Musk speaks out for the first time in three years: Bitcoin benefits from the AI arms race, fiat "false currency" will depreciate

Tesla CEO Elon Musk posted on X platform on October 14 praising Bitcoin (BTC) for its energy-based anti-inflation mechanism, emphasizing that "energy cannot be faked" and criticizing fiat as "false currency."

Musk speaks out for Bitcoin for the first time in three years

On October 14, billionaire entrepreneur Musk posted a widely discussed message on the X platform. He wrote: "This is why Bitcoin is based on energy: you can issue fake fiat currency, every government in history has done this, but you cannot counterfeit energy." This statement directly points out the core value of Bitcoin's Proof of Work model - the economic security established through energy consumption, which cannot be created out of thin air by governments or any centralized institution.

This statement marks a significant shift in Musk's stance on Bitcoin. Since November 2022, Musk has made very few serious comments related to Bitcoin. This period coincided with the dark times of the FTX and Alameda exchanges collapse, which resulted in an $8.9 billion loss of investor funds and became a major catalyst for the subsequent crypto winter. FTX filed for bankruptcy on November 11, 2022, due to the misappropriation of user funds, and market confidence plummeted.

On November 14, 2022, shortly after the FTX collapse, Musk posted on X predicting: "BTC will pull through, but it may be a long winter." At that time, the price of Bitcoin hit the lowest point of the previous bear market at $16,000. Looking back now, Musk's prediction was quite accurate—Bitcoin indeed experienced nearly a year of tough bear market conditions before stabilizing and starting a new bull market at the end of 2023.

AI Arms Race: Catalyst for Fiat Depreciation

Musk's comments on October 14 were actually a response to a post by the well-known analyst Zerohedge. Zerohedge attributed the current strong momentum of Bitcoin and precious metals to the "fiat depreciation" required to fund the government-sponsored AI arms race. This race is unfolding between the world's largest economies, particularly the United States and China.

"AI is the new global arms race, and capital expenditures will ultimately be funded by governments (the US and China)," Zerohedge wrote in a post on X on Tuesday, attributing the recent price increases of Bitcoin, gold, and silver to "the devaluation funding the AI arms race." This perspective reveals a key logical chain: AI development requires astronomical amounts of capital investment → governments will fund it through printing money → fiat purchasing power declines → scarce assets (Bitcoin, gold) increase in value.

This analysis is not without basis. Major global technology companies and countries are currently investing heavily in the field of AI. The R&D expenditure on AI by tech giants such as OpenAI, Google, and Meta has already reached hundreds of billions of dollars, and the computational cost required to train the most advanced large language models is increasing exponentially. More critically, AI is regarded as a strategic technology related to national security and economic competitiveness, making it impossible for governments of various countries to stand idly by; they will inevitably intervene through fiscal expenditure.

Historical experience shows that when governments face significant strategic investment needs, printing money is often the most convenient choice. Whether it was the military spending during World War II, the space race during the Cold War, or the quantitative easing after the 2008 financial crisis, the expansion of government balance sheets has always been accompanied by a weakening of fiat purchasing power. If the AI competition truly evolves into a war of capital consumption on a similar scale, then Bitcoin's value proposition as a fixed supply asset will be even more pronounced.

Energy-Supported Anti-Inflation Mechanism

Musk's emphasis on Bitcoin's "energy-based" characteristics touches on the core of cryptocurrency economics. Bitcoin's proof-of-work mechanism requires miners to consume real electric energy through calculations to compete for the right to record transactions, ensuring that the creation of new Bitcoins must incur actual costs, rather than being printed out of thin air.

This stands in stark contrast to the fiat system. Central banks can create trillions of currency out of thin air by simply typing on a keyboard in a computer, without any physical resources to back it up. As Musk said, "Every government in history has done this." From the dilution of silver coins in the Roman Empire, to the hyperinflation of the Weimar Republic, to the modern era of infinite quantitative easing, the devaluation of fiat currency is a recurring script in human financial history.

