Bitcoin’s Decline Marks Crypto’s Transformation
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Bitcoin’s Decline Marks Crypto’s Transformation
Crypto no longer needs Bitcoin.
Navigating Web3 tides with focused insightsBy: nikshep
Translated by: Luffy, Foresight News
AI has usurped Bitcoin’s risk-speculative attributes; USD-pegged stablecoins have replaced Bitcoin as the de facto medium of exchange across crypto markets. The once-silent anchor holding together crypto’s fragmented ecosystem—Bitcoin—is no longer that anchor. This is the most structurally bullish shift the industry has seen in years—yet few grasp its underlying logic.
This week, Bitcoin fell below $70,000—down roughly 45% from its October 2023 high—triggering widespread lamentation. Spot ETFs suffered record-breaking, sustained outflows—the longest redemption cycle since their launch. “Digital gold” languishes, while physical gold surges.
Yet market sorrow is misdirected.
Amid Bitcoin’s persistent downtrend, an onchain exchange—unknown to most—surpassed Coinbase in annual trading volume last year. A prediction market platform reached a $20 billion valuation, generating $365 million in annualized fees. A privacy coin long dismissed by the market surged 70% in a single week, delivering an independent price action distinct from Bitcoin’s sideways consolidation. And an undervalued foundational network enabled cross-chain private transfers—users can even move assets without purchasing its native token.
The crypto industry did not sink with Bitcoin. Crypto no longer needs Bitcoin.
At first glance, this sounds bearish—but it’s precisely the opposite. Crypto is maturing: leaving behind the lawless era where all tokens rose and fell with Bitcoin and trading was driven purely by price speculation—and evolving into a real-economy ecosystem priced in USD. Projects now rise or fall based on fundamentals; a new foundational interoperability infrastructure is supplanting Bitcoin as the connective tissue binding the entire crypto world.
This year, Bitcoin lost two core functions—replaced by two emerging categories—creating fertile ground for entirely new opportunities.
AI Has Captured Bitcoin’s Risk-Speculative Capital
Bitcoin generates no cash flow, earnings, dividends, or interest. Its price is almost entirely dictated by the inflow or outflow of speculative capital—a classic liquidity reservoir: surging when liquidity is abundant, correcting sharply when liquidity tightens. In 2026, the AI sector’s explosive growth is steadily diverting speculative capital previously flowing into Bitcoin.
Global AI infrastructure investment this year is projected at $700–830 billion—roughly half the size of the U.S. investment-grade bond market—and could reach $7 trillion by 2030. AI contributes ~5% to U.S. GDP, now driving more incremental economic growth than household consumption. NVIDIA alone accounts for 8% of the S&P 500’s index weight. AI is no longer just another sector—it’s a powerful gravitational field for capital, reshaping the entire market’s pricing logic.
AI siphons capital from Bitcoin across three dimensions:
1) Narrative dominance. Bitcoin’s historic appeal lay in “asymmetric upside bets on the future.” But AI delivers tangible revenue, rapidly expanding demand, and strong policy support across jurisdictions—accessible via simple index funds. Institutions now group Bitcoin with unprofitable, theme-driven penny stocks as a single risk asset class. Within that shared risk pool, one side delivers realized earnings while the other relies solely on expectation—so capital naturally migrates away from Bitcoin. This explains the persistent ETF redemptions.
2) Capital hunger. AI expansion leans heavily on debt financing. Cloud giants’ bond issuances have already exceeded last year’s full-year total; private credit directed at AI has surpassed $200 billion. High-quality AI projects absorb top-tier capital through massive bond offerings—leaving far less liquidity available for high-risk assets like Bitcoin.
3) Interest-rate pressure. AI drives up production costs—power, storage chips—causing broad-based price increases of 5% to double digits across related categories, anchoring U.S. inflation near 3.8%. The Fed is thus compelled to maintain a high benchmark rate of 3.50%–3.75%, with virtually no rate-cut expectations for the year. AI doesn’t merely compete with Bitcoin for capital—it locks in a macro environment hostile to loose liquidity.
