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The Great Repricing

Michael Green AKA Professor Plum on X, has a fascinating post on the future of Bitcoin.

Please consider The Great Re-Pricing: When the “Digital Gold” Bill Came Due

In April 2025, I asked a simple question in my note, “What is Gold?”:

“If the $1.7 trillion now sitting in bitcoin had flowed into bullion instead, what would the yellow metal trade at?”

My models suggested that bitcoin acted as a “shadow discount” on Gold, depressing its price by 30–50% by diverting monetary flows into a faster, digital horse. I argued that if those flows ever reversed—if the “Passive Bid” for bitcoin evaporated—Gold would violently re-rate to where it belonged.

Eight months later, we have our answer. In 2025, bitcoin and Gold flows became negatively correlated.

Now, this is not a STRONG relationship, and I’m not remotely going to suggest that the only source of gold flows is coming from bitcoin. But it IS happening. And as I noted last week, it’s an indication of what I believe is the most significant asset rotation of the second half of the 2020s — not a “rotation” from Tech to Value, but a rotation from Energy Consumers to Energy Conservers/Producers.

The bitcoin “Store of Value” trade has fundamentally broken in two. Unlike gold, which is mined with energy, but then remains “gold” regardless of how much mining energy is expended, bitcoin requires continual energy expenditure to maintain the bitcoin network. The mining stops and bitcoin stops; the mining slows, and the bitcoin network’s “safety” and performance degrade.

The “Jaws of Death” (bitcoin’s insolvency)

To understand why Gold is soaring, you first have to understand why bitcoin is bleeding.

In the “Post-Capitalist” era of zero interest rates and surplus energy, we believed we could solve financial problems with code. We ignored the Second Law of Thermodynamics: entropy. Maintaining a digital ledger requires a constant injection of ordered energy.

This chart is the receipt for that entropy [Lead Chart]

I have noted this relationship in many discussions of bitcoin. It’s important to remember what “bitcoin” actually is — the token issued to miners (accountants) for maintaining the network. If the price of bitcoin falls, miners receive less compensation for doing the work.

• The Divergence: Since October 2025, bitcoin’s price has crashed ~27%.
• The Stickiness: The network Hashrate (the cost to maintain the bitcoin network) has only dropped ~5-8%.

The miners are currently doing the same amount of work for 27% less revenue. They have billions in sunk capex, and as long as bitcoin remains above the marginal cash cost of mining (~$85K), they will keep mining. This, in itself, is nothing new. It has always been the case that mining has periods of unprofitability. With an “all in” (including depreciation cost) of roughly $130K, the average public miner is now deeply unprofitable and selling everything they mine to generate cash. All else equal, the hashrate must fall, and miners must move to lower cost regions as equipment depreciates and existing power purchase agreements (PPAs) roll off into new, higher pricing.

The difference this time is that bitcoin miners are no longer using “surplus” energy (debates about renewable sources have notably disappeared), and are now bidding against Microsoft and Amazon for “Machine Food” (electricity). This is not a “dip”; it is a squeeze. The marginal miner is underwater, burning treasury (selling bitcoin) to keep the lights on, hoping for a bailout that isn’t coming. While bitcoin survived previous drawdowns because “true believer” miners had no competing use for their power connections, today AI datacenters pay 3-4x the revenue per kilowatt as bitcoin mining — and the miners are switching.

The resulting decline in hash rate won’t slow the supply of new bitcoin as the network difficulty adjustment will fall. But if the price remains elevated and the hashrate falls, the network becomes increasingly vulnerable to attacks from the remaining miners. Chinese concentration in 2021 has given way to US concentration. And US concentration, in a region where financial crimes are at least nominally punishable (e.g. FTX), is now giving way to a migration to Africa — where miners are perhaps “less incentivized” towards good behavior. If you really believe that the global store of value will be maintained by African hydro, and that once in place, those energy connections do not face the same AI arbitrage by adding high-speed data connections, I’m not really sure how to help you.

And all of this is occurring as the entire bitcoin network faces rising security risks from the emergence of quantum computing and another “halving” in 2028 (which will reduce revenue per hash by 50% unless the bitcoin price increases by 100%). A major capex boom to replace existing mining equipment while miners are barely hanging on and increasingly drawn to AI substitution ahead of a 50% revenue reduction in two years? Unlikely (but admittedly possible).

