GM, crypto fam.

If you checked your portfolio in January, you probably felt a distinct pain in your chest.

We just watched $300 billion exit the room, leaving many of us wondering if we missed the exit sign. It was brutal.

But here's the strange thing. While our "digital pockets" are getting lighter, the real economy is suddenly accelerating. This is a classic example of the saying, "the patient is healthy, but feels very bad."

We need to ignore the feeling and look at the vital signs because our macro experts just flagged something that changes the entire narrative.

We need to talk about the Russell 2000 index $RUT ( 0.0% ). This is the index that tracks small public companies, and it is currently the single most important chart for your crypto strategy.

While we were distracted by red candles, the Russell 2000 quietly rallied 5% in January.

Why should you care about boring old stocks? Because these "small" companies are the ultimate vibe check for investor confidence.

When people are scared, they hide in cash or giant tech monopolies. When they feel brave, they buy Small Caps. And when they feel really brave, they buy Crypto.

The fact that money is flowing into these smaller, riskier companies tells us that the "risk-on" switch has been flipped.

We are seeing a rotation away from the safe haven of the "Magnificent 7 $MAG7.SSI ( ▼ 0.56% )" tech giants and into assets that actually move with the economic cycle.

Right now, Wall Street is obsessed with AI companies boosting profits, but the logic for Blockchain is identical.

Both are technologies that make businesses faster and cheaper. The stock market has realized it for AI, and it is only a matter of time before that same realization hits the crypto sector.

If the vibes are so good, why is Bitcoin $BTC ( ▼ 1.03% ) struggling? It is the question keeping us up at night.

Part of it is just a hangover. We are likely still dealing with selling pressure from the October 10th fallout and some large entities liquidating positions. But there is also a "guilt by association" problem.

Software stocks have taken a beating recently, and in the eyes of a traditional investor, crypto is just another form of risky software. When one bleeds, the other bruises.

However, the lack of new money entering the space is the real concern. It suggests we are in a lull of excitement.

But we think this is temporary because the fundamental machine that drives asset prices the economic cycle is heating up.

Forget the recession doom-scrolling. The latest ISM data dropped, and it was a shocker in the best way possible. The index hit 52.6, smashing expectations.

For the first time in a year, American factories are expanding, not shrinking. This isn't just a "less bad" report; it is a "we are back in business" report. Production is up.

New orders are skyrocketing. The data shows that the slump of 2025 is officially in the rearview mirror.

This matters because a strong economic cycle historically leads to a strong bull market.

We are seeing the exact conditions we predicted for 2026 - tax policies helping business and AI boosting productivity.

When the manufacturing PMI holds above 50, it is usually green lights ahead for assets.

You can have a great engine, but you need fuel. That fuel is global liquidity, and the tank is finally being refilled.

After two years of the Federal Reserve draining money out of the system (Quantitative Tightening), they have officially stopped. As of December 2025, the drain is plugged.

Now, through "Reserve Management Purchases," they are actually adding about $40 billion a month back into the system.

Combine that with China pledging to cut rates and pump cash into their own economy, and you have a recipe for rising asset prices.

The structural headwind that held Bitcoin $BTC ( ▼ 1.03% ) down for the last two years is gone. The pipes are flowing again.

Finally, let’s look at inflation and Gold. Real-time data from Truflation shows inflation has crashed to 0.86%. The war on inflation is over.

This low-inflation environment triggered a massive run in Gold $GOLD ( ▲ 15.94% ), which shot up 60% in six months. That is a $20 trillion asset moving like a meme coin.

But gravity always wins. Gold $XAU ( ▼ 0.34% ) is now pulling back, and that profit has to go somewhere.

Investors are sitting on massive gains from Gold, and with risk appetite returning (thanks to those Small Caps we mentioned), that capital is looking for a new home with higher upside.

Crypto is the logical next step for that money. We are watching for a "Great Rotation" from physical gold to digital gold.

Here is the first major point that most people are missing regarding the January crash. The drop wasn't a fundamental failure of crypto assets or blockchain technology. It was a mechanical "flush" of the system.

When markets get too excited, traders tend to pile on leverage. They borrow money to bet on Bitcoin $BTC ( ▼ 1.03% ) going up forever because they get greedy. This makes the market heavy and incredibly fragile.

The correction we saw in January effectively wiped out billions in open interest and liquidated the "tourist" money that was just here for a quick flip.

This is actually incredibly bullish for us.

Why?

Because a market built on leverage is a house of cards waiting to collapse.

A market built on spot buying is a fortress. We just replaced weak, over leveraged hands with long term holders who have higher conviction.

The foundation has been reset. The "fear" you feel right now is actually the sound of the market getting healthier and preparing for a more sustainable move up without the dead weight of greedy traders.

We need to talk about the elephant in the room which is Artificial Intelligence. Right now, AI stocks are eating the world and sucking up all the oxygen in the room.

But this brings us to a critical insight that creates a massive opportunity for crypto.

Investors are currently obsessed with companies leveraging AI to boost profit margins. That is why the stock market is up. But crypto is essentially the "venture capital" version of the software market.

As valuations for AI companies get stretched to perfection, smart capital starts looking for the next undervalued asset class that intersects with technology.

That asset class is Web3. Blockchain is simply the financial rail that AI agents will use to transact in the future.

We are betting that the massive profits currently being made in AI stocks will rotate. They always do. Money moves from the "proven" winner to the "undervalued" contender.

Crypto is currently the only tech sector that hasn't repriced to reflect the booming economic cycle.

That is an arbitrage opportunity waiting to close, and you want to be positioned before that rotation happens, not after.

⚠️ Disclaimer: This newsletter is for informational purposes only, just for fun and knowledge. This is not investment advice. Your money, your responsibility!