The Regime Change

Macro

For months, markets have been driven by micro catalysts. Individual tariff headlines, Fed speakers, earnings prints. React, reprice, reset. But that framework is breaking down, and Citrini's recent piece crystallised brewing sentiment that many investors already shared but never articulated. The feeling that we are in a regime change.

The Fed has been the dominant market force for the better part of this cycle. That's changing. The forces driving asset prices now are slower, harder to trade and don't resolve with a pivot. Tariffs aren't going away. AI is disrupting entire sectors in real time. Growth is slowing while inflation stays sticky. The Fed with their disposable tools are less effective against these, leading to investors questioning the “Fed/Trump put” we had in the market for a while which led to growth and momentum (excluding crypto) outperforming.

Two structural trades are now running simultaneously and reinforcing each other:

• The AI rerate. U.S. FY25 earnings combined with Anthropic's Opus 4.6 have forced the market to underwrite AI disruption risk sector by sector, in real time. This is no longer a narrative. Software moats are being reassessed, growth multiples are compressing, and the capex intensity of the hardware side of the trade is being questioned. The easy AI trade seems to be over (for now). What replaced it is messier and more volatile.
• Deglobalisation. Trump's pivot from IEEPA to Section 122 after the Supreme Court ruling was the clearest signal yet: tariffs are structural, not transitory. The administration will always find the mechanism. Supply chains stay fragmented, input costs stay elevated, and geopolitical settlement risk is now a permanent feature of asset allocation.

Both drivers are attacking the same thing: the valuation premium embedded in globally-integrated, software-leveraged growth businesses. The rotation is well advanced. Gold, hard commodities, industrials, metals and mining, defense and energy are outperforming. Value is working. Growth is being sold off. And there is no clarity on rates that would reverse this. The Fed can't cut into sticky inflation and can't tighten into slowing growth. That paralysis is the whole trade.

Digital Assets

BTC has now failed $70k on multiple attempts since the liquidation cascade two weeks ago. The absence of a recovery bid is more telling than the range itself. Price action is choppy, liquidity is thin, and the range is tight without conviction. ETH dipped below $1,900 this week, a level that matters psychologically more than technically, the real level to watch here for ETH is ~$1,600.

Institutional demand also doesn't seem to come back despite price stabilisation, something we saw convincingly in the previous price range of $85-95k. The derivatives are the lack of directional views and appetite. Basis at multi-month lows, put skew elevated and moving higher, open interest declining since October.

On the desk, flow skewed to selling activity, however an interesting signal mid-week was a brief appetite from HNWIs to step into selective altcoins, a small but notable spark of confidence in an otherwise defensive environment which…faded very quickly.

The second half of the week turned choppy again following by any appetite to step in fading, suggesting the market isn't ready to reward early positioning yet. The marginal activity remains protection, not conviction.

Our take:

“Gradually, then suddenly. It feels as if the market is putting the different narratives together into what looks like a regime shift"

Right now crypto is getting sold as the highest beta growth asset, alongside tech and momentum, in a world where risk premia on growth are rising and the Fed can't act. The ETF outflow streak confirms it. That's the near term reality.

But zoom out and the more interesting question is how sticky this regime actually is. The narrative around stagflation, deglobalisation and Fed paralysis is starting to feel less like a short term catalyst and more like a genuine repricing of the macro backdrop, one that favours hard assets, commodities and value over growth. Crypto sits at the wrong end of that trade for now.

That said, we've seen this before. Multiple times over the past decade, growth scares have triggered rotations that ultimately reversed as risk appetite returned and the market found its way back to momentum. The difference this time is the structural nature of both the AI rerate and deglobalisation. But it's too early to call it a paradigm shift. How sticky this narrative proves to be is the most important question for crypto in 2026, and we don't have the answer yet.