Uncharted Waters
What tumultuous and uncertain times. Recently Trump was more unpredictable than ever, threatening increasingly hostile global action which thankfully has simmered with last week’s ceasefire. AI has made another stepchange with Claude’s Mythos being so powerful they won’t release it to the public. In a matter of hours, Mythos managed to escape a secure environment and hack through decade old vulnerabilities the world’s best security engineers had never found. VIX and Oil skyrocketed last month and sentiment metrics surged into fear. Just a matter of days ago there was widespread concern about nuclear action and calls for Bitcoin to $40K.
It’s not easy navigating markets at the best of times, but challenging more so when you have to monitor the news for daily “end of civilization” posts from the President, and consider how AI could compromise your own security layers.
While Claude Mythos isn’t publicly available today, it’s clear given the rate of change we have seen the AI industry make in the last 12 months, and how each of the Big 3 (Google, OpenAI and Anthropic) play catch up every couple of months, that Mythos level AI intelligence capabilities will probably be widespread within 6-9 months. Many stable assumptions of the past need to be rethought in 2026. What was secure in the past may not be anymore. A wave of AI hacks will likely hit the world in the next 2 years, followed by quantum hacks from there.
Intelligence has just hit the J-curve exponential and there is no turning back.
How do we position ourselves to manage this threat?
How do we navigate markets within this rapidly evolving environment?
Safety first
Security and risk management is our first priority at Capriole. We’ve done a lot in this space and it’s always front of mind. Capriole was one of the only funds to have no exposure to FTX when it went down, despite having traded there (we wrote extensively about our 24/7 risk management process for this years ago here). But AI presents a whole new wave of security threats that we must position for now.
Historically, DeFi and crypto have been quite vulnerable to security flaws and hacks. While that has largely stabilized in recent years, I expect that is about to change. The risk we now face from the AI world are classic “unknown unknowns”.
Way back in 2016, Google’s AlphaGo beat the world champion Lee Sedol in Go, a complex game with more move combinations than atoms in the universe. This was a groundbreaking leap for AI (reinforcement learning), but one of the most intriguing elements was the unique board moves that the AI made, many stated that no human would have ever conceived of or made those moves. AI has the ability to see problems and opportunities that humans overlook.
This probably isn’t good news for many crypto protocols, DeFi platforms and complex smart contract structures. AI will likely cripple and bleed out many in the coming 1-2 years, as the time to identify bugs and attack shrinks from months to minutes. Noteworthy is that Mythos is now available to select large private organisations today, to help them patch critical bugs and vulnerabilities before widespread public release, but that list of select organizations does not include anyone in the cryptospace.
If you don’t have a really good reason to use complex DeFi protocols and smart contracts, you probably shouldn’t be as we enter this new AI realm. Think about it. Is it really worth the complexity of juicing out that extra few basis points to lend/borrow/bridge/stake/restake?
Simplification is the name of the game. Whatever application, process, or wallet you don’t need, get rid of it. Minimize the threat frontier, then fortify your reduced enclave. Elimination is the first step at improving security posture here.
Make sure all your software and apps are up to date and auto updating. This will ensure bugs are patched quickly, as the enterprise firms get access to more powerful AI first. Those running older software will be the first targets by would be AI hackers.
Use institutional custody solutions, multisig, MPC wallets or work with a trusted organization that does. One that monitors for counterparty threats in real-time (like Capriole).
Opportunities
Our minds are hotwired to focus on the threats, fears and uncertainties of this new world. While there will be challenges, remember that the most likely outcome is positive. Already AI has eliminated monotonous workloads and provided greater intelligence and capability to all of us.
AI today is a workforce multiplier. At Capriole we are each running multiple agents in parallel to multiply each person’s output. Two years ago our coding output increased about 50%, 2026 has leapfrogged that into the multiples with agents. I truely believe Artificial General Intelligence (AGI) is here, as of 2026.
Today we can create new models faster, simulate and scenario test 100,000s of permutations to manage risk and hone in on long-term alpha faster. We’ve built and deployed a lot of new models in 2026 and deployed many on Capriole.com/Charts. Today we leverage our enterprise AI usage to release new products faster – including tangential AI products (we have something fun launching very soon, watch this space!)
