Opinion: The Stock Market AI Bubble Has Arrived, Why I'm Turning to Bet on Bitcoin?
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Opinion: The Stock Market AI Bubble Has Arrived, Why I'm Turning to Bet on Bitcoin?
"Among all assets in existence today, BTC offers one of the widest margins of safety, even if the final lows drop about 15-20% from here."
Navigating Web3 tides with focused insightsAuthor: Investing Beanstock
Translated by: TechFlow
TechFlow Editor's Note: AI stocks are surging ahead, but this trader is instead clearing out tech stocks and turning to bottom-fish Bitcoin—he uses Howard Marks' cycle theory to check against the current market item by item, finding that AI already matches almost all "bubble top" characteristics. For investors, this article provides a calm cycle positioning framework to help you judge whether to be greedy or fearful now.
The stock market is experiencing a AI-driven frenzied bull market, which shouldn't surprise anyone.
If you don't have a position, you simply feel like a fool—because capital expenditures (CAPEX) will only continue to rise, and the forward valuations of all these stocks will only become crazier.
I don't intend to comment on specific stocks or indices, anyway banks and financial media around the world are reporting extensively on them. I'm more interested in figuring out—or at least trying to decipher—what stage of the market we are in. Not just crypto, but the entire financial market.
For this, I drew a lot of inspiration from one of my favorite books: Howard Marks' "Mastering the Market Cycle".
Most people understand cycles as a series of events. Most people also understand that these events usually follow each other in a conventional order: after a rise comes a fall, and then eventually a new round of rise. But to fully understand cycles, this is not enough. Events in a cycle should not be viewed merely as one after another; more importantly, each one leads to the next happening.
Straight line = midpoint, the market's pendulum is a wavy line oscillating around the midpoint. Together they constitute the market cycle, driven by various market forces, causing it to deviate from the midpoint from time to time.
The movement of cyclical phenomena can be easily identified into several stages:
a: Recovery from the overly suppressed lower extreme or "low point" towards the midpoint
b: Continuing to swing past the midpoint towards the upper extreme or "high point"
c: Reaching the high point
d: Correction downwards from the high point back to the midpoint or mean
e: Continuing downward movement past the midpoint towards a new low point
f: Reaching the low point
g: Recovery from the low point back to the midpoint
h: Cycle repeats
So Where Are We Now?
Is this a bubble? I think it is already obvious at this point that AI is indeed a bubble. According to Marks, when the sentiment that "price doesn't matter" is strong, this is a sign of a bubble.
In a bubble, investors often conclude: you can make money by borrowing money (leverage) to buy frenzied assets. No matter what your loan interest rate or funding rate is, the asset will surely appreciate at a rate higher than that.
"No price is too high" is the ultimate ingredient of a bubble, which is a fairly obvious signal that the market has gone too far.
There are actually conflicting schools of thought that believe the market can be far above its intrinsic value and still continue to return multiples due to frenzy.
What Should We Do?
Since we are uncertain when the bubble will burst, in my opinion, we have two clear portfolio allocation methods.
Dollar-cost averaging (I mean real DCA, no market timing, you just buy bit by bit in a boring, mechanical way. The more batches you divide, the smoother the final cost basis will be, that's the whole point of doing this.)
Heavy cash position, but still allow yourself to participate in the market through tactical/satellite positions, such as active trading.
I personally prefer the second method. But that's because I actively monitor the market day after day, I rely on my own market experience and intuition to deal with all this.
Dollar-cost averaging is not a bad method either. But it does require individuals to truly extend their time horizon. Not 1 year or 3 years, but at least 5 years to really see some results. Most people DCA for a few weeks, or try to DCA while timing the market, ultimately counterproductive. If you plan to DCA a specific investment, ensure you fully understand this business/industry, then stick with it in a super boring, repetitive way, and continue living your life.
In my 2025 review and reflection post, I mentioned allocating 25% of the position to passive ETFs, including QQQ, SOXQ, XAR, URA, and UFO. I think a large part of the gains came from QQQ and SOXQ, but I sold them all in May because I thought the market had far exceeded the midpoint.
I also said I was generally bearish on crypto until early 2026 (turned out to be right), I managed to keep a large amount of cash, and now I am patiently deploying some of it into BTC. The target accumulation range is $50,000-$60,000, so I have started allocating when writing this article.
"Crypto Is Dead, Switch to AI"
Honestly, my only regret is not allocating more to speculative private market exposure in Anthropic and xAI. I think frontier models still provide the purest AI exposure, compared to the "selling shovels" types in the public market, such as GPU/semiconductor/storage narratives. Since those are already consensus, I don't think chasing highs at this point can provide asymmetric upside. That was a long time ago. Stocks like MU have nearly risen 10 times in a year, while stocks like SNDK fluctuate basically like memecoins. Upside might still be there, but downside risk looks worse.
But CAPEX! Yes, this may translate into real value add in the future, but it is still speculative. Excessive speculation, excessive money pouring into the same thing, I have seen this movie before.
