Macro update

Pretty much as expected. Post the liquidation cascade of two weeks ago, we've entered a period of new price discovery. While BTC has been rangebound in the $60-70k range, the market has been choppy as fear of a leg lower persists, analysts are adjusting near-term price targets and volatility has returned. In the absence of a pickup in spot volumes, leverage is driving the market, leading to erratic price action in both directions.

The week was a tale of two macro prints: January NFP beat expectations handily, unemployment ticking down to 4.3% and Treasury yields jumping in response, immediately crushing near-term rate cut odds and triggering heavy ETF outflows. The narrative flipped Thursday when January CPI printed soft at 2.4% YoY, down from 2.7% the prior month, easing inflation fears and sparking a relief rally that carried through Saturday before a modest Sunday pullback. ETF flows remained under pressure throughout, and the bounce, while real, lacked the conviction needed to shift the broader narrative.

Cross Asset

The broader, cross-asset market narrative this week crystallized around something that’s been brewing in the background for a while. Investors are rotating out of AI and tech exposure into momentum and cyclicals. Sectors like discretionary, industrials and chemicals have been the beneficiaries, alongside a more quiet bid for value names. On the surface, the trigger seems to have been the U.S. FY25 earnings and Antropic’s announcement of Opus 4.6. But in reality it’s been in the making for a while now as valuations, after tech names have been stretching for a while, especially into the earnings numbers, finally giving the market a reason to rotate from growth and momentum into value and cyclicals.

The deeper dynamic feels more structural. We’re entering a new phase in the AI diffusion cycle where the cost of innovation is compressing rapidly, which increases perceived disruption risk across established business models and drives risk premia higher. While this has been a narrative since November 2022 when GPT entered the scene, we’re finally at the stage where it’s no longer hypothetical and we’re seeing tangible impact on numbers. As a result, we’re entering a new round of assessing economic moats of software-supported sectors.

This uncertainty doesn’t only put pressure on software but feels like an excuse to rebalance the total portfolio. The initial gold and precious metals rally, also driven by the USD debasement narrative, was the first leg of that trade, and it clearly overheated. Now that it’s partially corrected, the market’s doing a deeper reassessment of the whole playbook.

That said, it’s too early to call this a structural shift in market dynamic as in this environment we can’t discount the appetite to buy the dip in technology names. We’ve seen this happening before and as the market’s heavily narrative driven and all roads lead to AI, it’s hard to rule out a recovery of momentum and a bid for growth, which in turn provides support to crypto as well.

Digital Assets

BTC is hovering around $68,300, repeatedly failing to reclaim $70k, while ETH sits around $1,965, one tentative bright spot being BTC dominance rejection from 60%, with alts showing some resilience in the back half of the week. With spot volumes compressing, leverage is the primary driver of short-term movements, sharp swings in both directions with no structural bid underneath to absorb them. Technically, BTC has found support near its 200-week moving average, historically where bear market bottoms form.

Our take:

“Positioning is light, conviction is absent, and until macro clarity returns, every rally will be perceived as an opportunity to derisk vs momentum to chase."

Positioning is lighter post-liquidation but conviction is absent. The easy explanation is higher-for-longer and Warsh uncertainty and while those are real headwinds, the more interesting dynamic is the broader rotation away from growth and momentum that's been quietly building. At these valuations, after somewhat underwhelming FY25 results, the market finally had enough reason to take chips off the AI trade and redistribute into cyclicals and value. Crypto, at the highest-beta end of the growth spectrum, gets hit hardest when that happens.

The harder question is whether this is cyclical or structural. Our view is that it's too early to call a paradigm shift. the appetite to buy the dip in AI has been relentless for two years. What's changed is the risk premium investors attach to software-supported business models as AI diffuses more broadly and disruption risk becomes harder to underwrite. Hard assets remain the natural destination for rebalancing flows. Gold's initial leg overheated and corrected, but the underlying impulse behind that trade hasn't gone away.

For crypto, the path back runs through macro clarity. The 200-week moving average is holding, and the lack of structural damage means recovery could be sharper than sentiment implies when it comes. We're rangebound with a downward bias, leverage is driving the short-term tape, and $70k seems to be a resistance level in the short term.

A recovery into 2H26 is possible but getting there requires patience that most participants have already run out of.