Managing Editor’s Note: If you missed our colleague Larry Benedict’s “24-Hour Profit Windows” special event yesterday, there’s not a moment to lose…
The next calendar date is right around the corner. And if you’re ready to trade, you could pull in hundreds or even thousands of dollars in a single day.
To learn about Larry’s strategy and get your hands on his calendar of profit windows, be sure to catch the replay here.
There was certainly no shortage of excitement this week in high tech. In fact, I can’t remember the last time that there weren’t any incredible developments.
An odd one for this week was OpenAI CEO Sam Altman getting subpoenaed while on stage at an event in San Francisco. The subpoena was lawful and in connection with a criminal case for which Altman has been called as a witness. It was initiated by the group Stop AI, which is known for its concerns about the development of artificial intelligence.
It’s symbolic in a way. I am certain that we’ll continue to see more protests and lawsuits as job displacements increase as a result of the employment of artificial intelligence. And every step closer to AGI will only increase societal concerns. This will be especially true for players like OpenAI, Anthropic, and Google, which have proven to make concerted efforts to rewrite history and infuse their AI models with their own politics rather than the pursuit of evidence-based truth and balanced responses to complex issues.
No better example can be seen than by simply comparing the quality of xAI’s just-launched Grokipedia versus the heavily biased and often completely incorrect Wikipedia. I’ll be writing about this in a future Bleeding Edge, but for now, the most important takeaway is to immediately stop using Wikipedia and tell your kids, grandkids, and friends to use Grokipedia as their only source of an online encyclopedia. It’s phenomenal, and it’s only version 0.1.
There was also a sudden interest in space-based computing as a result of Google’s announcement of Project Suncatcher. The idea is to launch data centers into space and power them with solar power… The cooling comes free naturally. We’ll definitely explore this idea some more in the very near future.
If that wasn’t enough, the largest incentive-based compensation package was voted in by more than 75% of Tesla shareholders for Elon Musk for the next decade at the helm of Tesla. It is worth almost $1 trillion and is comprised of 12 tranches of stock that would result in Musk increasing his ownership of Tesla to 25% in the event that Tesla becomes worth $8.5 billion.
I know that it sounds like a crazy comp package, and it is. But consider this. Musk built Tesla from the ground up. It became the most successful EV company in the world and has built the #1 selling car in the world. Musk solved autonomous driving technology, launched a robotaxi network, and is leading the world in intelligent general-purpose robots. He has made his shareholders very rich, and Tesla is now worth about $1.4 trillion.
If he can increase Tesla’s value to $8.5 trillion, he will have $7.1 trillion of value for his shareholders. His roughly $1 trillion would represent about 14% of that value created. Not so unreasonable, and only obtainable if he hits those targets. Autonomous vehicles and general-purpose intelligent humanoid robots will benefit the world in incredible ways and save millions of lives.
I want him and his team to be successful and motivated to achieve these incredible feats. And if we’ve learned anything about Musk, when he has additional resources, he puts them to work in incredibly productive ways… like preserving freedom of speech and working toward making the human race a multiplanetary species.
Something to think some more about this weekend. I hope you have a wonderful one.
Jeff
I am a member of your Near Future Report and have started following your crypto analysis in the newsletter. I am still learning about crypto and appreciate your newsletter.
I have been learning about the Bitcoin halving cycle. What is your opinion on the future halving cycles and their effects on the price of Bitcoin? I know from past cycles that there seems to be a large decrease in Bitcoin price every four years. This is intriguing, as there seems to be a great deal more factors affecting the price now than in the past.
I know you cannot make personal recommendations. But I am interested in your general opinions about the future patterns of bitcoin halving cycles. Thank you.
– Steven R.
Hi, Steven,
Thanks for sending in your question.
The Bitcoin halving cycles have been the main driver of bull and bear markets throughout Bitcoin’s history.
To understand just why, we need to first grasp what a halving is. A halving is an event where the new supply rate of Bitcoin is cut in half. This happens every 210,000 blocks.
A block is a batch of transactions that the network agrees on to be the current state of the network. And these blocks are created approximately every 10 minutes.
This means it takes about four years for a halving to take place.
Bitcoin’s monetary policy has a maximum amount of supply that will be created. It’s 21 million Bitcoin. It’s literally written into Bitcoin’s software code. And there were no Bitcoins in existence until the first block was mined or approved by the network. That first block came with a 50 Bitcoin reward. And each subsequent block came with a 50 Bitcoin reward.
There have been four halvings to date since Bitcoin’s first block on January 3, 2009. The current rate of new Bitcoin being created every 10 minutes is now 3.125 BTC per block.
This means the current rate of supply inflation is about 0.825% per year.
The hard-coded supply or issuance schedule essentially makes Bitcoin scarcer over time. That’s because less supply is entering the market than before a halving date.
And this supply dynamic tends to dictate bull and bear markets for the currency.
We can see these halving dates – and subsequent price action surrounding these dates – in the chart below.
