Luke Lango says Bitcoin has hit its Fourth Bust… a “growing consensus” about the government and your wallet… Eric Fry’s pick crushes Nvidia… where to find tomorrow’s biggest AI winners
This is, without a doubt, the most difficult weekly update I’ve sat down to write in my years as your Chief Analyst.
That’s not exactly the kind of line anyone wants to read in their investment newsletter.
But it’s exactly how our blockchain expert, Luke Lango, opened his note to crypto investors over the weekend.
In short, Luke says Bitcoin’s fourth boom cycle is over, and we’ve most likely entered the fourth bust.
To make sure we’re on the same page, as I write on Tuesday morning, Bitcoin trades around $68,600 – a 44% collapse from its October high of just over $124,000.
Source: StockCharts
Worse, this “44% down” figure represents a mild rebound from last week’s low of roughly $60,000.
In early 2025, we highlighted predictions that Bitcoin would reach $200,000+ by year-end. Some industry experts put the target number even higher.
Bitcoin has failed to live up to its multi-faceted potential in this cycle.
It failed in two principal ways: as a cutting-edge technology, and as a storehouse of value.
Technological failure: Last year, as risk-on assets soared, Bitcoin – the purported “foundational technology of the future” – dropped 6%.
Value failure: In the second half of 2025 and into early 2026, we saw the “de-dollarization” trade explode. Yet, as gold, silver, copper, and palladium soared, Bitcoin collapsed.
Back to Luke:
When it was time for Bitcoin to act like a tech revolution, it tripped at the starting line. When it was time for Bitcoin to act like a true store of value, it stayed in bed.
Anything can happen, but the odds of this collapse being imminently recoverable are low.
Luke highlights a few technical reasons why, including:
So, if a new crypto winter is here, how far might we drop?
Back to Luke:
We are likely heading toward $40,000 before this is over.
Typical bust cycles see a 70-80% peak-to-trough drop. A 70% collapse from our highs puts us right at the $40,000 mark.
Since we peaked in October 2025, we should expect to find the floor around October 2026 to early 2027.
Luke’s recommendation to crypto investors?
Recognize these technical realities and adapt. That means aggressively reducing exposure to smaller altcoins and shifting your mindset from “accumulation for immediate gains” to “capital preservation for the 2027 entry.”
But – importantly – Luke writes that this isn’t the curtain call:
The blockchain still has the potential to rewire global finance through stablecoins and decentralized rails, but the market doesn’t believe that story right now.
And in investing, what the market believes is the only thing that pays the bills.
We’ll keep tracking this. But for now, “defense” is the official stance for crypto investors.
Speaking of the need to play defense…
At the start of the year, I predicted that 2026 would bring a wave of controversial legislative proposals aimed at investment wealth.
Behind this prediction is our widening K-shaped economy, where Americans with assets are watching their portfolios soar while those without face stagnant wages and stubborn inflation.
Since then, we’ve seen California’s Billionaire Tax proposal gather signatures, Washington propose its first 9.9% income tax aimed at high earners, and Michigan advance a 5% surcharge on annual taxable income over $500,000.
But yesterday’s Wall Street Journal highlighted something that could accelerate the timeline of such legislative proposals:
A consensus has formed that while artificial intelligence may create new and better jobs, its threat to current job holders requires massive new government training programs, unemployment assistance, income supplement programs and even a guaranteed minimum income.
Now, the article’s authors oppose these programs, noting that “previous efforts to cushion the transition from jobs of the past to jobs of the future have done little to benefit those making the transition – and have raised the cost for society as a whole.”
Still, that “consensus” is forming.
About the same time that I made my prediction, Luke made several of his own…
One of which was that unemployment would hit 6% this year as AI replaces workers faster than the economy can absorb them. That’s potentially millions of newly displaced workers creating political pressure for action.
(Tomorrow brings the latest jobs report, and the unemployment rate is expected to remain at 4.4% – we’ll bring you the details.)
