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Forbes
2 hours ago
- Business
- Forbes
Economists Are Still Puzzled By Bitcoin—Should Anyone Be?
When one of the world's leading macroeconomists publicly apologizes for underestimating Bitcoin, it's worth paying attention. Ken Rogoff is a formidable scholar, and over the last decade—from my professor days at MIT to the design of Libra—I've learned a great deal from conversations with him. He has trained some of the best macroeconomists in the market, and I was fortunate to persuade a few to take crypto seriously, work with me over the years, and help move the space forward. But on Bitcoin, even after his mea culpa, Rogoff is still wrong. And I don't blame him. Much of what Bitcoin is, and represents, is an architectural departure from the macro playbook of recent decades. When I was a junior professor trying to understand cryptocurrencies and designing the MIT Bitcoin experiment, many senior colleagues worried I was throwing away a promising academic career on what they saw as a Ponzi scheme. As his Harvard colleague Rebecca Henderson has shown in her pioneering work on innovation, the changes that truly challenge incumbents are architectural—subtle structural shifts in how the pieces fit together. They're hard for those steeped in the status quo to grasp—even when they want to—so they get dismissed until they're obvious. Bitcoin is one of those architectural innovations in how we think about money and financial infrastructure. That's why many economists have a visceral reaction: it runs against much of what they've been taught and believe in. Concede the textbook: when done well, monetary policy can be extremely helpful. Confront the practice: few central banks are truly independent, fewer still consistent. Treat Bitcoin as a neutral asset and financial infrastructure, and the true pattern comes into focus. A Digital Gold Rush In a gold rush, it is important to not get caught in the frenzy—unless you're selling shovels and you profit regardless of the outcome. But is Bitcoin just a frenzy? More than a decade on, the answer is no, for a simple reason: Satoshi Nakamoto solved a thorny computer‑science problem—the double‑spending problem. Before Bitcoin, any digital money needed someone to control the ledger—a central bank, financial institution, or wallet provider. With cryptography and incentives, Satoshi created a currency that's scarce, hard to copy, and neutral: no one's in charge of defining ownership or recording transfers. Bitcoin's neutrality is novel. Though often compared to gold, its properties are different enough to be category‑defining. Yes, both are scarce, both swing in price, and both hold value because society agrees they do. Gold has industrial and jewelry uses, but most of its value comes from its role as a store of value. And while gold has the advantage of centuries, as more of life moves online, a digitally native asset like Bitcoin has unique advantages—from spending to custody. Finally, Bitcoin's utility goes beyond the asset: its network can operate as an open, neutral settlement layer—especially as scaling tech raises throughput to meet real‑world payments demand. What is a neutral form of digital money—and an open protocol for moving value—worth to society? Unpacking the Bitcoin Price Media and crypto community obsess over price swings, but on a log scale much of the drama fades and a steadier trend appears. That pattern matches the diffusion of innovation along an S‑curve—popularized by Everett Rogers—where a new technology works through successive segments of adopters. Bitcoin incubated within a small community of cypherpunks and developers. As its price rose, it drew a broader group of early adopters; then consumers and businesses—often in countries with unstable currencies—embraced it as an alternative savings tool and, at times, payment rails. Today, large financial institutions offer it, and sovereigns increasingly eye it to shape fintech and investment strategy. This diffusion process, combined with Bitcoin's fixed 21 million supply, inevitably translates the S-curve into a slow and steady price growth. So while regulatory and market uncertainty drive short-term swings, over longer periods of time addressable‑market expansion explains more of the data. What's Bitcoin's equilibrium price? Unknown—and it hinges on where we are on the S‑curve. If Bitcoin stays niche, the price could stall. If it goes truly mainstream, further exponential growth is possible. Investors model this against gold, the value of payment and card networks, and more. It's also prudent to consider the risk that some technological breakthrough or failure may render Bitcoin obsolete. Reassuringly, despite billions raised by would‑be alternatives, none has matched Bitcoin's network effects or institutional