up to 70% by year-end. Core Scientific spent $10.2 billion converting a 300 MW Bitcoin mine into an AI data center; Riot is selling its Bitcoin holdings and leasing land to AMD. These entities that once protected Bitcoin's network security are collectively fleeing.

Compared to the threat of quantum computing, AI brings a permanent structural transformation. Even if future quantum computers can crack Bitcoin's encryption, the industry can upgrade protocols with post-quantum cryptography standards and soft forks; but AI's narrative capture, capital, and electricity resource competition are irreversible, with no protocol upgrade capable of reversing this. Bitcoin's first core value is thus completely nullified.

USD stablecoins replacing Bitcoin as the fundamental currency in the crypto market

This is the most overlooked key change. Historically, Bitcoin has been the industry’s reserve asset and a medium for inflows and outflows: fiat currency is exchanged for Bitcoin, then converted into various altcoins; all tokens are priced in BTC, and off-chain funds must first buy Bitcoin before entering the market. This was the root cause of the entire market's correlated price movements.

Stablecoins have severed this link. USDC's trading volume surpassed USDT for the first time since 2019, with global stablecoin annual trading volume exceeding $30 trillion. Now, the entry path for users is: fiat → USDC → various assets, with Bitcoin completely removed from the circulation chain. Polymarket has recently launched a native USD stablecoin (pegged 1:1 to USDC), and Hyperliquid now settles all transactions in USD. As industry insiders summarize: stablecoins have become the universal reserve currency at the application layer, with various platforms simply branding them differently.

Therefore, when market risk aversion rises, Bitcoin's share declines while stablecoins' share increases. Funds are not leaving the crypto market but are shifting internally to USD-denominated assets. Investors no longer need to hold Bitcoin to participate in crypto; USD stablecoins have taken over this role. All on-chain transactions rely on USD, and on-chain capital flows no longer support Bitcoin buying. Bitcoin's second core function has officially ended.

Beyond Bitcoin, the crypto economy is thriving

Disregarding Bitcoin, current on-chain products are no longer speculative tokens tied to price but are commercial projects with real cash flow.

Hyperliquid alone is enough to disprove the notion that "cryptocurrency is dying." This on-chain spot contract exchange matches top centralized exchanges in depth and transaction speed, with user assets self-custodied; last year, it achieved a total trading volume of $2.6 trillion, higher than Coinbase's $1.4 trillion, with annualized revenue of $70k to $1.3 billion. 97% of platform fees are used for secondary market buybacks and token burns; the total buyback volume is about $1.3 billion annually, accounting for 7% of the total token market cap, with a burn rate 4-5 times that of Ethereum and 14 times that of Solana. The project relies on community airdrops and fee-based buybacks to create a value loop; trading volume fluctuations are entirely driven by trader demand and are unrelated to Bitcoin's price, with platform scale increasing during Bitcoin's bear market.

Another key player is the prediction market leader Polymarket, valued at $20 billion, with an annual trading volume of $250–300 billion, annualized fees of $365M, and a five-month user growth of 2.5 times; it issues a platform-native USD stablecoin, with its token soon to launch. Polymarket's products revolve around betting on elections, sports events, and global incidents, with demand unrelated to Bitcoin price movements.

These projects now adopt traditional enterprise valuation logic: revenue, user base, valuation multiples—signs of industry maturity.

New sector dividend: privacy becomes a scarce resource

If the transparent and monitored ledger of Bitcoin was the default option in the past, privacy now represents a new upgrade. Privacy is a sovereign, untraceable form of currency that can only be obtained on-chain. But the way to acquire this currency is entirely different, and this difference is crucial.

Self-owned privacy. Zcash (ZEC) surged 70% in a single week, with a market cap approaching $10 billion, more than 45 times its low in 2024, establishing an independent trend during Bitcoin's sideways movement. Its fundamentals are solid: privacy transfer volume increased from 11% to 30% last year, and most privacy assets do not return to the public chain, with circulating supply shrinking and demand rising. Regulatory crackdowns on privacy compliance have instead boosted privacy coin value: Robinhood launched ZEC spot trading, and Grayscale filed for the industry's first privacy coin spot ETF. Privacy has evolved from a single application scenario to a long-term investment logic. However, ZEC requires separate token purchase and switching to different blockchains for use.

Cross-chain universal privacy. NEAR does not require purchasing privacy tokens or cross-chain asset migration; relying on 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, leveraging decentralized multi-party secure computation networks for key custody. Coupled with confidential transaction protocols, users can privately transfer assets across any public chain, with counterparties and routing information fully hidden, executed via privacy sharding. Users' assets remain on their original chains, with privacy becoming an additive, universal underlying service.

Compared to single privacy tokens, this model is more disruptive. Users do not need to hold ZEC, nor leave the native ecosystems of Ethereum and Bitcoin; privacy shifts from an exclusive asset property to a built-in feature of all-scenario transactions.

The underlying coordination layer for multi-chain era, replacing Bitcoin as the hub

Looking at the entire crypto landscape: the industry is no longer converging into a single chain but is expanding through multiple chains and ecosystems, with USD stablecoins becoming the foundational currency, and AI agents owning credentials, calling interfaces, and transferring funds as new participants.

The vast multi-chain + AI ecosystem urgently needs interconnection infrastructure. Over the past decade, Bitcoin has played this role; now, the vacant spot is filled by a new coordination privacy layer: cross-chain signatures, USD settlement, private transactions, and autonomous smart agents.

NEAR is targeting this track. It supports AI agents using USDC for private settlement, leveraging hardware security modules for confidential computation, and building signature networks into the key management hub of the agent economy, providing users and bots with cross-chain, privacy-preserving services without relying on public chains.

Another product in this track is Venice. It focuses on privacy-interactive AI applications, attracting many Web2-native users; the platform's VVV token can be staked to share AI inference revenue, with the project burning over 40% of circulating tokens through buybacks, driven by AI usage demand, with token prices decoupled from Bitcoin.

The new industry focus has already taken shape: no longer a single token, but underlying infrastructure, with various real-world projects attaching to this infrastructure to create genuine value.

Summary

Putting it all together: USD is the universal circulating cash across the industry, while tokens like HYPE, POLY, ZEC, NEAR, VVV represent corporate equity; the privacy cross-chain layer is the infrastructure connecting the entire industry; Bitcoin is just one part of the ecosystem. AI is capturing macro speculative capital, physical gold is serving as a hedge, and stablecoins monopolize reserve currency functions—these three forces are squeezing Bitcoin out of the spotlight.

Over the past decade, the entire industry has been fixated on Bitcoin's price movements, with all altcoins following Bitcoin—an era that has now come to an end. Today, evaluating projects aligns with traditional corporate standards: real revenue, active users, and whether tokens can capture project growth benefits.

Stop judging the crypto industry by Bitcoin's rise and fall. Focus instead on project revenues, user growth, and the underlying infrastructure connecting the entire chain: enabling private cross-chain transfers, USD settlement, and human-machine interoperable cross-chain infrastructure.

AI has taken macro speculative funds, USD has taken the reserve currency status, and new foundational protocols are undertaking the task of interconnection across the industry. Bitcoin dropping below $70k is not the end of crypto but a historic turning point where crypto finally breaks free from Bitcoin's shackles.