Key Insights
- AI-driven growth from the Magnificent Seven offset the Fed’s tightening cycle, disrupting crypto’s traditional four-year rhythm.
- Elevated interest rates persisted longer than expected because AI kept the broader economy from weakening, delaying the usual rate-cut-driven crypto bull run.
- Bitcoin’s recent gains came from institutional inflows rather than the typical low-rate environment, breaking historical cycle patterns.
- The current market downturn increases the likelihood of Fed easing in 2026, potentially restoring the classic rate-cut-led crypto upswing.
AI changed the usual mechanics of the four-year crypto cycle, and that shift helps explain why the expected rate-cut-driven crypto boom did not arrive in 2025, even as institutions flowed capital into digital assets.
The observation, first set out in a widely circulated thread by X user Gammichan on Nov. 2, 2025, argues that AI-led growth in a narrow tech cohort altered monetary transmission and delayed the macro conditions that normally spur retail-driven crypto rallies.
AI Rewired the cycle
The core claim is simple. In prior cycles, weak macro data and falling inflation prompted the Fed to cut rates. Lower rates encouraged retail risk-taking and a broad liquidity surge that lifted crypto prices.
Historically, the cycle followed a predictable pattern: as the economy slowed, the Fed lowered interest rates, encouraging retail investors to take on more risk, which in turn fueled crypto bull markets.
However, the surge in AI changed this dynamic. Heavy investment in AI infrastructure and software funneled growth toward a small group of major tech companies, disrupting the usual flow.
That concentration kept parts of the economy — notably technology — growing even as manufacturing and other sectors softened.
The result: the Federal Reserve delayed easing because headline growth and activity appeared stronger than it otherwise would have been.
Gammichan framed the argument as AI having “thrown off the typical 4-yr credit/business cycle,” a point that has since been picked up across market commentary.
Data: rates, PMI and Market Concentration
The factual backbone of the narrative is straightforward and measurable. The Fed began a sustained campaign of rate increases in 2022 to fight inflation; by year-end 2022 the target range had climbed from near zero to the mid-single digits.
That tightening materially altered borrowing costs across the economy. At the same time, manufacturing activity has shown persistent weakness.
The ISM Manufacturing PMI was below the 50 expansion threshold through much of the period and registered 48.7 in October 2025, signaling continued contraction in factory activity.
Lower manufacturing demand is the kind of economic slack that historically precedes rate cuts. Yet markets were lifted by outsized AI winners.
The so-called “Magnificent Seven” — led by companies such as Nvidia and Microsoft — materially outperformed and came to account for a large slice of S&P market value.
Recent reporting estimates those names together represented roughly a third of the S&P 500 by late 2025, underscoring how a narrow group can sustain headline market gains even as broader activity cools. That concentration changed the Fed’s calculus.
Why this Mattered for Crypto in 2025 — and What it Means for 2026
Because the Fed’s path stayed firmer for longer, the classic, low-rate trigger for a retail crypto boom did not appear in 2025.
Crypto instead saw capital come from institutional channels and selective product launches.
That institutional inflow supported prices but altered market breadth: fewer retail participants, fewer exuberant micro-caps, and a muted, less universal rally.
This is not the same as the cycle permanently breaking. Monetary policy remains the dominant macro lever.
If broader activity weakens enough to compel the Fed to cut rates, the familiar retail-led re-risking can return.
In that case, the “delayed” bull run — historically tied to easing — could still arrive in 2026. The key variables are whether ISM and other real economy indicators keep deteriorating and whether the Mag Seven’s growth can no longer mask the slowdown.
For investors and strategists, the AI-interruption thesis offers three immediate lessons. First, monitor real economy indicators (PMI, payrolls, capex) not just equity indices.
Second, watch concentration risk: when a few firms dominate benchmarks, headline market strength can mislead policymakers.
Third, understand flow composition: institutional liquidity can prop prices without producing the same retail breadth that fuels blow-off tops.
The Fed’s historical playbook still matters. If inflation shows sustainable improvement and manufacturing and services soften, rate cuts become more likely.
That dynamic would re-open the classic channel that has historically supported the next phase of crypto rallies. In short, AI delayed the timing — it did not erase the mechanism.
Gammichan’s thread crystallized an important observation. AI-driven gains concentrated in a small set of firms altered monetary outcomes and, by extension, crypto’s expected timetable.
Markets now face a two-track reality — strong tech and weak manufacturing — that complicates forecasting.
For traders, that means patience and a data-first posture. The conditions that trigger the next broad retail crypto uplift are still macroeconomic, and they may arrive in 2026.
Whether they do will depend on whether AI’s growth continues to outpace the slowdown elsewhere, or whether broader weakness forces a Fed pivot and the classic cycle resumes.