acceptance. Money‑As‑Software As our tools for recording debits and credits have evolved, so has our idea of money: from shells and beads to salt, metals, paper notes, and ultimately database entries—alongside the rise of central bank independence. Through booms and crises we've oscillated between harder and more flexible money—a pendulum swinging between the needs of creditors and debtors. Given that history, it isn't unreasonable to think that a hard, neutral money secured by cryptographic keys could play a real role in global finance—and possibly be what comes next. Like every form of money before it, Bitcoin has value because enough people agree it does—and as consensus grows, its trajectory looks more like gold's. That belief powers the 'all‑in' Bitcoin treasury companies—Strategy, Trump Media & Technology Group, and Twenty One—backed by SoftBank, Tether, and the Commerce Secretary's son's firm, Cantor Fitzgerald. Their logic: if Bitcoin becomes the ultimate safe haven, accumulate as much as possible—even with risky leverage—so long as interest and principal can be serviced in dollars. But there's a flipside to expectation‑driven value: if, for any reason, society stops believing Bitcoin will reliably store value and buy future goods and services, its price could collapse toward zero. Fiat currencies experience something similar when faith in governments' balance sheets fails, and while Bitcoin can't be debased, other shocks could trigger a comparable loss of trust. Ironically, reckless, leveraged buying by large Bitcoin‑treasury companies—meeting a sharp market correction—could be what undermines confidence in Bitcoin's progress along its S‑curve. Even then, the underlying innovation is likely to endure: as neutral infrastructure, it disintermediates, cuts costs, and creates real economic value—not just regulatory or tax arbitrage—a puzzle worthy of economists' attention, Rogoff's included.
Bloomberg
2 hours ago
- Business
- Bloomberg
BofA's Tech Chief Says AI Delivers Returns for the Bank
Bank of America's new Chief Technology and Information Officer Hari Gopalkrishnan says the bank and its customers are seeing returns from AI investments. He discusses the bank's efforts and an MIT study showing that generative AI investments aren't paying off for most enterprises with Caroline Hyde on 'Bloomberg Tech.' (Source: Bloomberg)
Economic Times
3 hours ago
- Business
- Economic Times
Cracks in the AI hype? Warning signs suggest the Bubble could soon explode
In March 2000, Barron's asked, 'When will the internet bubble burst?' warning the pop could happen before year-end. On that same day, a top tech company saw its share price drop 60pc, and many others collapsed, wiping out trillions. Now, some Wall Street experts worry the same 'unpleasant popping sound' may hit the AI boom. On Tuesday, tech stocks fell sharply after a report from MIT said most AI investments give 'zero return' for businesses. MIT academics wrote: 'Despite $30-40bn in enterprise investment into Generative AI, 95pc of organisations are getting zero return'. Nvidia shares dropped 3.5pc and Palantir fell 9pc after the report. MIT's findings could be the pin that pops the tech stock bubble, which has increased US stock values by trillions. Since ChatGPT's launch in 2022, Silicon Valley has claimed AI chatbots will transform the economy, promising cost savings and productivity gains. MIT's report suggests the AI revolution has stalled, despite big investments, as reported by The Telegraph. MIT surveyed 150 business leaders and 350 employees, finding only 5pc of AI pilots generate millions in value; the rest show no measurable profit impact. Marko Kolanovic, former JP Morgan head of research, commented: 'Sounds about right for a bubble'. MIT found half of AI projects fail, 80pc of companies explored AI, but only 40pc actually deployed it. Only 20pc of enterprise-grade AI systems reached the pilot stage and just 5pc reached production. ALSO READ: Google Pixel 10 series and Pixel 10 Pro fold launched with AI features and new designs Many employees prefer using consumer AI products like ChatGPT on their own rather than corporate AI tools. The report emphasized: 'AI is already transforming work, just not through official channels'. Despite benefiting from AI, OpenAI CEO Sam Altman warned investors: 'Are investors overexcited? My opinion is yes… some people stand to lose a phenomenal amount of money'. Investors worry about SoftBank, which invested billions in OpenAI; its shares fell 7pc on Tuesday. OpenAI recently launched ChatGPT-5, which underwhelmed users; improvements were seen as small or incremental. Morgan Stanley predicts $3tn will be spent on data centres over three years, mostly fueled by debt, to support AI growth, as stated by The Telegraph. Morgan Stanley also projects AI could add $16tn to