The fixed supply of Bitcoin (capped at 21 million coins) combined with energy-based mining costs creates an anti-inflationary economic model. Theoretically, as energy costs rise or mining difficulty increases, the "production cost" of new Bitcoins will also increase, providing a dynamic bottom support for Bitcoin prices. When prices drop below mining costs, some miners will shut down, and the difficulty adjustment mechanism will lower the difficulty, reducing costs until a new equilibrium is reached.

Current data shows that the sustainable energy usage rate for Bitcoin mining has reached a historic high of over 55%. This data comes from modeling research by climate tech venture capitalist Daniel Batten and Bitcoin analyst Willy Woo. The improvement in this energy structure partially responds to Musk's past criticisms of Bitcoin's environmental impact and adds a green dimension to the "energy-based" value proposition.

TSL and Bitcoin's Complex Relationship

(Source: CoinTelegraph)

Musk's relationship with Bitcoin has been filled with dramatic twists. In May 2021, electric vehicle manufacturer TSL suddenly announced it would stop accepting Bitcoin as a payment method for vehicle purchases, citing environmental concerns. This decision caused the price of Bitcoin to plummet by 6% within an hour, dropping from $54,800 to about $51,600. At that time, the entire crypto market felt the power of the "Musk Effect."

Musk's main criticism at the time was that Bitcoin mining excessively relied on fossil fuels, particularly coal power. On June 13, 2021, he stated that once it could be confirmed that at least 50% of the energy used by the Bitcoin mining network comes from clean energy, Tesla would allow BTC transactions. This promise has yet to be fulfilled, although according to the latest data, the renewable energy usage rate of the mining network has already surpassed this threshold.

It is worth noting that although Tesla has suspended BTC payments, the company has not sold most of its Bitcoin holdings. Tesla purchased $1.5 billion worth of Bitcoin at the beginning of 2021 and still holds a considerable amount of BTC to date. This "hold but not use" attitude has sparked ongoing speculation in the market: When will Tesla resume Bitcoin payments?

Currently, TSL has not made any official comments regarding the possible resumption of Bitcoin payments. Although Musk's tweet on Tuesday praised Bitcoin, it did not mention TSL's payment policy. Investors should note that Musk's personal views do not necessarily translate immediately into TSL's corporate decisions.

Potential Catalysts for Bitcoin Price

Musk's renewed voice, combined with the depreciation expectations of fiat caused by the AI arms race, provides several potential bullish catalysts for Bitcoin prices.

First is the change in narrative level. When one of the most influential entrepreneurs in the world publicly praises Bitcoin's anti-inflation characteristics and contrasts it with "fake fiat", this message reinforces Bitcoin's positioning as "digital gold". In the context of a traditional financial system facing a crisis of trust, this narrative has a powerful psychological impact.

Secondly, it is the coordination of the macro environment. If the AI development competition truly leads to massive money printing by governments around the world, inflation expectations will rise, and investors will seek assets that can preserve value. Gold has already reflected this trend (recently hitting a historical high), and Bitcoin, as a more liquid and divisible alternative, should theoretically share in this wave of hedging demand.

The third is the continuous deepening of institutional adoption. Although Musk's tweets do not involve institutional movements, the current backdrop is that Bitcoin spot ETFs have been approved in the United States, attracting billions of dollars in capital inflow. If more traditional financial institutions incorporate Bitcoin into their allocations to hedge against fiat depreciation risk, the demand side will receive substantial support.

However, investors also need to be aware of risk factors. Musk's statements have always been highly volatile, and his attitude may change at any time. In 2021, he halted BTC payments due to environmental issues, and he may shift again in the future due to other considerations. Moreover, the depreciation of fiat resulting from the AI arms race is merely an analyst's prediction, and the actual evolution may differ from expectations. If governments adopt more cautious fiscal policies, or if AI development costs are lower than expected, this bullish logic will weaken.

From a technical perspective, Bitcoin currently needs to break through key resistance levels to validate bullish expectations. If Musk's statements can drive an improvement in market sentiment, coupled with capital inflows, it may serve as a catalyst for price breakthroughs. However, if it remains at the level of rhetoric without actual actions from entities like TSL, the impact may be short-lived.