The minutes of the most recent Federal Reserve meeting from the end of January 2026 added to the hawkishness elements. Following the meeting, the Fed’s rate-setting committee upgraded their assessment of the economy while easing fears over weakness in the labor market. The minutes revealed a growing concern over core consumer inflation levels that remain well above target, which prompted “several” policymakers to suggest that higher rates could be needed in order to maintain credibility over their inflation-fighting mandate. The shift to the inflation side of the mandate could intensify further following the better-than-expected January payrolls report. Despite the hawkish tone, market-implied odds continue favoring two 0.25% rate cuts this year .
The selloff happening across technology and growth stocks leveraged to the artificial intelligence (AI) theme has more to do with the rate outlook versus displacement of industries and economic turmoil caused by AI itself. Valuations in large-cap growth stocks and the largest companies in the S&P 500 are running well above historic averages, and are particularly vulnerable to a less dovish rate outlook. That impacts the discounting mechanism for future expected profits while the outlook for market liquidity can have a massive impact on more speculative stocks. While the rotation away from the AI theme is weighing on the indexes like the S&P 500, the average stock continues to push ahead.
Even if the Fed goes an extended period on hold with interest rates, it’s worth remembering that financial conditions are still running much looser than average. That should remain a tailwind for the bull market for now, even if the S&P 500 doesn’t reflect it. The combination of loose conditions and strong market breadth means a positive backdrop for position trading (for now).
We are living through the collision of two singularities.
One is technological : the emergence of Artificial Intelligence, a force that promises to bring the marginal cost of intelligence to zero. It is a singularity of abundance.
The other is monetary : the maturation of Bitcoin, a network that enforces a globally verifiable, unchangeable supply cap. It is a singularity of scarcity.
For the last century, the global economy has operated on a specific set of assumptions : that labor is scarce, that resources are finite, and that money must be elastic to manage the friction between the two. But as AI begins to restructure the fundamental unit of economic value—human cognitive labor—those assumptions are breaking.
We are entering a period where the cost of producing goods and services will plummet, creating massive deflationary pressure. In a vacuum, this would be a utopia of cheap goods. But we do not live in a vacuum. We live in a credit-based fiat system that views deflation not as a benefit, but as a systemic threat.
The resulting clash between the deflationary force of AI and the inflationary response of central banks will be the defining economic narrative of our lifetimes. In this chaotic transition, rational actors will seek an asset that is immune to both the dilution of supply (inflation) and the dilution of quality (AI fabrication).
The arrow of history is pointing in one direction. AI → Bitcoin.
The Deflationary Tsunami
To understand why Bitcoin becomes essential, we must first understand the economic shockwave AI represents.
For all of industrial history, technology has been deflationary. The steam engine, electricity, and the internet all allowed us to do more with less. But AI is different. Previous technologies replaced muscle or mechanical repetition. AI replaces cognition.
Consider the inputs of the modern service economy : coding, legal drafting, data analysis, graphic design, translation, and customer support. These are distinct forms of “cognitive labor.” Until recently, they were scarce. A senior engineer cost $200,000 a year because their knowledge was hard to acquire and their time was strictly limited.
AI pushes the marginal cost of this labor toward zero.