The “Passive Bid” Has Diminished

At the same time that network risks are rising, the demand side is diminishing. Bitcoin is not temporarily flow-driven. It is necessarily flow-driven. In the absence of endogenous cash generation, price discovery collapses to a reflexive equilibrium governed by marginal buyer demand and balance-sheet constraints.

For two years, the ETF complex provided a mindless, price-agnostic bid for bitcoin. That tap has slowed radically, and now bitcoin must find a new untapped bid. My hunch is that 2026 will start with “value” buyers, rebalancers, and tax-loss harvesting from 2025 returning to bitcoin ETFs and driving prices higher for a time.

All else equal, this would drive bitcoin’s price close to $110K and “complete” the distribution pattern that has been in play for most of 2025 as we transitioned from believers to return seekers. For most bitcoin holders, we’ve shifted from “faith” to “show me the money.” You don’t hold bitcoin as an ETF because you believe the world will collapse, AND you need an insurance policy. ETF buyers want returns. Absent endogenous cash flows (e.g. earnings, transaction fee share, dividends), bitcoin has no stabilizing feedback loop—only reflexive ones. Further declines do not summon value buyers; they merely test the resilience of belief. And while long-term holders may not SELL, they are no longer the marginal price setters; and as prices fall, their reduced balance-sheet capacity leaves them with less ammunition to buy, especially for leveraged balance-sheet buyers (e.g., MicroStrategy).

The Gold Restoration (The “Zero-Maintenance” Arbitrage)

While Western retail investors are paralyzed by their crypto drawdowns, Central Banks and the Global South are buying Gold at a record pace. Why?

Because existing Gold does not eat.

In a world of “Scarcity Economics”—where energy is rivalrous and expensive—the “Cost to Carry” an asset matters.

Bitcoin: Requires a massive, continuous calorie burn (electricity) just to prevent the network from collapsing. As energy prices rise (thanks to AI and the exhaustion of the 2010s surplus), the cost to maintain your “digital gold” rises.

Gold: Is chemically inert. It sits in a vault. Its maintenance cost is effectively zero and largely unaffected by existing value.

Bitcoin was the “marginal buyer” of energy in an era of surplus. That energy has finally found a “structural buyer” in AI. As the “Pig” (demographic demand) enters the “Python” (limited infrastructure), bitcoin is a luxury being squeezed out of the grid. The market has begun to realize that you cannot store generational wealth in an asset that competes with AI for power. You store it in the asset that exists outside the energy grid.

The Shadow Lifts

The hypothesis I made in April 2025 — that bitcoin was artificially suppressing Gold — is being validated in real-time. The capital fleeing the “Risk-On” speculation of crypto is not going to cash; it is going to the “Risk-Off” insurance of Gold.

We are seeing the removal of the “Shadow Discount.” The 30–50% premium that Bitcoin stole is flowing back to the King of Metals. In the “Electron War” of 2026-2030, the winner is the rock that does nothing.

That’s a well thought out post and one of the best I have ever seen on Bitcoin.

That does not mean he is right, but so far the thesis fits.

Ten Key Points

1. The bitcoin “Store of Value” trade has fundamentally broken in two. Unlike gold, which is mined with energy, but then remains “gold” regardless of how much mining energy is expended, bitcoin requires continual energy expenditure to maintain the bitcoin network.
2. Maintaining a digital ledger requires a constant injection of ordered energy.
3. The miners are currently doing the same amount of work for 27% less revenue. They have billions in sunk capex, and as long as bitcoin remains above the marginal cash cost of mining (~$85K), they will keep mining. This, in itself, is nothing new. It has always been the case that mining has periods of unprofitability.
4. The difference this time is that bitcoin miners are no longer using “surplus” energy.
5. AI datacenters pay 3-4x the revenue per kilowatt as bitcoin mining — and the miners are switching.
6. Another “halving” in 2028 will reduce revenue per hash by 50% unless the bitcoin price increases by 100%. 
7. The “Passive Bid” Has Diminished. For two years, the ETF complex provided a mindless, price-agnostic bid for bitcoin. That tap has slowed radically, and now bitcoin must find a new untapped bid.
8. Absent endogenous cash flows (e.g. earnings, transaction fee share, dividends), bitcoin has no stabilizing feedback loop—only reflexive ones. Further declines do not summon value buyers; they merely test the resilience of belief.
9. Bitcoin requires a massive, continuous calorie burn (electricity) just to prevent the network from collapsing. As energy prices rise (thanks to AI and the exhaustion of the 2010s surplus), the cost to maintain your “digital gold” rises.
10. Gold is chemically inert. It sits in a vault. Its maintenance cost is effectively zero and largely unaffected by existing value.

