Expert: AI Mania Isn’t Over, and Crypto May Be the Biggest Beneficiary

• AI mania shows fear, not peak confidence, signaling more growth for crypto markets.
• Rising margin debt and liquidity injections support speculative cycles benefiting digital assets.
• Crypto could gain as AI-driven capital spreads beyond mega-cap tech into broader markets.

The AI bubble will not pop anytime soon, according to top market analyst Bull Theory. 

The analyst argues that current market conditions mirror early-stage bubbles, not final peaks. Fear is high, valuations are elevated but not extreme, and warnings are everywhere. History shows this is exactly when bubbles accelerate, not collapse.

Bull Theory points to a consistent pattern across major market manias. Economists warned about tech stocks in 1997, yet the dot-com bubble didn’t burst until 2000. Housing market warnings emerged in 2005, but the crash came in late 2007. 

Early warnings never kill bubbles; they simply mark the beginning of the acceleration phase. Right now, AI warnings started appearing in 2023, suggesting the real peak may not arrive until 2027 or 2028.

Valuations Show Room to Run

Current market metrics remain far below historic extremes. The Nasdaq has climbed 88% over the past five years, a solid gain but nowhere near the dot-com era’s 12x surge. 

Today’s Nasdaq trades at a price-to-earnings ratio of 26x, less than half the dot-com peak of 60x. The S&P 500’s P/E ratio sits around 40x, elevated but still below previous bubble tops.

Margin debt tells a similar story. Investors are using record leverage at $1.1 trillion, the highest level in history. Bull Theory notes that bubbles historically burst only after leverage starts declining sharply. 

Since margin debt continues rising, the speculation cycle appears to be building rather than peaking. This suggests more upside remains before any serious collapse.

Fear Dominates Market Sentiment

Google search data reveals widespread crash expectations. High search volume for terms like “AI bubble” indicates persistent fear among investors. 

Bull Theory emphasizes that bubbles typically burst when confidence peaks and fear disappears. Current market behavior shows the opposite dynamic. Every tech selloff triggers sharp VIX spikes, jumping from 20 to 28. 

Put option buying surges heavily on each dip, reflecting defensive positioning rather than euphoria.

Real bubble tops usually feature low volatility and minimal hedging activity. Investors become complacent, believing the rally will never end. That confidence doesn’t exist today. Wall Street remains divided on market direction. 

Retail investors panic during every correction. This sentiment profile matches early-to-mid bubble stages, not late-stage mania.

Narrow Rally Lacks Full Participation

The S&P 500 equal-weight index has gained just 10% over the past year. This narrow performance reveals that a handful of mega-cap stocks are driving the entire rally. 

NVIDIA, Tesla, Apple, Google, and Amazon account for most of the gains. The broader market has barely moved. 

Bull Theory argues that true bubble peaks require widespread participation across all sectors and market caps. That full-market involvement hasn’t materialized yet, suggesting the cycle has further to run before exhaustion sets in.

Crypto Positioned to Capture Liquidity Wave

Bull Theory remains optimistic about crypto markets despite recent turbulence. The firm believes upcoming liquidity catalysts are too powerful to ignore. 

The Federal Reserve has begun easing by purchasing T-bills, a policy shift that historically boosts risk assets’ valuations. Trump administration policies aim to attract global capital back to U.S. markets, potentially flooding the system with liquidity.

Federal debt is projected to reach $50 trillion to $55 trillion by 2029. This massive expansion will inject enormous amounts of money into the economy. 

Combined with monetary stimulus from Japan, China, and the U.S., global liquidity conditions favor speculative assets. These macro tailwinds have historically extended bubble cycles rather than ended them. Crypto stands to benefit as one of the most liquid and speculative asset classes available.

Corporate earnings continue to support current valuations, particularly for AI leaders like Nvidia and Microsoft. The AI investment cycle is accelerating, not slowing. 

Market funding remains strong and continues increasing. All these factors point to a bubble still in its early stages.

Bull Theory expects corrections and volatility throughout this period. Sharp pullbacks will shake out weak hands and create buying opportunities. 

But nothing in the current data suggests an immediate collapse. If historical patterns hold, the true mania phase, where valuations go vertical and euphoria peaks, still lies ahead. 

Crypto markets could emerge as the primary beneficiary of this extended cycle.