The Fog of War & The Age of Uncertainty
Why Geopolitics and AI are Creating a "No-Man's-Land" for Risk Assets
Aloha friends,
my original plan for today was to focus on the roadmap for the coming months. However, the world changed over the weekend. With the recent attacks involving Iran and several other nations, we are entering a phase of heightened volatility.
War is a tragedy first and foremost, but for the markets, its primary product is uncertainty. When you combine the drums of war with the rapid, disruptive rise of AI technology, which is currently reshaping our economy and daily lives, you get a perfect storm of unpredictability.
Disclaimer: Views expressed are the author’s personal views and should not be relied upon as investment advice.
Markets are built on anticipating future cash flows and stability. Right now, nobody can say for sure who the winners of this transition will be. When the “if” and “when” become too loud, investors do what they always do: they head for the exits. What does this mean for the market? I would expect a more volatile time ahead of us and the VIX to continue to increase.
Volatility is the New Baseline
Typically, markets try to price in the future. But how do you price in a world where kinetic warfare and AI disruption happen simultaneously?
Historically, values over 20 tend to go into risk-off mode. We came from a level below 15 and I expect to cross the 20 next week, as we did multiple times last year - which led to a sell off (e.g. April 2025: Liberation Day).
As we can see, the VIX is climbing. This mirrors the growing unease. While I observe many "bullish" charts for Bitcoin suggesting that BTC acts as a hedge during conflict (referencing brief rallies in previous wars), I remain skeptical.
The AI Disruption Factor
It’s not just the geopolitics. We are standing at the doorstep of an AI revolution that looks to disrupt the very foundations of our society. This adds another layer of Unknown Unknowns.
Labor Markets: Uncertainty about job stability affects consumer spending. Below as one example which ran through the media the last days with Block releasing 40% of their labor force.
Capital Allocation: Huge amounts of liquidity are being sucked into AI infrastructure, leaving less for speculative “risk-on” assets like crypto.
The "Relief Rally" Trap
Yes, we might see a technical bounce. A relief rally toward the $74k - $80k zone is possible (it would be a Short Squeeze getting >7b of shorts out of the market).
In my view, we are still firmly in a bear market. A spike to $74-80k would likely be a lower high on the macro scale before we see a further leg down over the coming months (which is my base case). Even though, we have seen the $60k holding now for a while, I would prefer the short rally up before we go down. Yes, there is always a probability we have seen the bottom - but as stated above, macro does not give me this indication yet.
Final Thoughts
Uncertainty is the enemy of growth. Until we have clarity on the escalation in the Middle East and a clearer picture of how AI integration affects corporate earnings, the so called Smart Money will likely stay on the sidelines or in Gold (as discussed in one of my previous letters).
Portfolio Management
I am holding my ground. While the temptation to “buy the dip” during war-induced volatility is high, the macro setup (Hawkish Fed + Geopolitical Stress + AI disruption) suggests that patience is still the most valuable asset in your portfolio. I am watching the $54k level (Realised Price) closely for any signs of a structural bottom, but we are not there yet.
If you have no position yet: On a long term perspective, I think we are trending around fair price. Many of the data points I am looking at are close to where I want them to be (more on this in a later letter).
That’s it for today - I hope I could deliver some valuable insights.
Maloha
Stay Humble. Stay Curious. Enjoy the Journey.
Disclaimer: Views expressed are the author’s personal views and should not be relied upon as investment advice.