Halving – Point Number 6

The last Bitcoin halving occurred on April 19, 2024, reducing the block reward for miners from 6.25 BTC to 3.125 BTC, marking the fourth halving event in Bitcoin’s history and decreasing the supply of new bitcoins

The next Bitcoin halving is projected for mid-2028, around April 17-29, when the block reward for miners will be cut from 3.125 BTC to 1.5625 BTC.

The next halving will reduce revenue per hash by 50% unless the bitcoin price increases by 100 percent.

The Bitcoin belief is twofold (price follows the hash rate, and the hash rate always goes up).

That’s not always true. But over the long haul, it’s generally been true. Regardless, in an energy sensitive environment with demand coming from AI, halving isn’t what it used to be.

Meanwhile, if miners have better things to do with their energy than mine Bitcoin, the hash rate only has one way to go.

Bitcoin vs Hash Rate

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For other time frames see Blockchain Bitcoin Hash Rate.

America’s Biggest Bitcoin Miners Are Pivoting to AI

Wired reports America’s Biggest Bitcoin Miners Are Pivoting to AI

In the face of a profitability crisis, industrial-scale bitcoin miners are transforming their data centers into AI factories.

Across the US, an identical pattern is playing out at bitcoin mining facilities owned by a variety of operators. In the last 18 months, at least eight other publicly traded bitcoin mining companies—Bitfarms, Core Scientific, Riot, IREN, TeraWulf, CleanSpark, Bit Digital, MARA Holdings, and Cipher Mining—have announced plans to pivot either partly or wholly to AI.

The change reflects rabid demand among AI companies for data centers equipped to handle the energy-intensive workloads required to train their models. Ironically, as the AI arms race intensifies, large-scale bitcoin mining firms—which contributed to the AI boom by pouring billions of dollars into data center infrastructure—are being forced to reinvent themselves.

“Bitcoin mining created the blueprint for the AI compute boom and the modern data center,” says Meltem Demirors, general partner at the VC firm Crucible Capital, which invests in companies in the crypto, compute, and energy sectors. “They have found that their cost of capital is much lower if they go into the AI narrative. They have the powered shell, they’re ripping out the [mining machines], and their tenant is bringing the GPUs.”

A Perfect Storm

In the last few years, with advances in hardware, the amount of competition on the bitcoin network has increased at an exponential rate, meaning that winning a bitcoin reward has required ever more compute. In 2024, meanwhile, the size of that reward fell by half—as happens roughly every four years—to 3.125 bitcoin. Against that backdrop, the recent decline in the price of bitcoin to around $85,000—a 30 percent drop from its 2025 peak—has created a perfect storm that threatens the profitability of all but the most cost-efficient mines.

“The economics are terrible today,” says Charles Chong, VP of strategy at the crypto advisory firm BlockSpaceForce and former director of strategy at the bitcoin mining company Foundry. “If I buy a bitcoin mining machine today, I don’t know if I can make the money back.”

As of mid-November, a tiny minority of the largest publicly traded bitcoin mining companies stood to remain profitable at the current bitcoin price, according to research from the crypto investment firm CoinShares.

By comparison, the AI market promises superior margins and predictable revenues, codified in multiyear contracts with major tech firms. In the last few months, publicly traded bitcoin mining companies have announced more than $43 billion worth of AI and HPC contracts, CoinShares found.

“Bitcoin mining is still profitable,” claims Ben Gagnon, CEO at bitcoin mining company Bitfarms, which recently announced it would switch wholly to AI and HPC by 2027. “It’s that HPC creates so much more value per unit of energy and does so predictably for years into the future that the company can’t justify further investment into bitcoin mining.”