the S&P 500 through 40pc salary savings, though MIT's report suggests this may be unrealistic. Meta announced a reorganization of its AI division, including staff reductions, showing even big AI believers are cautious. Mark Zuckerberg has spent hundreds of millions to hire AI engineers at Meta, as per the New York Times the sell-off, the market hasn't collapsed completely; some analysts see it as just a speed bump. Dan Ives, tech analyst at Wedbush Securities, said skeptics of the tech rally will be proven wrong again. Nvidia will report results next week, potentially showing the true state of AI investments in major companies. Ives believes the tech bull cycle will continue for another 2-3 years, but many are still listening for the ominous pop, as mentioned by The Telegraph. Q1. Is the AI boom at risk of a market crash? Yes, experts warn that most AI investments show zero return, which could trigger a tech stock bubble burst. Q2. Are big companies slowing down their AI projects? Yes, many firms like Meta and SoftBank are cautious, with AI projects failing or being scaled back.
Time of India
4 hours ago
- Business
- Time of India
Cracks in the AI hype? Warning signs suggest the Bubble could soon explode
In March 2000, Barron's asked, 'When will the internet bubble burst?' warning the pop could happen before year-end. On that same day, a top tech company saw its share price drop 60pc, and many others collapsed, wiping out trillions. Now, some Wall Street experts worry the same 'unpleasant popping sound' may hit the AI boom . On Tuesday, tech stocks fell sharply after a report from MIT said most AI investments give 'zero return' for businesses. MIT academics wrote: 'Despite $30-40bn in enterprise investment into Generative AI , 95pc of organisations are getting zero return'. Nvidia shares dropped 3.5pc and Palantir fell 9pc after the report. AI investments struggle MIT's findings could be the pin that pops the tech stock bubble, which has increased US stock values by trillions. Since ChatGPT's launch in 2022, Silicon Valley has claimed AI chatbots will transform the economy, promising cost savings and productivity gains. MIT's report suggests the AI revolution has stalled, despite big investments, as reported by The Telegraph. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Top 15 Most Beautiful Women in the World Undo MIT surveyed 150 business leaders and 350 employees, finding only 5pc of AI pilots generate millions in value; the rest show no measurable profit impact. Marko Kolanovic, former JP Morgan head of research, commented: 'Sounds about right for a bubble'. MIT found half of AI projects fail, 80pc of companies explored AI, but only 40pc actually deployed it. Only 20pc of enterprise-grade AI systems reached the pilot stage and just 5pc reached production. ALSO READ: Google Pixel 10 series and Pixel 10 Pro fold launched with AI features and new designs Live Events Many employees prefer using consumer AI products like ChatGPT on their own rather than corporate AI tools. The report emphasized: 'AI is already transforming work, just not through official channels'. Despite benefiting from AI, OpenAI CEO Sam Altman warned investors: 'Are investors overexcited? My opinion is yes… some people stand to lose a phenomenal amount of money'. Big companies cautious Investors worry about SoftBank, which invested billions in OpenAI; its shares fell 7pc on Tuesday. OpenAI recently launched ChatGPT-5, which underwhelmed users; improvements were seen as small or incremental. Morgan Stanley predicts $3tn will be spent on data centres over three years, mostly fueled by debt, to support AI growth, as stated by The Telegraph. Morgan Stanley also projects AI could add $16tn to the S&P 500 through 40pc salary savings, though MIT's report suggests this may be unrealistic. Meta announced a reorganization of its AI division, including staff reductions, showing even big AI believers are cautious. Mark Zuckerberg has spent hundreds of millions to hire AI engineers at Meta, as per the New York Times report. Despite the sell-off, the market hasn't collapsed completely; some analysts see it as just a speed bump. Dan Ives, tech analyst at Wedbush Securities, said skeptics of the tech rally will be proven wrong again. Nvidia will report results next week, potentially showing the true state of AI investments in major companies. Ives believes the tech bull cycle will continue for another 2-3 years, but many are still listening for the ominous pop, as mentioned by The Telegraph. FAQs Q1. Is the AI boom at risk of a market crash? Yes, experts warn that most AI investments show zero return, which could trigger a tech stock bubble burst. Q2. Are big companies slowing down their AI projects? Yes, many firms like Meta and SoftBank are cautious, with AI projects failing or being scaled back.