The main item that tends to stick out is how the most recent halving event hasn’t resulted in the same moves to the upside as prior events.
It’s something that causes many to question if Bitcoin’s halving events are still relevant to the asset, just as you inquired, Steven.
And the truth here is that halving events likely don’t impact Bitcoin as much as they did previously. The reason is twofold. The first is because of that inflation rate mentioned earlier.
A change to an inflation rate that is already sub 1% isn’t going to cause much of a market impact, like it did when Bitcoin’s new supply rate dropped from 50 BTC per block down to 25 BTC per block.
The second reason is that Bitcoin is becoming an asset that is truly global. The liquidity and volumes that exist in its market are substantial. We covered it yesterday in Bitcoin’s Existential Crisis.
What matters more to Bitcoin is access. How easy is Bitcoin to buy and store for retail, institutions, and even sovereign nations? This has been getting easier and easier with each passing year.
And right now, we are at the cusp of legislation that makes it even easier for some of the deepest pools of capital to buy, store, and hold Bitcoin and even other cryptocurrencies in a compliant manner.
This bottleneck is part of why the popular company MicroStrategy (MSTR) has been such a popular stock to purchase for these larger entities. They don’t need to worry about storage since the stock sits in existing brokerage accounts and follows common reporting practices. They can easily hedge their exposure. And buying or selling the stock won’t dramatically impact the price of Bitcoin since it’s a derivative.
But that’s starting to change, and upcoming legislation will change this dynamic for the largest possible buyers.
It’s why we’ve been following the progress happening in Washington, D.C., so closely, as the impact is gearing up to be far more significant than what a halving can do to the price of Bitcoin and cryptocurrencies at large.
And despite the delays in Congress caused by the silly government shutdown, progress is still being made behind the scenes on the CLARITY Act, which is the comprehensive bill regarding market structure for digital assets. The passing of the CLARITY Act will have a far more significant and positive impact on the price of Bitcoin and other digital assets than the last having that took place.
Hi Jeff, can you explain how the Petro Dollar agreement with Saudi Arabia not being renewed by Saudi Arabia would impact the demand for dollars worldwide, and specifically how it could impact the U.S. dollar’s status as the World’s Reserve Currency? What would this mean for the price of gold and the impact on the United States economy… interest rates, real estate prices, etc., etc. Thanks.
– Todd L.
Hi, Todd,
This was a hot topic of discussion last year. There were some sloppy and politically motivated journalists who tried to spread rumors that the petrodollar agreement had not been renewed in June 2024.
It was all a bunch of nonsense. There is now a renewal date, and the agreement is still in place between the U.S. and Saudi Arabia.
For everyone’s benefit, the petrodollar agreement was made to price oil exports in U.S. dollars and for Saudi Arabia to cycle excess dollars into U.S. assets – primarily, but not limited to, U.S. Treasuries. That agreement is still 100% in effect today, as evidenced by the fact that 80% of global oil trade takes place in U.S. dollars.
But just as a thought experiment, let’s think about what would happen if there were a major shift away from pricing oil in U.S. dollars:
The practical impact of this would be:
With that said, here are the realities:
Good question and a great thought exercise. And I’m happy to say that the U.S. doesn’t have much to worry about, and I see a strengthening economy in the years ahead.
I just finished reading about Bittensor (TAO), and I’m wondering if the human factor of finding enough miners is something we need to worry about, especially at the rate DeFi is growing. Crowdsourcing seems a rather shaky way, by itself, to attract future miners.
Is this being addressed, or are there always qualified people out there who are ready, willing, and able to be miners?
I apologize if the question is elementary. I’m just a newbie.😄
– Nina G.
Thanks for the interest, Nina.
You raise a great question regarding how many miners are out there.
And as you mention, with DeFi or decentralized finance, the growth rate is truly mind-boggling. U.S. dollar stablecoins, for instance, are about $315 billion in circulation, with $110 billion happening just in the last year.
These stablecoins are often used to interact with DeFi protocols in numerous ways, such as swapping assets, earning yield, and borrowing capital.
The financial ingenuity taking place is incredible to watch and take part in.
What we should realize when it comes to these protocols is that they don’t depend on miners to operate. Most of the supply and activity takes place on Ethereum and its layer-two networks. This means the applications in these ecosystems are using the proof-of-stake security of the Ethereum network to ensure transactions are verified.
That’s what is so incredible about smart contract networks like Ethereum: They don’t require fresh waves of capital or validators to run the network. It’s a scalable solution.
When it comes to new networks and projects that require miners, the point you raise is worth considering.
But if we focus on projects such as Bittensor specifically, we can see that not all mining operations are the same.
We can think of Bittensor like an arena for small technology games being played. These games are constantly being played each day, and the winners get rewarded based on the rules of the game.
What’s interesting is that these games often involve the output of certain AI solutions, such as an LLM, an AI/ML model predicting prices, or some generative AI image output.
