🥛 How AI killed crypto's 4yr cycle 🔪

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Here’s what we got for you today:

✍️ How AI broke the crypto cycle
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HOW AI BROKE THE 4YR CYCLE (AND WHAT IT MEANS FOR 2026) 🤖

We just found our new favorite follow on Twitter: Gammichan – and its all thanks to this tweet.

You should go and read it – but if it’s a little too dense, lemme break the big idea down for you:

AI broke the 4-year crypto cycle, and because of this, the current market downturn (as much as it hurts) could actually end up being a bullish catalyst.

Lemme explain…

Usually, economic booms/busts typically work like this:

The economy weakens, people lose their jobs…
The Fed lowers interest rates (giving businesses access to cheaper loans)...
Businesses take on cheap debt to hire new people/buy more materials…
The economy starts to grow (and with it, so do crypto prices)…
The economy eventually overheats, and inflation becomes a concern…
The Fed raises interest rates, restricting businesses from accessing cheap loans and growing further, weakening the economy and forcing prices to stabilize (hurting crypto)...

(Repeat).

And with each peak/trough cycle – the economy typically ends up higher than it was in the beginning:

Source: St. Louis Fed

Now, in 2022, the Fed started raising interest rates in order to fight inflation – which should have weakened the economy.

And it did. But its effects were somewhat counteracted by the rise of AI.

The AI boom helped to grow the economy, while the Fed was actively trying to slow it.

But this growth wasn’t broad-based. It really only hit the tech sector.

Hell – it mostly just hit a select few companies – aka, the Magnificent 7:

Alphabet (parent company of Google), Amazon, Apple, Meta, Microsoft, Tesla, and Nvidia.

And it’s starting to look like the Mag 7 essentially cock blocked us from getting a traditional crypto bull run in 2025.

Keep scrolling to the next article to learn how. 👇

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HOW AI BROKE THE 4YR CYCLE (AND WHAT IT MEANS FOR 2026) P2 🤖

Where were we? Ah yes, the Magnificent 7 cock blocked us….

As the Mag 7 grew, it started to make up more and more of the US stock market.

(To the extent that, now, more than 50% of the S&P 500’s value is made up of these 7 companies).

Source: The Motley Fool

With this AI-driven growth in the US economy, that ‘sweet spot of economic weakness’ that the Fed was aiming for took way longer to reach.

So they held out on lowering rates and giving businesses outside of the AI/tech sector access to cheap loans that would allow them to hire/build again.

And this meant the crypto market couldn’t rely on lowered interest rates to float its prices, as per usual.

Instead, the influx of capital came from institutional investors, and was helped along by softening regulatory conditions in the US.

Need a visual aid?

Check out the story being told by the ISM Purchasing Managers Index (which tracks how much manufacturers are spending on materials to make new products) and the BTC price:

Source: @Gammichan

The beat-by-beat of what’s being shown here:

Inflation became a worry in 2022, so the Fed raised rates…
This stopped manufacturers from being able to access cheap loans/increase spending (see how the blue line falls/flattens out through 2022 and beyond)...
But at the same time… along comes AI, boosting the economy and counteracting the effects of these higher rates, forcing the Fed to keep them heightened…
As a result, BTC doesn’t get its typical low interest-rate bull run, but instead finds a way to grow thanks to institutional capital inflows…

Ok, now here’s the bit that makes the current market downturn actually feel kinda bullish…

Remember what we talked about at the top of this edition:

When the economy weakens, the Fed cuts rates to stimulate growth → which has downstream effects on the crypto market (raising its value).

More market weakness = increased chances of rate cuts / economy stimulating measures from the Fed.

Meaning: the typical low interest-rate crypto bull run that we all thought we’d missed out on this cycle?

It could still be on its way in 2026 ;)

P.S. If you want a closer look at what is currently happening in AI (like the massive AI build-out that no one is pricing in just yet) – check out today’s episode of Milk Road AI! 👇