If you are optimistic and willing to adopt and try new tools, this is a truely exciting time to be alive, build and outsource a lot of the grunt work. If you have deep domain knowledge and expertise, that can be applied at scale and used to manage the risks and gaps that AI alone (or in the wrong hands) frequently overlooks.
A good analogy to keep perspective. Humans overweight fear and loss. Optimism usually triumphs.
Bitcoin technicals
We are still mid month, so plenty could still go wrong but if we continue to close above $71.5K, that would be the strongest technical close for Bitcoin in 12 months. If the month were to end here, this is fantastic looking Bitcoin price action.
The same chart on the daily looks even more promising with an engulfing move and significant relative strength over other markets since the Iran War began. Here, we are also looking for a weekly over $71.5K, which unfortunately failed to materialize last week. Nonetheless given the relative strength of Bitcoin and the fact we are trading higher after the start of the war (when Bitcoin has been a risk off asset for the last 9 months) this is a significant sign of strength that we do not ignore.
Bitcoin on-chain showing strength
We also have bottom signals across many on chain metrics, including normalized Dormancy here. Dormancy measures the “coin days destroyed” divided by the total transfer volume, signaling whether old or new coins are moving. When it’s very low like today, long-term holders (the “smart money”) are refusing to sell their coins, even as prices drop. A quick look at the chart (green) shows these are promising zones.
We can see long-term holders have resumed restacking in recent weeks below, with a turning point in 2 year + holders recently occurring. Long-term holders have re-entered the market. Similar pivots marked. All were Bullish.
Spent Output Profit Ratio (SOPR) tells us whether investors are selling at a profit (values above 1) or loss (values below 1). Today, most transactions are at a deep loss. All periods of either very deep SOPR plunges, or measured time of SOPR spent below 1, have also been great Bitcoin opportunities in the past.
Perhaps today is similar?
We’ve been in a deep miner capitulation (Hash Ribbons) and we’re hearing miners are pivoting to AI. These are bullish contrarian signals historically.
At the same time Miner Sell Pressure is also very low. This metric tracks miner outflows to miner Bitcoin reserves. Lower represents less selling than usual. The green zones on this chart speak for themselves.
Perhaps one of the most important metrics below is showing institutions are net buyers of Bitcoin again. All major price appreciation in the last 5 years has occurred in this backdrop of institutional buying exceeding mined supply. Bullish.
Tradfi sentiment signals are also fitting. The VIX triggered a macro buy signal last week, plunging from 30+ to 20 and CNN’s fear and greed is also in the buy zone. All similar periods on the below chart were at least local buy opportunities.
The top down macro liquidity environment has also jumped for the better in the last week. This was the biggest spike in US Liquidity since May 2025, a breakout move which has driven risk asset prices higher.
Amongst this swathe of data (and more) it’s hard not to be bullish on Bitcoin above $71.5K.
Of course, risks remain. Locally the biggest risk is a potential resurgence of Oil back above $100 and escalated global actions which drive broad risk off behavior. But with all the information we have today, this all leans positive and we have a very nearby technical line in the sand.
War is bullish
Many such analyses confirm that wars are contradictorily bullish events, with almost all in the last century seeing strong risk asset performance in the following months and year.
The Iran war has been a bit nuanced due to the impact on global oil passing through the Hormuz strait. The risk from this is not over yet, but the market today is pricing in greater chance of resolution (or simply not caring).
We have seen evidence for this optimistic market expectation across several fronts:
- Oil is back below $100
- The current Iran-US ceasefire
- Iran offered a 5 year halt on nuclear weapons
- The S&P500 is trading higher today than when the war started
- The VIX volatility index spiked over 30 (risk-off zone) and has since plunged back into risk-on zone in the 20 region.
The markets are very good at sniffing out and pricing in risk and opportunity and today it’s telling us that the outlook on the Iran war (at least with regards to investing) is now positive.
We’ve also seen Bitcoin outperform equities (and all markets) by 11% since the war started. The ultimate risk on asset, which has been in a broad multi month downtrend, is now showing signs of relative strength. That’s big. These sort of shifts are not to be ignored.
