source avatarPaul Mampilly🇺🇸

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Imagine that I'm right about my AI bubble driven crash prediction. Just go with me, especially if you own Bitcoin or crypto because this could explain why crypto is finding buyers even though the regular narrative is that Bitcoin/crypto is simply a form of Nasdaq/tech volatility. That hasn't been true for at least 6 months. In fact, Bitcoin/crypto have been nearly inversely correlated for this period. One reason for the inversion correlation in my view is that people simply sold Bitcoin/crypto to chase AI bubble/mania stocks. However, right now as Bitcoin/crypto keeps finding bids amid rising signs that the AI stock bubble is leaking air and setting up for a burst. That's not a reversal of the folks who sold Bitcoin/crypto coming back to buy. I say this because the retail money thats getting liquidated in AI stocks are selling to meet margin calls. And institutional money selling AI stocks are also cutting exposure in response to losses. So why is Bitcoin/crypto rising? I believe that some number of investors are buying in anticipation of the second order consequences of a AI bubble burst driven stock market crash. We already know what the Fed and central banks around the world will do when this happens...they will cut rates, restart QE and generally do whatever it takes to keep markets liquid and the economy from keeling over. This is and will always be their MO because thats what they were set up for. However, today we have a currency system - crypto - that will not react even in a crash scenario. This what I mean...will Bitcoin supply be increased because of a stock market crash and a recession? Nope. Same for most crypto. There will be no reaction to the Fed and world central banks easing rates, increasing liquidity and flooding markets & economies with money. In 2020, when the Fed and central banks flooded markets and economies with money on a scale never seen before due to Covid, markets panicked and sold Bitcoin/crypto along with all risk assets. However in 2026, conditions are different. US inflation is running at 4%, nearly twice the so called policy rate of 2%. The Fed has been running a loose money policy for 5 years now, with "real" (after inflation) rates at negative levels. Bottom line, a stock market crash in 2026 is not going to generate the same crash scenario as in 2020. I believe that in a AI bubble burst crash scenario, we'll see money seek out the the known, fixed and transparent hedge of Bitcoin & crypto against fiat debasing. In other words, we have a macro setup for where in a crash Bitcoin/crypto could actually see a melt up rather than a meltdown.

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