Beyond this, the compute layer itself is being disrupted. Bitcoin mining and AI compute both convert electricity into computational power—competing for the same scarce energy resources. Yet NVIDIA servers deliver far higher economic returns per watt than ASIC miners. Last quarter, top publicly traded miners averaged ~$80,000 in all-in costs to mine one BTC—while BTC traded at only $70,000, yielding a $19,000 loss per coin. Many miners are pivoting to AI compute: the industry has collectively signed over $70 billion in AI supercomputing contracts, with leading miners projecting AI-related revenue to account for up to 70% of total revenue by year-end. Core Scientific spent $10.2 billion converting a 300-MW Bitcoin mine into an AI data center; Riot sold its Bitcoin holdings and leased land to AMD. These entities—once Bitcoin’s network security backbone—are collectively exiting.
Compared to the much-dreaded quantum computing threat, AI brings permanent structural change. Even if quantum computers someday break Bitcoin’s cryptographic algorithms, the industry can patch the protocol via post-quantum cryptography standards and soft forks. But AI’s capture of narrative, capital, and energy resources is irreversible—no protocol upgrade can reverse it. Bitcoin’s first core value proposition has fully collapsed.
USD Stablecoins Have Replaced Bitcoin as Crypto’s Base Currency
This is the most overlooked yet pivotal shift. Throughout crypto history, Bitcoin served as the industry’s reserve asset and on/off-ramp: fiat was first converted to BTC, then swapped for altcoins; all tokens were priced in BTC; and external capital entering crypto had to buy Bitcoin first—explaining why all tokens historically moved in lockstep with Bitcoin.
Stablecoins severed this chain. USDC’s trading volume surpassed USDT’s for the first time since 2019; global stablecoin annual transaction volume has exceeded $30 trillion. Today’s onboarding path is: fiat → USDC → any asset. Bitcoin has been completely removed from the circulation chain. Polymarket launched its native USD stablecoin (1:1 USDC-backed) this year; Hyperliquid conducts all platform settlement in USD. As industry insiders summarize: stablecoins serve as the universal base reserve currency for applications—platforms simply affix their own branding atop them.
Thus, when risk aversion rises, dominance charts show Bitcoin’s share falling while stablecoins’ share rises. Capital isn’t fleeing crypto—it’s rotating internally into USD-denominated assets. Investors seeking crypto exposure no longer need to hold Bitcoin; USD stablecoins have assumed this function. All onchain transactions now run on USD rails—onchain capital flows no longer generate Bitcoin buy-side pressure. Bitcoin’s second core function has officially ended.
Crypto Economy Thrives Independent of Bitcoin
Detached from Bitcoin, today’s live products are no longer speculative instruments tethered to price volatility—they’re commercially viable ventures generating real cash flow.
Hyperliquid alone dismantles the notion that “crypto is dying.” This onchain spot-perpetuals exchange matches the order-book depth and execution speed of top centralized exchanges, while users retain self-custody. Its total annual trading volume hit $2.6 trillion—exceeding Coinbase’s $1.4 trillion—with annualized revenue of $800 million–$1.3 billion. The platform allocates 97% of fees toward secondary-market buybacks and burns of its native HYPE token—repurchasing ~$1.3 billion annually, equivalent to 7% of its total market cap. Its burn rate is 4–5x Ethereum’s and 14x Solana’s. With zero venture funding, it sustains a closed-loop value model via community airdrops and fee-driven buybacks—its trading volume depends solely on user demand, bearing no correlation to Bitcoin’s price. During Bitcoin’s bear market, Hyperliquid’s scale grew逆势.
Another standout is prediction market leader Polymarket—valued at $20 billion, with $250–300 billion in annual trading volume and $365 million in annualized fees. Its daily active users grew 2.5x over five months; it launched a platform-native USD stablecoin, and its token is set to list soon. Polymarket’s products focus on elections, sports, and global events—demand is wholly decoupled from Bitcoin’s price action.
These projects now follow traditional corporate valuation logic—revenue, user scale, and multiples—precisely signaling industry maturity.