Bitcoin mining is still profitable … maybe … for now. It depends on the cost of energy and the price of Bitcoin.

But desirability to mine Bitcoin also depends on other offers, notably servers for AI rather than mining.

Michael Green addressed this point made by Wired.

A dramatic drop in bitcoin mining activity could increase the feasibility of what’s known as a 51 percent attack, whereby somebody hijacks bitcoin transactions by controlling the majority of the computing power directed at the network. For now, such an attack remains prohibitively expensive. But as the reward for bitcoin mining continues to fall every four years, the fear is that mining will no longer be economical. “It’s definitely a threat—and a serious one,” claims Chong, the BlockSpaceForce executive. “But how soon is an open question.”

Others are betting that bitcoin mining will become the sole preserve of sovereign states—like Bhutan, El Salvador, and the US—that cannot abide any threat to the value of the national bitcoin stockpiles they have accumulated. “Maybe people will mine at a loss,” says Demirors, “because it’s a matter of national security.”

MSTR Strategy Inc

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Corporate Strategy

Grok AI: MicroStrategy (now rebranded as Strategy, but still trading as MSTR) has positioned itself as a pioneer among public companies in adopting Bitcoin as a primary treasury reserve asset.

The core approach involves aggressively accumulating Bitcoin through various financing methods, treating it as a long-term store of value rather than a short-term trading asset. As of January 5, 2026, Strategy holds approximately 673,783 BTC, acquired at an average cost of about $74,000 per coin, representing over 3% of the total Bitcoin supply that will ever exist and making it the largest corporate holder.

This leveraged approach amplifies Bitcoin exposure. The company continues to double down, viewing Bitcoin dips as buying opportunities, and has influenced other firms to adopt similar “crypto treasury” strategies.

Liquidity and Debt Obligations: Aggressive capital raises have raised concerns about dilution (e.g., issuing more shares erodes existing shareholders’ value) and liquidity squeezes.

As of early January 2026, mNAV hovered around 1.02, meaning the stock is barely worth more than the underlying Bitcoin.

In summary, Strategy’s Bitcoin play is a high-conviction bet on long-term crypto adoption, but it exposes the company to amplified market risks, making MSTR a volatile investment vehicle rather than a stable tech stock.

Liquidation Threat

Strategy does not have any collateralized loans or margin calls tied to its Bitcoin holdings as of January 2026. The company repaid its previous Bitcoin-backed loan (from Silvergate in 2022) and currently holds its ~674,000 BTC unencumbered. Its debt consists primarily of convertible senior notes totaling around $8.2 billion, with no maturities until 2028.

There are no specific debt covenants that force liquidation at a particular Bitcoin price. That said, a prolonged severe drop in Bitcoin’s price could strain the company’s ability to service its ~$854 million in annual fixed obligations (mostly preferred stock dividends and minimal interest).

With a $2.25 billion cash reserve providing 2.5+ years of coverage, short-term dips—even below the $75,000 average cost basis—are manageable without selling Bitcoin.

However, if Bitcoin falls below approximately $13,000 (where the value of holdings roughly equals outstanding debt), the company could face insolvency risks, potentially leading to forced asset liquidation in a bankruptcy scenario. This figure assumes no additional capital raises, which Strategy has historically used to navigate downturns.

Dip Buying

Strategy has demonstrated a pattern of using available liquidity — including portions of its cash reserve — to aggressively buy Bitcoin during price dips, even as the reserve was initially positioned to cover fixed obligations like preferred dividends and debt interest. The company most recently exemplified this in late December 2025 and early January 2026, purchasing ~1,286 BTC for $116 million (at an average ~$90,391) while Bitcoin hovered in the high $80k–low $90k range, funded partly through concurrent equity sales that also bolstered the USD reserve to $2.25 billion as of January 4, 2026.

Strategy already reported a $17.4 billion unrealized loss in Q4 2025 from a ~25% quarterly drop. A deeper crash would amplify paper losses but wouldn’t immediately force action, as holdings are unencumbered (no collateralized loans or margin calls).

Strategy funds buys via equity ATM sales and convertibles. If stock trades at a discount to NAV and Bitcoin stays low, new issuances become dilutive or impossible without eroding shareholder value further. This breaks the “infinite money glitch” of raising capital accretively.