Yahoo
6 hours ago
- Business
- Yahoo
US tech stocks slide after Altman warns of ‘bubble' in AI and MIT study doubts the hype
enthusiasm for artificial intelligence wavered Tuesday as major tech stocks sold off. Nvidia dropped 3.5% and Palantir nearly 10% after an MIT study claimed 95% of companies see no returns from generative AI, while OpenAI's Sam Altman warned of a potential bubble. The Nasdaq declined more than 1.2% this morning. Investors' long-running enthusiasm for artificial intelligence showed signs of faltering late Tuesday and early Wednesday morning as tech stocks tumbled. The tech-heavy Nasdaq declined more than 1.2% this morning. Nvidia, fresh off becoming the world's first $4 trillion company, sank 3.5%, while Palantir slid nearly 10%. The sell-off appeared to be sparked in part by an MIT report that claimed 95% of companies investing in generative AI are seeing no returns, and was potentially deepened by earlier comments from OpenAI's Sam Altman suggesting investors may be caught in an AI bubble. Late last week, Altman drew a parallel between today's AI frenzy and the 1990s dotcom bubble, when internet company valuations spiked dramatically before crashing. And while the MIT study attributed failures to corporate 'learning gaps' and flawed integration rather than actual AI model quality, the market reaction highlights growing concerns about AI's commercial viability. The Nasdaq logged its steepest drop since August, and the rout quickly spread overseas. Korea's SK Hynix, one of Nvidia's key suppliers, lost 2.9%, while chip giant TSMC slipped 4.2%. SoftBank, long bullish on AI, cratered more than 7%. However, Alibaba and Tencent barely dipped, and China's chipmaking champion SMIC even popped 3%. 'Tech stocks were under pressure yesterday, led by AI poster child stocks Palantir and Nvidia as investors worry the tech rally is due for a pullback/correction with the constant valuation arguments front and center,' Wedbush's Dan Ives wrote in a note on Tuesday. 'We are still in the early days of the AI Revolution as the use cases are just starting to massively expand as more companies recognize the value creation being driven by a handful of tech companies led by the Godfather of AI Jensen and Nvidia.' Concerns that investment in AI is racing ahead of sustainable growth are not new. High-profile figures, including Alibaba cofounder Joe Tsai and Bridgewater Associates founder Ray Dalio, have cautioned against the pace of the boom. Dalio has also likened today's Wall Street cycle to the run-up to the dotcom crash of the late 1990s. 'There's a major new technology that certainly will change the world and be successful. But some people are confusing that with the investments being successful,' he told the Financial Times earlier this year. Others see the risks as even greater. Apollo Global Management chief economist Torsten Slok argued last month that the AI surge could eclipse the internet bubble of the 1990s, pointing out that the 10 largest companies in the S&P 500 are now more overvalued relative to fundamentals than they were at the height of the dotcom era. This story was originally featured on