New Sector Tailwind: Privacy as a Scarce Resource
If Bitcoin’s transparent, surveillable ledger was yesterday’s default, privacy is today’s upgrade—a sovereign, untraceable currency uniquely possible onchain. Yet how users access this currency differs fundamentally—and that difference is critical.
Self-hosted privacy. Zcash (ZEC) surged 70% in one week, approaching a $10 billion market cap—up over 45x from its 2024 lows—delivering independent price action during Bitcoin’s consolidation. Its fundamentals are robust: privately transferred volume rose from 11% to 30% last year; most private assets never return to public chains, tightening circulating supply amid rising demand. Regulatory pressure once seen as a headwind has instead accelerated privacy adoption: Robinhood listed ZEC spot trading; Grayscale filed the industry’s first privacy-coin spot ETF. Privacy has evolved from a niche use case into a long-term investment thesis. Yet ZEC requires separate token purchase and chain switching.
Cross-chain universal privacy. NEAR enables users to transact natively across Bitcoin, Ethereum, and Solana—without buying privacy tokens or migrating assets cross-chain—leveraging onchain signature tech. No wrapped tokens. No bridge risks. Private key custody is secured via a decentralized multi-party computation network. Combined with confidential intent protocols, users can execute private asset transfers across any public chain—counterparties and routing info remain fully hidden, enforced via privacy-focused sharding. Users retain assets on their original chains; privacy becomes an overlay service, universally composable.
This model is more disruptive than single-purpose privacy coins. Users needn’t hold ZEC or leave Ethereum or Bitcoin ecosystems—privacy shifts from an exclusive asset class to an inherent feature of all transactions.
The New Coordination Layer for the Multi-Chain Era—Replacing Bitcoin’s Hub Role
Across the broader crypto landscape: the industry is no longer converging but proliferating—multi-chain coexistence and ecosystem expansion are accelerating; USD stablecoins have become the universal base currency; and AI agents—autonomously holding credentials, calling APIs, and moving funds—have emerged as a new participant class.
This sprawling multi-chain + agent ecosystem urgently requires interoperable infrastructure. For the past decade, Bitcoin filled that role. Now, that void is being filled by a new coordination-and-privacy layer: cross-chain signing, USD settlement, private transactions, and autonomous agent execution.
NEAR is targeting exactly this space. It enables AI agents to settle privately in USDC, performs confidential computation via hardware security enclaves, and positions its signature network as the key-management hub for the agent economy—offering users and bots cross-chain, privacy-preserving services without tying them to any specific chain.
Other live products in this category include Venice. It focuses on privacy-first AI applications, attracting large numbers of Web2-native users; its native token VVV earns stakers a share of AI inference revenue; the project has burned over 40% of its circulating supply via product-driven buybacks—demand is tied to AI usage, and its token price is decoupled from Bitcoin.
A new industry center of gravity has clearly formed—not around a single token, but around foundational infrastructure, with real-world projects building atop it to generate genuine value.
Summary
Put it all together: USD is the industry’s universal cash; tokens like HYPE, POLY, ZEC, NEAR, and VVV represent equity stakes in enterprises; the cross-chain privacy layer is the connective infrastructure; and Bitcoin is merely one component within the ecosystem. AI has captured macro-level speculative capital, physical gold has absorbed safe-haven demand, and stablecoins have monopolized the reserve-currency function—triple pressure rendering Bitcoin’s former glory obsolete.
For the past decade, the entire industry watched Bitcoin’s price—every altcoin moved in tandem. That era is over. Today, judging a project’s merit aligns with evaluating traditional companies: Does it generate real revenue? Does it have active users? Can its token capture value from the project’s growth?
Stop using Bitcoin’s price to gauge crypto’s health. Focus instead on project revenue, user growth, and foundational cross-chain infrastructure—enabling private cross-chain transfers, USD settlement, and human-machine interoperability.
AI seized macro-level speculative capital; USD stablecoins seized the reserve-currency mantle; and new foundational protocols have assumed the responsibility of connecting the entire industry. Bitcoin falling below $70,000 isn’t crypto’s demise—it’s the historic inflection point where crypto finally breaks free from Bitcoin’s gravitational pull.
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