The Light at the End of the Turbulence 2
Back on April 8th at the depths of fear around tariffs and Liberation Day, I published a Substack titled The Light at the End of the Turbulence. The S&P had fallen 20%, economists were calling for recession, and panic dominated. I argued the self-inflicted sell-off would prove to be an extraordinary buying opportunity due to AI and that six months later we’d realize the panic was not justified relative to the advancements of AI.
In the end, that is what happened. The market recovered. Risk assets rallied. The AI narrative accelerated and people adapted.
Then in November, as despair set into the Bitcoin crowd about its consolidation and underperformance relative to stocks, I wrote “Bitcoin’s Silent IPO,” arguing that Bitcoin’s frustrating consolidation while other assets rallied wasn’t weakness but a necessary distribution phase. The OG whales were finally having their liquidity event, methodically selling into the deep institutional bid created by ETFs and corporate treasuries. Like a traditional IPO lock-up expiration, uncomfortable, grinding, but ultimately healthy long term.
Well, that consolidation broke. The Silent IPO distribution led to a deeper correction as stocks finally began correcting, led by the retail-heavy AI speculative names. I highlighted this in my weekly video this past weekend. This move took Bitcoin to slightly negative on the year. The cognitive dissonance that frustrated the crypto community has morphed into genuine bearishness and doubt. Liberation Day optimism feels like a distant memory. The end of the four-year cycle conversations are getting louder. The “Bitcoin has lost its upside” echo reverberates through X and the “this time is different” crowd is capitulating.
This fall has taken the CMC Crypto Fear and Greed index down to the same level as the lows back near Liberation Day at 15. All hope seems lost. That’s why it’s time for The Light at the End of the Turbulence Part 2. And again, this story for me is built around the same idea as Liberation Day. Every asset is being driven by advancements in AI and I will continue to argue that eventually all investors will recognize in the years to come that they missed one story. The purest AI story is Bitcoin.
Aside from having similar birthdays with the Bitcoin Whitepaper in 2008 and the 2009 Raina–Madhavan–Ng paper as the first influential study to show that GPUs could accelerate deep learning by over 70×, effectively igniting the modern GPU-powered era of machine learning, both are part of exponential innovations and could not have happened without each other.
Exponential innovation reduces the need for people to work from an office, or at all. Exponential innovation causes distribution of wealth inequality, forcing governments around the world to continue running deficits and having financial assets move higher as a form of UBI. Today’s UBI isn’t a check from the government, it’s Universal Beta Income: your wealth grows because the system has no choice. For those without assets, they will have transfer payments as another form of UBI. This creates the K-shaped economy we all hear about, and it leads to anger from the majority of people as affordability suffers, both from labor fear and wage pressure from reduced hiring, and from government UBI-driven induced inflation. Bitcoin benefits from this spiraling situation, correlated to risk assets until AI begins to consume capitalism and public markets. Stablecoins combined with AI agents bring velocity of money to reduce the need for leverage, and tokenization allows concentrated dormant assets like real estate, private debt, private equity, and venture capital to trade freely 24/7, thus reducing the leverage being used to support their prices. As AI advances, its deflationary pressures will be seen. In 2026, AI drug discovery, autonomous robotaxis, and AI agents will help drive prices as margins increase and competition accelerates from commoditized intelligence.
And here’s what makes this moment fascinating: People were worried that is wasn’t following equities on the upside well now it is finally behaving exactly as it should. As equities pulled back, especially the frothy retail AI names, Bitcoin fell in lockstep. The divergence that confused everyone during the Silent IPO has resolved. Bitcoin is trading as a risk asset again, correlated with growth expectations and liquidity conditions. In my opinion, this will create the buying power and energy necessary to get a new trend to the upside going.
Which means, as I look at the setup heading into 2026, I see it again: the light at the end of the turbulence. Just as April’s tariff panic created a buying opportunity for those who could see past the fear, this Bitcoin correction—synchronized with broader risk asset weakness—is setting up the next significant move higher.
Why Bitcoin Trading With Stocks Is Actually Bullish
One persistent misconception: Bitcoin should trade independently of traditional risk assets. The narrative goes that Bitcoin is digital gold, a hedge against the system, uncorrelated to stocks. Therefore, if Bitcoin falls when stocks fall, something must be broken.
This is wrong. Bitcoin is a risk asset. I wrote this in my Subtack Yes Virginia, Bitcoin is a Risk Asset.
Yes, it has store-of-value properties. Yes, it’s decentralized. But in terms of market psychology and capital flows, Bitcoin behaves like a high-beta risk asset. ETF buyers allocate Bitcoin alongside stocks, when they de-risk portfolios, Bitcoin comes out with equities. Retail traders use the same capital for both crypto and stocks. Even the debasement crowd accumulates more aggressively during strong economic periods when cash flows are healthy.