Equities
Much of the above information and metrics are relevant for equities too. The market is up on some of the worst geopolitical news we’ve had in years. The S&P has broken through technical resistance and is pushing all time highs (ATH). VIX has reset to a risk-on level. US Liquidity is driving higher… these are all very bullish factors for US Equities. We are also in the midst of AGI rollout which is driving massive revenue growth across industries and is likely to spur the biggest growth rate to GDP we have seen in decades, perhaps ever.
Provided the recent pivot in Iran-US relations holds and the worst is largely behind us (as the market is pricing in today), we can expect what I like to call “volatility fatigue” to set in right about now.
“Volatility Fatigue” is the market starting to discredit/ignore the polar flips in news-of-the-moment headlines (like Trump and Iran’s daily reversals and escalations) and move back to pricing fundamentals and major macro drivers. The whip saws shrink. We’ve seen the downside has been capped in recent weeks. In short, people get tired of the same old news story fatigue and move on to the bigger picture. The bigger story today is monetary supplyand intelligence expansion which is driving the MAG7 and AI techstack businesses higher.
Amidst this backdrop, we quite like some of the tickers popping into our AI stock screener including DELL.
DELL was recently the top ranked equity by our AI Screener. It’s showing a strong technical structure and ATH breakout. Low sector PE of 20, and it’s pivot into AI is paying off with strong growth, overtaking the legacy DELL business and seeing 300%+ growth in AI optimized servers in Q4 alone. It’s trading like a value stock in this industry, but with a big technical breakout, all while actually being an AI growth stock. I suspect the market still incorrectly views DELL as simply a laptop manufacturer.
What could go wrong for equities?
The same headwinds we’ve discussed in depth in recent times remain, the biggest being:
- The Gold-to-stock ratio breakout (discussed last issue and in recent podcasts). Similar past periods saw low or negative returns for equities on the whole, as Gold outperformed. The birth of super intelligence makes it harder to compare these periods and relative forward growth.
- Oil is up 61% year-on-year. Sustained high oil prices (particularly above $100) are a strain on risk assets, increasing supply chain and power costs, inflation and potentially interest rates. For now Oil has pulled back and it will be important to monitor the oil price over the coming months and look for a gradual decline from here.
- Late employment cycle (with possible AI driven redundancies). The employment rate cycle has been in a multi-year bottom structure for some time, which has held up incredibly well. Will it hold up well over the coming 1-2 years as AI powers go to a new level?
Sustained high oil priced puts pressure on risk assets. The key word is sustained. If we gradually head down from here, it’s unlikely to have an impact on markets. Nonetheless, Oil is a key metric to monitor over the coming months.
Bottom Line
These are uncertain times but right now the market is telling us it’s less concerned about the risks and more excited by the opportunities. And the market is usually right. It is especially promising when you get radical repricing in the midsts of widespread fear and supportive fundamentals, like we have seen in the last couple weeks.
This brings us full circle to the start of this newsletter. Let’s not overweight the problems in our head, but be prepared accordingly. Long-term performance has historically rewarded those that position for the optimistic outcome, while concurrently managing risks, diligently monitoring the data and acting with strong conviction (loosely held). In short, if the current move breaks down next week, and risk metrics start flashing, our systematic portfolio will pivot accordingly. Until then, things look great for Bitcoin and equites today.
If you liked the charts and metrics here, check them out at Capriole.com/Charts; there’s dozens more on the platform with automated strategies, alerts and AI screeners for 1000s of assets. With many more released every week.
Charles Edwards
Recent Media
- Markets live stream – we’ve started hosting weekly Youtube live stream market updates covering all asset classes. Join the live stream to ask questions and get our point of view. Latest episode here and subscribe to our new channel here to catch the forthcoming show
- The Bitcoin Value Zone – Bitcoin Podcast with CCI recorded 12 March here
- The Quantum Threat and Opportunity – Real Vision Podcast recorded 24 February here
- How on chain analysis has chained – Consensus 2026 recorded 12 February here
- Investing for 2030, how to think about a 5 year portfolio – Gamma Prime Hong Kong recorded 9 February here
