Good morning everybody.
Bitcoin is still doing what it has been doing for weeks.
We’re sitting around $64,000, moving sideways, and the Fear & Greed Index is back in fear.
Before we get into the news, I want to follow up on yesterday’s conversation about Strategy.
Paul wrote in and made the argument that Strategy isn’t a Ponzi. His point is that there’s an actual asset underneath the structure. Strategy is raising money and buying Bitcoin. Investors aren’t simply handing over money that gets passed directly to previous investors.
Fair enough.
But investors aren’t buying Bitcoin either. They’re buying securities issued by a company that owns Bitcoin.
And the more complicated Strategy’s capital structure becomes, the more questions I have about it. We’re now talking about preferred shares, dividends, capital raises, Bitcoin sales, and money being raised partly to service obligations created by earlier financing.
Maybe “Ponzi” is the wrong word.
But I still don’t completely understand where this structure ultimately goes.
Anyway, let’s get into the news.
Riot Signs a $9.1 Billion AI Deal With Anthropic
Riot Platforms shares surged more than 20% in premarket trading after the Bitcoin miner signed a 20-year, $9.1 billion computing infrastructure agreement with Anthropic.
The initial agreement covers approximately 191 megawatts at Riot’s Rockdale, Texas campus, with expansion options that could reportedly increase the total potential contract value to approximately $60.1 billion.
This changes my thinking somewhat about the Bitcoin miner pivot toward AI.
I’ve been arguing that miners will move toward AI while Bitcoin mining economics are weak and then potentially shift back toward Bitcoin when the next bull market arrives.
A 20-year contract changes that calculation.
If Riot can lock in predictable revenue from Anthropic, it doesn’t need to constantly gamble on Bitcoin mining economics.
And Riot clearly needs revenue.
According to the figures discussed in the show, its Bitcoin holdings fell from approximately 16,680 BTC to 11,380 BTC by the end of the quarter.
That’s a substantial reduction.
AI gives these companies another way to monetize the infrastructure they’ve already spent billions building.
I Don’t Believe This Deal Lasts 20 Years
Here’s where I’m skeptical.
I don’t think Anthropic will need this exact infrastructure for twenty years.
Maybe the contract survives financially. Maybe there are renegotiations, upgrades, replacement equipment, or completely different infrastructure built into the agreement.
But the physical computing requirements of AI are changing too quickly for me to believe today’s infrastructure remains economically competitive for two decades.
We’re currently in the brute-force phase of AI.
More GPUs.
More data centers.
More electricity.
More compute.
But industries optimize.
Models get smaller.
Chips get better.
Inference gets cheaper.
Companies find ways to accomplish the same task using fewer resources because there is enormous financial incentive to do so.
You don’t need the newest iPhone to send an email, browse the internet, or use most applications. I’m still using an iPhone 13 Pro Max. It works fine.
I think AI eventually reaches something similar.
The models become good enough that most people don’t need the newest, largest model to perform ordinary tasks.
That’s why I’m skeptical that all of the enormous AI data centers being constructed today will still look necessary fifteen or twenty years from now.
Maybe I’m completely wrong.
But I’m putting my prediction down now.
I think within three to five years we’re going to look at some of today’s AI infrastructure the same way we look at enormous computers from decades ago.
What Happens to Bitcoin Mining?
If miners move substantial amounts of computing infrastructure toward AI, what happens to Bitcoin?
The network adjusts.
Bitcoin’s difficulty mechanism exists specifically to deal with changes in mining participation.
If miners shut down or redirect capacity, difficulty eventually adjusts so blocks continue being produced around Bitcoin’s target interval.
That doesn’t mean mining economics don’t matter.
It means Bitcoin doesn’t simply stop functioning because some miners discover they can make more money doing something else.
Trump Media Reports a $238 Million Loss
Trump Media reported a $238 million second-quarter net loss, including approximately $190.4 million in unrealized losses across digital assets, pledged digital assets, and equity securities.
The company says it plans to revamp its crypto treasury strategy to maintain long-term exposure while better managing volatility.