Is it disappointing to miss a big chunk of the AI bull market? Of course, it does hurt a bit. But I still have exposure, and it's doubling. I really don't think telling others that AI stocks are really worth buying at today's valuations is responsible, unless they really know what they are doing and are in it for the long term (most are not, they are here for quick money).
Market Sanity Checklist
Now, let's go back to how Marks judges whether we are approaching/at the market top:
Economy is growing, economic reports are positive
Corporate earnings are rising and exceeding expectations
Media only reports good news
Securities market is strengthening
Investors are becoming more confident and optimistic
Risk is considered scarce and mild
Investors believe taking risk is the only way to profits
Greed drives behavior
Demand for investment opportunities exceeds supply
Asset prices exceed intrinsic value
Capital markets are wide open, raising funds or rolling over debt is easy
Defaults are rare
Skepticism is low, confidence is high, meaning risky trades can be made
No one can imagine things going wrong. No favorable development seems impossible
Everyone assumes things will get better forever
Investors ignore the possibility of loss, only worry about missing opportunities
No one can think of a reason to sell, and no one is forced to sell
Buyers outnumber sellers
If the market falls, investors will be happy to buy
Prices reach new highs
Media celebrates this exciting event
Investors become euphoric and carefree
Equity holders marvel at their own cleverness: maybe they will buy more
Those who have been watching feel regret; therefore, they surrender and buy
^ This means:
Future returns are low (or negative)
Risk is high
Investors should forget missed opportunities, only worry about losing money
This is the time for caution!
So, how many of these do you think the current stock market is exhibiting?
On the other side of the "Market Top" checklist, the opposite scenario may also occur:
Economy slows down: reports are negative
Corporate earnings flat or declining, below expectations
Media only reports bad news
Market weakens
Investors become worried and depressed
Risk is considered ubiquitous
Investors believe taking risk is just a way to lose money
Fear dominates investor psychology
Securities demand is lower than supply
Asset prices are below intrinsic value
Capital markets are tightly closed, difficult to issue securities or refinance debt
Defaults surge
Skepticism is high, confidence is low, meaning only safe trades can be made, or none at all
No one thinks improvement is possible. No outcome looks too negative to happen
Everyone assumes things will get worse forever
Investors ignore the possibility of missing opportunities, only worry about losing money
No one can think of a reason to buy
Sellers outnumber buyers
"Don't try to catch a falling knife" replaces "Buy the dip"
Prices reach new lows
Media focuses on this depressing trend
Investors become depressed and panicked
Equity holders feel stupid and disillusioned. They realize they don't truly understand the reasons behind the investments made
Those who did not buy (or sold) feel vindicated and are praised for their cleverness
Those who hold give up and sell at depressed prices, further exacerbating the downward spiral
^ This means:
Implied future returns are sky-high
Risk is low
Investors should forget the risk of losing money, only worry about missing opportunities
This is the time to be aggressive!
Based on the checklist above, I do think BTC is exhibiting many of these (especially the Saylor/MSTR situation). So I do feel BTC shows a more attractive investment prospect compared to today's high-flying AI stocks.
However, please note that the above progressions are simplified, they may not even appear in the same order, and not necessarily appear in every market cycle, but these behaviors are real, they are indeed elements that rhyme in the market over decades.
The AI revolution obviously benefits tech stocks, especially semiconductors during the 1/3/5 year period.
But investing is never about looking in the rearview mirror (unfortunately, most people do this and draw references from the past), advantage appears where people ignore/dismiss it. We need to look at "what will happen 1 to 10 years from now", not what the environment is today.
Looking at the chart above, saying you are a crypto investor and you should have invested in stocks would look very silly.
According to the chart above, if you chose stocks, statistically speaking, the probability of underperformance in the future is high.
Also, reading this passage now in 2026 might sound like a joke, but based on past lessons on cycles and understanding of forward returns/valuation fundamentals, I do think BTC will outperform stocks in the next few years.
The Most Disconnected Macro Environment in History
We are also in one of the most disconnected and irrational market environments in history.
Under the leadership of new Fed Chair Vash, interest rates are currently maintained at 3.5-3.75%, and he has also publicly taken a hawkish stance. But rates are not compressing, yet the stock market continues to rise, just because AI will cure cancer and everyone will make infinite money forever, right?
The stock market Shiller CAPE ratio has broken through 40 for the first time, this is the first time since the peak of the internet bubble era. The US stock market cap is now close to 2 times its GDP, valuations are even higher than during the 2000 bubble.
Valuation multiple expansion during a tightening cycle, this is a textbook definition of disconnection.
This disconnection is mainly driven by a three-engine narrative/liquidity machine.
AI Capital Expenditure Super Cycle: Large hyperscale cloud providers spend up to $725 billion in 2026, close to $1 trillion, now accounting for more than 30% of the entire S&P 500.
