As most of you might be aware I am very bullish on Bittensor ($TAO) to the point of publishing a 20 page report last year calling for $10k TAO. With the introduction of dynamic Tao (dTAO) and Alpha tokens for Subnets I am even more bullish onTAO and its ecosystem. I believe the dTAO system of Alpha tokens strengthens the ecosystem overall by introducing strong competition incentives. However, I’ve been reluctant to allocate heavily into Subnet Alpha tokens due to all the hype early in their launch and knowing that a lot of these subnets will fail. As a crypto investor, its easy to get caught up in the whirlwind of short-term strategies. This industry breeds the “Wen Lambo” and “Moon” culture. I find it valuable to step back, take a breath, and think about the longer horizon.

That being said, I am still bullish on subnets and wanted to do a deeper dive into what long term investing in subnets might look like over a 3 year window. In this report I’ll explore the assumptions, analyze the risks, and evaluate whether long term subnet investing holds water as a risk-adjusted investment strategy.

Before diving into the numbers I’ll give a little background in case you haven’t read my longer report. Bittensor is a decentralized machine learning network that incentivizes participants to contribute computational resources and data to train AI models. Its native token, TAO, operates on a tokenomic model similar to Bitcoin’s, with a hard cap of 21 million coins and a halving cycle every four years. Within this ecosystem, subnets are specialized networks that focus on specific AI tasks—like natural language processing, image recognition, or predictive modeling. Each subnet has its own token, referred to as “alpha,” which operates as a derivative of TAO. Investors can stake TAO to acquire alpha, earn yields through emissions, and potentially benefit from price appreciation as the subnet ecosystem grows.

The appeal of subnets lies in their diversity and potential for high yields. As of April 2025, there are 100 active subnets, a number that has nearly tripled in the past year. This growth signals increasing utility for Bittensor’s machine learning applications, even amidst market volatility. But what happens if we take a $10,000 investment, spread it across a basket of “solid” subnets, and let it ride for 36 months?

Let’s assume I’m starting with $10,000, and the price of TAO is $370 (roughy where the price is hovering as I write this). This gives me 27 TAO. I decide to allocate this across a diversified basket of subnets, each with a strong team and product. At an average subnet price of 0.1 TAO per alpha token, my 27 TAO nets me 270 alpha tokens (27 TAO ÷ 0.1 TAO/alpha = 270 alpha).

Bittensor’s subnet ecosystem is expanding rapidly. With a new subnet launching every two days, we can project the total number of subnets in 36 months.

365 days/year × 3 years ÷ 2 days/subnet = 547.5 new subnets plus the existing 100 for a total of roughly 650 subnets by May 2028.

This dilution will most likely pressure subnet prices, as the market spreads its attention across more projects. Right now, the average subnet price is 0.02 TAO (calculated as the sum of all subnet prices divided by the number of subnets) but I’ve assumed my basket starts at 0.1 TAO per alpha, a premium for quality projects (Chutes, one of the largest subnets is currently trading at this price).

Here’s where I lean heavily pessimistic to stress-test the strategy. Let’s say the average price of my subnet basket crashes by 400% from 0.1 TAO to 0.02 TAO over the next 36 months mirroring the broader subnet market due to dilution and competition. That’s a brutal hit but thats where the compounding yield comes in. Subnets generate alpha emissions, akin to staking rewards, which are likely to remain elevated at 150%+ annually until the first halving event for alpha tokens (which I’ll assume happens after my 36-month window for simplicity).

With a 150% annual yield, my alpha holdings compound over three years:

So, even after a 400% price crash, I’m sitting on 4,218 alpha tokens, each worth 0.02 TAO. That’s 4,218 × 0.02 = 84.36 TAO.

Now, the real question: what’s TAO worth in May 2028? Lets say $10,000 in 36 months. This gives it a market cap near $100B. This might seem crazy bullish but that is still less then Solana at its peak and I think it reflects Bittensor’s growing utility. At $10,000 per TAO, my 84.36 TAO is worth $800k. That’s a massive return on my initial $10,000, even with my subnet basket crashing 400% in price.

What if my subnet prices don’t crash? If they hold steady at 0.1 TAO per alpha, my 4,218 alpha tokens are worth 4,218 × 0.1 = 421.8 TAO. At $10,000 per TAO, that’s $4.2 million. That is an insane return. Even if TAO completely under performs barely rising above its previous high to $1k my return is over $400k.

I’ve ignored a massive bullish factor in my initial calculation: the alpha halving. Bittensor’s tokenomics include halving events for alpha tokens, similar to TAO’s own halving cycle. When an alpha token undergoes its first halving, the amount of new alpha emitted per block halves, while the TAO injected into the liquidity pool remains constant. This creates algorithmic buy pressure, potentially driving alpha prices higher. I didn’t factor this into my numbers, but it’s a significant tailwind that could amplify returns even further.

This thought experiment hinges on several assumptions, each carrying its own risks:

So, is this set-and-forget subnet strategy worth engaging in with a 3-5 year conviction? Absolutely. The potential for returns this size makes it a no-brainer from a risk-reward perspective. Bittensor’s ecosystem is still in its infancy, and the halving dynamics add a layer of upside that’s hard to ignore. That said, this isn’t a get-rich-quick scheme; it’s a get-rich-slowly-if-you-don’t-panic play. It requires doing in-depth research, picking subnets with strong fundamentals, and commit to the long haul. I wouldn’t bet my entire bag on this but I think its well worth an appropriate sized bet for my portfolio.

Thanks for reading,

Will

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.