This is another example of what happens when companies turn volatile assets into corporate treasury strategies.
When prices rise, everybody looks brilliant.
When prices fall, the accounting gets ugly very quickly.
The SEC Is Preparing “Reg Crypto”
The SEC has scheduled an August 14 meeting involving a proposal referred to as Reg Crypto.
According to the reporting discussed in today’s show, this would represent the first major formal crypto rulemaking effort under SEC Chair Paul Atkins.
The proposal is expected to establish a tailored offering regime for digital-asset investment contracts.
This is the type of regulation I’ve wanted to see for years.
Crypto needs rules.
Exchanges need rules.
Stablecoins need rules.
Companies issuing investment products need rules.
What the industry doesn’t need is regulation based primarily on fear of the technology itself.
There is a significant difference between regulating an industry so companies know how they’re allowed to operate and regulating an industry primarily to stop it from developing.
Democrats Still Have a Crypto Problem
I’ve criticized Democrats repeatedly on this show for their approach to cryptocurrency, and I think the criticism is justified.
I ran for Congress twice as a Democrat. That doesn’t mean I’m going to pretend the party handled crypto well during the Biden administration.
It didn’t.
Too much of the political argument around crypto was based on scams, meme coins, money laundering, and fraud.
Those problems are real.
There are thousands of garbage tokens.
There are scams.
There is gambling disguised as investing.
There is money laundering.
Regulate those things.
But acknowledging the bad parts of an industry isn’t the same as deciding the entire technology should be treated as a threat.
My concern becomes much larger if Democrats eventually control both chambers of Congress.
I don’t think they’re likely to take the Senate this cycle, although the House is certainly possible. But if Democrats eventually control both chambers, I expect the CLARITY Act debate to become significantly more restrictive.
Banks would likely gain additional leverage.
Stablecoin yield could face greater restrictions.
And Trump’s crypto businesses would give Democrats an extremely effective political argument for tightening the entire system.
Which brings us to an uncomfortable point.
They would have a legitimate argument about conflicts of interest.
You can oppose Trump’s financial involvement in crypto without opposing cryptocurrency itself.
Those are two different questions.
FlightAware Sues Kalshi
FlightAware has sued prediction-market platform Kalshi in federal court in New York, alleging that Kalshi improperly used FlightAware data and trademarks to operate markets involving airline cancellations.
FlightAware claims Kalshi violated licensing terms, ignored cease-and-desist letters, and continued referencing its data even after adding a disclaimer.
The company is seeking damages and an injunction.
We’re now betting on whether flights get canceled.
Proper degens.
Prediction markets are basically demonstrating that if you can formulate something as a yes-or-no question, somebody somewhere will probably put money on it.
Crypto Prices
Bitcoin: $64,350, down approximately 1%
Ethereum: $1,889, down 1.4%
Tether: #3
BNB: $612, up 1.4%
USDC: #5
XRP: $1.00, down 2.6%
Solana: $75.98, down 1.2%
TRON: $0.336, up 1.5%
Hyperliquid: $55.16, roughly even
Dogecoin: $0.07, up approximately 0.8%
Total Crypto Market Cap: $2.2 trillion
Fear & Greed Index: 38, Fear
My Take
Riot’s Anthropic deal is the story today.
Bitcoin miners spent years building access to enormous amounts of electricity, land, data-center infrastructure, and computing capacity.
AI companies suddenly need exactly those things.
So the miners are monetizing them.
That makes perfect sense.
Where I’m skeptical is the assumption that today’s AI infrastructure requirements continue indefinitely.
Technology doesn’t normally work that way.
Competition drives efficiency. Hardware improves. Software improves. Models get optimized. Costs fall.
Maybe Riot collects Anthropic’s money for twenty years.
But I’ll put the prediction on the record now.
I don’t think the infrastructure Anthropic needs in year twenty looks anything like the infrastructure it’s paying Riot for today.
We’ll check back in 2046.
Happy Hodling, Everyone.