Late-cycle fiscal stimulus: Lowering corporate and individual taxes/tariff refunds boosted nominal earnings, even though the Fed is tightening policy.
Passive Index Fund Flows: Index funds mechanically invest every dollar of 401(k) pension into the largest market cap companies, regardless of price. Baby boomers are now forced to buy these hyperscale cloud provider stocks at historical highs, and continue to do so.
Risk Appetite Is Selective
Capital today is swarming into the AI/semiconductor field, while everything else including Bitcoin (the darling of the previous cycle) has hardly grown or is bleeding. This is not a universally greedy market, but a market that funnels all funds into a single narrative (AI and its related verticals).
In 2025, AI-related stocks accounted for about 80% of the entire US stock market gains. Behind these historical highs, market breadth is extremely narrow, most stocks did not even contribute to the rise (unless you are related to AI).
Cracks Are Forming
The whole building assumes AI capital expenditures can be met by real demand, and energy-driven inflation shocks will fade/be insignificant. Core PCE rose from 3% to 3.3%, oil prices surged from $57 to $113 during the Iran war and then fell to $76, this is exactly why rate cuts were ruled out.
Cracks have also appeared.
In the last full week of June, South Korea's KOSPI halted trading twice, Samsung and SK Hynix fell 12% in a single day, this is a warning about the number of sellers compared to remaining buyers.
Dalio also said his bubble indicator is close to 1929 and 2000 levels, Buffett... still holds a record $381 billion in cash. Prices have become dependent on narratives, positions, and leverage, there is really not much margin of safety left.
My Personal Plan
Considering all the above factors, here is how I think about the whole situation as a capital allocator.
Please note this is highly customized to my own life situation, investment goals and personality. Please do your own research, none of this constitutes financial advice.
I currently divide funds into 3 different buckets, and manage them according to specific buckets.
Trading Capital (Highest risk, highest volatility, highest variance)
Long-term Accumulation Capital (Buy and hold type that I don't intend to sell)
Illiquid Capital (Private Equity-SPV, Alternative Investments)
In terms of how to allocate capital to which bucket, it highly depends on market environment and liquidity.
Now, I keep most of my cash for Bucket 2. Due to diminishing market edge, I significantly reduced my allocation to Bucket 1. In the crypto field, I currently only think BTC, HYPE, and LIT are worth holding. Watching the stock market is like playing hot potato. Given current valuations, long-term allocation to stocks also doesn't make sense.
For Bucket 3, the amount is basically fixed, accounting for about 20% of my net worth. Given its illiquidity, it takes several years to realize full returns, so this bucket will basically not change in the foreseeable future.
As of writing, I am mostly in cash (>80%), the allocation weights between the 3 buckets are 10%, 70%, 20% respectively.
Under Bucket 2, I have so far made 4 buys of spot BTC, average price about $59,000. I am also interested in certain ETFs, will disclose when I decide to allocate long-term.
In summary, nothing too fancy. More like fishing, waiting for that big fish. I don't mind catching a few small fish before the big fish comes, but the focus is to continue fishing, stay focused, and not give up.
Perpetual DEX Airdrop Mining Is Still an Edge
Although my trading decreased in June, I think an extremely underestimated edge in the crypto field is perpetual DEX mining, especially Variational.
Although mainly driven by airdrop incentives, it still ranks in the top three among perpetual DEXs, excluding the clear market leader Hyperliquid.
Variational is still in private testing phase, meaning you need an invitation to use. What's special? This is an RFQ-based perpetual DEX, theoretically meaning they can list various trading pairs (even the most obscure), still having deep liquidity, unlike order books needing crazy bootstrapping.
I mainly use it to trade commodities like crude oil, gold, silver, copper and some other trading pairs. Focusing on open interest and holding long-term can obtain the most efficient points.
Referral can get 15% points boost, my code automatically grants you 90 days SILVER level upon registration.
Other platforms I am still mining and have significant points allocated are:
The TGE target for all mentioned perpetual DEXs is Q3 2026.
I think the fear surrounding STRC is excessive. But this financial engineering does change investor behavior around it. Unwilling to allocate before Saylor sells $1 billion BTC, now becomes the main "bottom signal".
At BTC price of $58,000, I think valuation is reasonable. It is now even below the 200-day moving average.
This means the second half of 2026 could be an important period for long-term accumulators. I do think there will be a final capitulation and massive forced selling (including Saylor), likely coinciding with the time the stock market starts to weaken.
Although this is not a pure BTC bullish post, I think among all assets existing today, BTC provides one of the widest margins of safety, even if the final low falls about 15-20% from here.
Think about it, in a long-term stagflation environment, scarce assets perform best. In the past it was gold, an asset that existed outside the monetary system, existing for thousands of years.
I think ten years later, accumulating BTC today will be one of the most rewarding moments in a long time.
Although the stock market will indeed rise over time in the future, at the current moment, I cannot justify buying at such high valuations, happy to watch until it returns to earth.
What do you think? How are you considering capital allocation now?
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