So when the Nasdaq falls, Bitcoin falls. When AI stocks get hit, Bitcoin gets hit. This isn’t a bug, it’s a feature. It’s Bitcoin behaving rationally given its holder base.
And here’s why that’s bullish: if Bitcoin trades with risk assets, then Bitcoin’s outlook is tied to the risk asset outlook. Which means to understand Bitcoin’s future, we need to understand what’s coming for equities.
Let me tell you why I’m extremely bullish on risk assets heading into 2026.
The 2026 Setup: Fiscal, Monetary, and AI Convergence
Markets climb walls of worry. Right now, that wall is built from AI bubble fears, recession concerns, and crypto pessimism. But the setup for 2026 is compelling.
Fiscal support continues. The infrastructure bill, CHIPS Act, and Inflation Reduction Act aren’t just talking points, they’re multi-trillion-dollar spending programs creating real economic activity and deficits. The One Big Beautiful Bill is front loaded for the Midterms. Data centers are being constructed at unprecedented pace. Semiconductor fabs are being built. Power infrastructure is being upgraded.
The Fed has room to ease. For now, inflation is under control. Wages, housing and oil prices have been under pressure this year so as the tariffs flow through, inflation should remain in check relative to the weakness in the labor market. AI is both a deflationary force and a labor weakness force.
AI breakthroughs are coming. The pace of AI advancement over the past year has been breathtaking. And we’re about to see tangible, real-world breakthroughs that will capture mainstream attention:
AI Drug Discovery: The first AI-discovered drugs are close to clinical trials. The implications for healthcare and economic productivity will be staggering once we get positive news on this. For November so far, pharmaceutical stocks are having their best relative month in 30 years . Every pharmaceutical company will race to integrate AI into R&D. Billions will flow into AI healthcare.
Autonomous Vehicles: After years of “five years away,” we’re at the inflection point. Waymo is expanding. Tesla’s FSD continues improving. Chinese companies are deploying robotaxis at scale. When autonomous vehicles become commonplace in major cities during 2026, speculation about humanoid robots will explode.
AI Agents and Productivity: AI agents performing complex tasks autonomously will start appearing everywhere, enterprise software, customer service, creative industries. The productivity implications are massive. This will expand profit margins across the economy. AI makes every business more efficient, more productive, more profitable.
Manufacturing is expanding. The AI infrastructure buildout is driving a US manufacturing renaissance. After years of contraction, manufacturing is showing signs of picking up. I believe 2026 will see a rise in PMIs driven by the above mentioned catalysts. Historically, crypto has and in particular altcoins have done extremely well when PMIs are rising.
The bears will cry “AI bubble!” Maybe. But bubbles take longer and go higher than anyone expects. The dot-com bubble didn’t peak when valuations first looked crazy in 1997 it peaked in March 2000, three years later. From the end of 1994 to the end of 1999, the Nasdaq 100 knows as QQQ went up 800%. The last five years for QQQ is up less than 100%. This is not a bubble compared to the dot-com bubble. If we’re in an AI bubble, we’re in the early-to-middle stages. The mainstream hasn’t fully bought in yet. Your relatives aren’t asking about AI stocks at Thanksgiving. That comes later and I believe in crypto.
And bubbles require a catalyst to pop, usually the Fed aggressively tightening into weakness. But the Fed already did their tightening. They’re potentially easing in 2026, not starting a tightening cycle. The typical catalyst isn’t present.
Bitcoin’s 2026 Catalysts
If 2026 is strong for risk assets, Bitcoin should significantly outperform as a high-beta risk asset. But there are Bitcoin-specific catalysts that make the setup even more compelling.
The Clarity Act. For years, regulatory uncertainty has anchored crypto down. The Clarity Act, expected to pass before the end of 2025 or in early 2026, will provide clear regulatory frameworks, establish jurisdictional clarity, and remove the legal ambiguity keeping institutions on the sidelines. The “we’re waiting for regulatory clarity” crowd which includes some of the largest asset managers and pension funds will finally have permission to allocate. The ETF flows we’ve seen will look quaint compared to what’s coming.
Tokenization is scaling. Major financial institutions are tokenizing treasury bonds, real estate, commodities, and equities. JPMorgan, BlackRock, Franklin Templeton they’re all building tokenization platforms. This validates the entire crypto infrastructure and proves blockchain isn’t just for digital gold. As tokenization scales and dormant assets begin trading 24/7 with reduced leverage requirements, Bitcoin becomes increasingly useful as a neutral settlement asset the TCP/IP of digital finance.