Now, beyond the job losses themselves, there’s a second-order risk: the government response could unintentionally reduce labor-force participation – and keep unemployment higher than it otherwise would be.
To illustrate why, the same WSJ article points to the decades-long “War on Poverty,” which had an enormous price tag for questionable results.
As federal welfare spending surged, labor-force participation among able-bodied persons in the lowest income quintile fell sharply:
As the annual federal welfare spending surged to more than $70,000 per poverty family, labor-force participation among able-bodied persons in the lowest income quintile collapsed to 36%, from 68% in 1967.
In other words, the WSJ authors argue that the expansion of government transfer payments has created a disincentive to work.
How? By making benefit values comparable to entry-level wages and reducing the net income difference between the lowest and middle-income brackets.
With AI, we’re at risk of this happening on a whole new scale. After all, as I’ve pointed out before in the Digest, once such government programs start, rarely do they shrink – even after the initial emergency fades.
Back to the WSJ:
A feel-good expansion of our existing programs to address AI transitions could idle tens of millions of workers, squander much of the economic benefit we hope to derive from AI, and foster a dangerous “bread and circuses” political system in which those who have chosen to remain outside the labor force demand an increasing share of the benefits created by those who have chosen to work.
So, consider the policy risk chain…
Millions of displaced workers… growing political consensus for permanent new programs costing tens of billions annually… and a political class already floating wealth (and investment) taxes in multiple states.
And who pays?
For now, the easy answer is “the rich.” But as new programs expand and the revenue need grows, the definition of “rich” tends to change – and eventually, ordinary investors’ gains end up in the crosshairs too.
Unlike Nvidia’s customers turning into competitors, nobody was trying to manufacture their own optical-fiber cables. Rather, the AI hyperscalers were all fighting to get more cables from Corning, not replace them.
So, in his “Sell This, Buy That” research package, Eric recommended investors rotate out of Nvidia and into Corning.
As you can see below, investors who made the jump (starting July 1, 2025) would have made nearly 7X more with Corning than they would have with Nvidia. GLW has returned 150% over this period compared to NVDA’s 20% gain.
This “Sell Nvidia, Buy Corning” recommendation was just one of a handful of portfolio moves Eric recommended. If you’d like to review his entire research package (he gives away several free “switches” in the report), click here.
In any case, a huge congratulations to everyone who got into Corning.
Circling back to tax legislation aimed at investments, this type of return goes a long way toward growing your wealth faster than the government can take it.
Between the potential for forced asset sales from wealth taxes and new levies to pay for permanent income support programs, investors could face a double headwind in the years ahead.
As I’ve noted before in the Digest, we have little control over whether these proposals pass. But we do control our investment strategy. And the only real defense is building wealth faster than the government can take it.
And that brings us back to today’s AI opportunity – specifically, what legendary investor Louis Navellier calls “Stage 2” of the AI boom.
As we covered in yesterday’s Digest, the market is shifting from the obvious mega-cap names (Stage 1) to smaller, under-the-radar companies positioned to capture the $710 billion in infrastructure spending flowing from the hyperscalers (Stage 2).
The biggest potential winners aren’t household names. But they’re companies with strong fundamentals, reasonable valuations, and direct exposure to the AI buildout.
From Louis:
These are the kinds of setups that historically produce the biggest gains – not because the companies are flashy, but because expectations are still low while fundamentals are improving rapidly.
Louis just recorded a special briefing on what he’s calling the AI Dislocation – this transition from Stage 1 mega-caps to Stage 2 infrastructure and application plays.
Back to Louis:
Companies with accelerating earnings momentum, cleaner balance sheets, and far less capital intensity are the kinds of businesses that tend to benefit when a technology moves from experimentation to profitable deployment.
That doesn’t mean the AI leaders of the past disappear. It means the next phase favors different characteristics – and different stocks.
