Bitcoin advocates have pushed back against what Chamath Palihapitiya (샤마트 팔리하피티야), chief executive of Social Capital, called bitcoin's "two problems."

Cryptopolitan, a blockchain outlet, reported on July 20 that Palihapitiya said speculative funds that would have gone into bitcoin are moving to prediction markets and equities. He also argued that electricity used for bitcoin mining could create 10 to 20 times more value in AI tokens.

Writing on X, formerly Twitter, he said there are two problems for cryptocurrencies, especially bitcoin bulls. First, he said additional speculative funds prefer prediction markets and equities to bitcoin. Second, he said marginal power used for bitcoin mining could be far more profitable if reallocated to AI token services. He added that these changes could be structural, but that he could be wrong.

But major industry figures countered that neither issue is likely to be a permanent headwind. Brian Armstrong (브라이언 암스트롱), Coinbase CEO, said the first issue would be resolved soon, while the second could last relatively longer.

Armstrong said he did not agree with the logic that directly links mining energy and price. Hashpower or energy used to mine bitcoin does not determine its price, he said, adding that even if miners leave, the network adjusts its difficulty so block creation speed is maintained. He also said bitcoin's long-term price largely reflects how much people fear inflation.

Jack Mallers (잭 말러스), co-founder and CEO of U.S. bitcoin payments company Strike, pushed back more strongly. He said funds moving to prediction markets, memecoins or AI were not bitcoin-loyal demand in the first place. Bitcoin does not win by competing with the latest speculative instruments, he said, but by replacing deposits and becoming money.

Matt Hougan (맷 호건) offered a middle ground. He said Palihapitiya's first claim could be true, and that it helps explain bitcoin's declining volatility and the possibility that the next bull market will unfold slowly. The second issue, he said, is largely self-correcting and not a short-term worry factor.

Investment expert David Hernandez (데이비드 에르난데스) called the two issues a "cyclical phenomenon." Speculative liquidity always moves to where there are better opportunities, he said. Analyst James Van Straten (제임스 밴 스트래튼) also said miners shifting equipment and power to AI is not new and has been happening for about 2 years.

Profitability pressure in the mining industry is already evident. CoinShares research showed that the average cost to mine 1 bitcoin at listed miners in the fourth quarter of 2025 was about $79,995. With bitcoin trading around $68,000 to $70,000 at the time, that implies a loss of about $19,000 per BTC.

The mining industry has therefore signed more than $70 billion in AI and computing contracts, and companies such as Bitfarms are moving to restructure around high-performance computing, or HPC, while selling bitcoin holdings. That means Palihapitiya's concern that mining power could move to other revenue sources was not purely hypothetical.

Indicators supporting a shift in speculative capital also emerged. Artemis data showed monthly prediction market trading volume hit a record $28.4 billion in May. Kalshi handled $17.3 billion and Polymarket processed $8.4 billion. Volumes rose for 4 straight months, showing more space for speculative funds to park outside bitcoin.

Still, a combined reading of industry responses shows the focus is less on the fact that funds and power are shifting in part than on whether that causes structural damage to bitcoin. Market participants acknowledged worsening mining profitability and dispersed liquidity, but did not conclude that bitcoin's price formation and long-term demand base have weakened.

There are two problems rn for crypto and, specifically, bitcoin bulls: 1) marginal liquidity would rather speculate in prediction markets and equity markets 2) marginal energy to mine BTC is worth 10-20x if reallocated to serving AI tokens These changes feel structural but I…