These solutions, in turn, act as off-the-shelf solutions for other builders to create consumer-facing applications.
This unique setup means the incentives of the miners help drive the quality of the end product.
There aren’t many projects like this in the market. And that’s part of the reason it’s been so successful in attracting miners to the network.
If a new project were to spin up a competitor to Ethereum, Solana, or other popular smart contract layer-one networks, it would be incredibly difficult to attract new validators to the network. That’s mostly because the likelihood that the network will succeed is very low.
Meanwhile, Bittesnor has a solution that is unique, and it’s part of why miners are attracted to take part in providing resources to the network.
And to answer your question on qualified individuals… These projects keep producing solutions that make it easier for new participants to get started. The documentation gets better, and new services get introduced that can make mining as simple as plug and play.
The industry is very mature around mining, and many businesses exist to provide such services to new projects. This means crowdsourcing people to get involved has become more about reaching out to professional service providers. As long as the mining economics make sense for a miner, a project can attract them.
The ecosystem has come a long way from the days of hobby miners providing validation or mining services to a network. It has since become a field of highly specialized businesses that provide reliable uptime and resources for existing and new projects coming into the ecosystem.
This is also why the investing themes of the current day are less about finding new layer-one networks and more about applications exposed to the stablecoin and new financial ecosystem coming our way using public blockchains.
Hi Jeff,
I always enjoy reading your articles.
Your latest article on needing to be ready for quantum decryption got me thinking. What recommendations do you have for individuals to protect their private information from the risks of quantum decryption?
Thanks, and keep up the great work.
– Steven H.
Thanks, Steven,
That’s a tough one to answer, because no single individual would have the power today to protect against a cyberattack with quantum computing resources.
But there are some things that we can do to protect ourselves:
With that said, the most important thing to happen to protect everyone from quantum-based cyberattacks is for the IT industry to quickly adopt and implement the NIST post-quantum encryption standards. I covered that quite a bit in my recent Quantum Week in The Bleeding Edge. (It was more like a quantum week and a half, as there were so many interesting topics to write about with regards to quantum computing.)
What I’ll be looking for in the near future is IT service providers that are first adopters of the NIST post-quantum standards. As individuals, we are empowered to shift the use of our digital services to companies that are proactive in adopting these standards.
And of course, you can be sure that you’ll read about those companies in The Bleeding Edge and in my other investment research publications.
AI Agents are taking over the markets, be that stocks, crypto, or derivatives of both. As a mere human, I am painfully aware that I cannot compete or even keep up. So, if you can’t beat them, join them! That’s where I need help!
I have insufficient expertise to even know where to get my own version of Iron Man’s “Jarvis.” Can you help point me in the right direction, given the need for privacy and control, as the agent will have access to wallets and accounts?
– Gary L.
Gary, that is a very relevant and timely question. I also like your attitude. Whether we like these technological innovations or not, they are coming, so to whatever extent we can, let’s learn about them and find ways to benefit from them.
AI agents are becoming more commonplace with each passing week, if not day. The improvement in developer tools and documentation is reaching a point where it’s becoming much easier to deploy an AI agent into the market.
What’s more, wallet tooling has greatly improved over the last year. This wallet tooling is made possible thanks to what we call wallet abstraction. It’s where a lot of the complexities of operating a wallet are simplified.
This includes moving assets across various networks and setting up what is known as session keys. It’s technology created by companies such as Privy, Dynamic.xyz, and Safe Wallet.
These session keys allow users to grant permissions to services or even third parties.
This might seem rather scary from a security standpoint. After all, it means giving the rights to manage assets in your wallet to some other entity, individual, or autonomous service. But these session keys are set up to restrict what actions can take place by the allowed “manager.”
AI agents are one of the growing use cases for these session keys. It allows them to move assets 24/7/365 without requiring the owner to be sitting at their desk confirming each action.
Instead, the AI agents might only be able to swap assets with specific protocols. It might also lack the permissions to simply send assets to a wallet that is not already approved or whitelisted by the user.
The permissions help define what can happen via the session keys. You can even specify how long the session keys are valid for.
The technology is quite literally changing the way users interact with public blockchains.
It’s a theme we’ve been focused on at Permissionless Investor. In fact, the two most recent projects added to our portfolio have built AI agents for the market. One of them is handling more than $20 million in assets with 50,000 agents deployed to date, creating nearly 700,000 autonomous transactions.
The future users of public blockchains won’t be clicking a screen to open a wallet, connect to a website, or confirm transactions… It’ll be done via a swarm of agents that handle your day-to-day finances, manage your portfolio of assets, and scour the markets for opportunity.
You’ll simply be managing it all with a simple prompt such as “send Alice $50 for the Thanksgiving meal” or “move the yield I’ve earned over the last 30 days to the wallet attached to my debit card.”
That’s what the future of public blockchains is shaping up to be: the future of finance.
And these agents at the nexus of AI x Crypto are one of the most incredible opportunities available in the market.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