Stablecoin acceleration. This is the most underappreciated bullish factor. Stablecoin adoption is exploding globally, particularly in the developing world. Tether and USDC are becoming the dollar payment rails for large portions of the global economy. When someone in Nigeria receives payment in USDC instead of naira, when an Argentine business holds USD-denominated stablecoins instead of pesos, when cross-border payments flow through stablecoins instead of correspondent banks the crypto infrastructure becomes essential to global commerce.
Stablecoins and Bitcoin aren’t competitors, they’re a two-part system. Stablecoins function as the medium of exchange for the digital economy, while Bitcoin serves as its store of value. As more activity and more money moves into the digital economy, a growing share naturally flows into Bitcoin. You can think of stablecoins as the M2 of the digital world, and tokenization as the bridge that pulls traditional fiat assets into that system. This sets up powerful network effects: stablecoin adoption brings millions of new users onto crypto rails, and those users eventually need a long-term place to store value once they step out of stablecoins. Bitcoin becomes the default destination. The network effects from stablecoin growth will accelerate Bitcoin adoption in ways that are hard to model but impossible to miss.
The Pattern Repeats
One lesson from decades in markets: initial lows often get retested. We saw this in April, the market bottomed, rallied, then retested those lows before launching higher. It’s a normal, healthy pattern as markets build support and shake out weak hands.
I expect Bitcoin may follow a similar pattern. We’ve likely put in an initial low, but we may well retest it in coming weeks. There might be another wave of selling as the last weak hands capitulate. There might be a final flush that takes Bitcoin briefly lower.
That retest, if it comes, is the opportunity of the year. Because here’s what happens during retests: the smart money that missed the first bottom gets a second chance. Retests on lighter volume with less panic confirm that the initial low was the real low. I would not wait for the retest. I think this area for both Bitcoin and stocks is the place to be looking to take advantage of the Fear while the Greed is very low.
Bitcoin is down on the year. The OG distribution from the Silent IPO may not yet be complete but it is further ahead. Ownership is more distributed than ever. The retail crowd is bearish and sidelined. The ETF buyers are accumulating patiently. The debasement crowd continues systematic accumulation. The developing world steadily adopts Bitcoin as financial infrastructure.
Meanwhile, the 2026 setup looks exceptional. Fiscal support continues. Monetary policy provides a tailwind. AI breakthroughs will drive speculation and actual earnings growth. Manufacturing is expanding. The Clarity Act brings regulatory certainty. Tokenization is scaling. Stablecoins are accelerating network effects.
Bitcoin trades with risk assets. Risk assets are set up for a strong 2026. Therefore, Bitcoin is set up for a strong 2026.
The Light Is There
I keep coming back to Liberation Day. The S&P had fallen 20%. Economists called for recession. People panic sold. I argued we’d look back six months later and realize the panic wasn’t justified. I was right.
I feel the same way now about Bitcoin. Yes, the correction has been painful. Yes, sentiment is terrible. The Fear and Greed index is at 15, matching Liberation Day lows. But corrections during bull markets always feel like the end of the world. They always seem different this time. They always convince people the rally is over.
And they’re always buying opportunities for those who can see past the fear.
I’ve survived enough crises during my trading career, Mexico 1994, Brazil 1998, the GFC, COVID, Liberation Day to know these moments, as unnerving as they are, are never as dire as they seem. One truth stands out: these times, if you can see past the fear, offer the best investing opportunities.
Bitcoin isn’t broken. Digital assets aren’t ending. What’s happening is exactly what should happen: a maturing risk asset is still recovering from the winter of 2022. It is currently correcting alongside other risk assets during uncertainty and position adjustment. The difference from April is this correction is narrower, specific to growth stocks and crypto, not broad market panic. That’s healthier. It means the market is differentiating. And it means the recovery, when it comes, will likely be sharper and more focused.
For those who can see it, this is the time to accumulate. Not recklessly, not with leverage, not with money you can’t afford to lose. But deliberately, thoughtfully, with conviction based on fundamentals rather than sentiment.
With AI driving the investment alpha, things will be volatile. There will be scary moments given the difficulties of governments trying to navigate this disruptive force.. There will be doubt. There will be headlines screaming about crashes and bear markets. Ignore them. Focus on the fundamentals. AI is the most important and powerful innovation of our lifetime and will bring better days in the years ahead.
By the time everyone sees the light, it’s too late to get positioned. There is an opportunity now for crypto, while the Fear and Greed index sits at 15, while the crowd is capitulating, while the tunnel is still dark.
Six months from now, just like with Liberation Day, the narrative around Bitcoin will be very different. We’ll look back at these prices and this sentiment and wonder why we ever doubted.
The light is there. You just have to be willing to see it.
🙏 for not putting your musings / insights behind a pay wall. I enjoy reading your writings.
One of the best macro thinkers of our generation. Thanks Jordi.