True forced liquidation isn’t triggered until Bitcoin falls to ~$12,000–13,000 (where holdings value ≈ total debt + preferred obligations of ~$15–16 billion). This is an 85–90% crash from current ~$90,000 levels — severe but within historical precedent (e.g., 2022’s 77% drop).

Strategy’s strategy has been to buy the dip. If one of these dip buys goes very sour, and investors refuse to buy additional convertible notes, the stock price is going to hell even if MSTR survives a genuine liquidity event.

What About the Whales?

That’s a very pertinent “whatabout” question. The term whale means huge holders of Bitcoin.

If whales take heed to what Green has said, there could be a massive “head for the hills” exit.

Regardless, someone has to hold every bitcoin ever mined (minus lost keys) all the way up and all the way down.

If whales believe the above, for any reason (even if it’s fundamentally flawed), Bitcoin will crash.

Technical Pattern

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Green noted a potential Head and Shoulders top (with the right shoulder not fully formed).

I note a rising wedge. Both are bearish patterns.

In this case, the technicals and the fundamentals are aligned.

Bitcoin Weekly Chart

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Dashed lines show support levels.

Bitcoin is on support now. There is support below at 75,000 at 55,000 and 40,000. If those break, you are looking at 25,000.

If support breaks things could get interesting. A 75 percent drop from the top, very routine with Bitcoin, would take the prices down to the low 30,000 range.

I prefer gold and silver.

The Debasement Trade

Gold and silver and even stocks are acting as part of the debasement trade. Bitcoin has diverged, for reasons above (or some other reason I don’t readily see).

Gold vs Faith in Central Banks

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I created similar charts years ago and periodically update them. That above chart is recent enough to not type all those anecdotes again.

Faith in the Fed and Congress is a much better explanation for moves in gold than fluctuations in the dollar.

Gold vs. Faith in Central Banks Major Timeline

August 15, 1971: Nixon ended convertibility of gold at the then fixed price of $35.00 per ounce. Nixon’s actions allowed the Fed and Congress to inflate at will.

January 21, 1980: Gold spiked to a then high of $850 per ounce in the wake of Nixon shock.

March 1980: Volcker restored faith in central banks by jacking up interest rates to 20 percent. Volcker was followed by Alan Greenspan, labeled the “Great Maestro” for keeping inflation under control.

May 7, 1999: Brown’s Bottom! On the BOE announced plans to dump gold for other assets. Gold was $282. The notice drove the price to $252. The event is named after Gordon Brown, then the UK Chancellor of the Exchequer.

August 23, 2011: Gold hit a then record high of $1923 with a European debt Crisis.

July 26, 2012: ECB president Mario Draghi made his famous “Whatever it Takes” speech. “Within our mandate, the ECB will do whatever it takes to preserve the Euro, and believe me it will be enough.” What did Draghi do? Curiously, nothing at all. However, his statement calmed the bond markets and equity markets. Gold was clobbered.

December 17, 2015: Gold bottoms as faith in central banks peaks again.

What followed was QE to absurd levels, three rounds of massive free money fiscal stimulus during Covid, and the Fed misjudging the ensuing inflation.

Now we have insane tariff policy by Trump, a Fed that still does not understand inflation, and Trump pressure on the Fed to cut rates.

Gold and Silver Surge to New Record Highs

On December 22, 2025, I addressed the question Gold and Silver Surge to New Record Highs, What’s Going On?

Debt and Deficits

All the Trump administration bragging about addressing the deficit is nonsense. Gold doesn’t believe that story will last and neither do I.

And to that we can add Trump Seeks a $500 Billion Increase in Defense Spending

That’s a 5.8 trillion increase in debt over 10 years factoring in interest.

And we need to factor in the US promising to “Run Venezuela”. To which I ask What Are the Odds that the US Can Successfully Run Venezuela?

Finally, we need to consider Trump proposes to Take Greenland the ‘Easy Way’ or the ‘Hard Way’ by Force

Trump wants Greenland. So he will take it.

A Word About Faith

Gold does not believe the Fed is under control, Congress is under control, budget deficits are under control, or Trump is under control.

Neither do I. But with all that debasement and global uncertainty, only true gold is shining.

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