A Test of Endurance

The war in the Middle East has sent shockwaves through global markets and reignited fears of recession, inflation and all the other economic bugbears everyone wishes would just go away. Today’s forward guidance looks at how the conflict may hinge on the economic consequences of the fighting and how global markets may decide Iran’s ultimate fate.

Meanwhile, we also take a look at the recent AI-related controversy involving Anthropic and the US Department of War. If we want to avoid someday meeting our demise at the hands of a murderous killer robot, then perhaps we need to start trying to preempt that scenario right around now.

📉Playing Both Sides 📉

Not so long ago, the US spot Bitcoin ETFs were on a hot streak of outflows. Many interpreted this as a sure-fire signal that institutional capital was abandoning BTC and going off to look for gains elsewhere. It seems like a logical conclusion to draw, but it’s not the full story.

On-chain data shows that, while retail may be absolutely cooked, whales and patient pools of institutional capital (including sovereign wealth funds) are apeing into BlackRock’s IBIT ETF and hoovering up BTC like they can’t get enough of it. So, what gives?

In today’s video, we explain what’s going on and what it means. We look at the unwinding arbitrage strategy that’s distorting our view of the market, why the ETFs aren’t giving us the full picture and why writing off Bitcoin at this stage may not be the best idea.

You can watch that video here.  

📈 Crypto Market Forecast 📈

It appears that seasonality remains undefeated. To refresh your memory, Ben Cowen and others were pointing out that crypto tends to rally in early March before declining into April in midterm years. This seemed impossible given what’s been going on in the Middle East, but crypto managed to experience explosive growth regardless, with Bitcoin rallying all the way up to $74k.

The reason for this rally was something that had been highlighted in last week’s newsletter, and that was the ISM Services and ISM Manufacturing PMIs coming in slightly higher than expected. In case you forgot, many crypto traders and investors believe crypto prices are driven by economic activity as measured by the ISM, given the strong correlation between the two.

So, when the ISM Services and ISM Manufacturing PMIs for February 2026 came in higher than expected, speculators and algorithms started buying, thinking that the ‘ISM thesis’ was playing out. In reality, what played out was a massive short squeeze that caused prices to go higher and for longer than everyone expected, which isn’t too surprising given how short everyone already was.

This begs the question of what comes next. The answer ultimately depends on what happens with the war in Iran. To be frank, this is something that’s impossible to forecast, and that’s mostly because it’s impossible to know what’s really going on. There has been propaganda and censorship from both sides - the so-called fog of war, where truth is the first casualty.

For what it’s worth, one thing is for certain: when the US and Israel struck Iran, they were expecting a so-called decapitation - kill the leader, and the country falls apart. At the time of writing, this hasn’t happened, and the result is that the conflict appears to be dragging on for longer than expected. Some reports suggest the conflict could last until September.

But, as with all sensationalist claims, the truth is likely in the middle. Where that middle is depends on the same thing as every war: the resources that each side has, specifically weapons and manpower. The US reportedly does not have enough air defense missiles to defend both Ukraine and the Gulf countries, but it likely still has weeks of offensive weaponry, if not more.

On the Iranian side, there have been viral posts showcasing how the number of missiles and drones launched from Iran have declined exponentially since the war began last weekend. The thing is that it is normal for the first strikes in a war to be the biggest ones. Case in point, if you look up the number of missiles launched by the US and Israel, the trend is the same as Iran’s.

As such, we’re dealing with a situation where it’s not clear how long Iran can continue fighting, but it’s clear that there is a limit to how long the US and Israel can continue fighting. Again, it’s unclear where this limit is, but it’s estimated to be weeks, not months. The good news is this means the war probably won’t last until September. The bad news is that this means the clock is ticking.

It’s clear that the US and Israel are getting desperate, as they are now working to arm ethnic minority groups within Iran in the hope that they can create an uprising. When it comes to war, hope tends not to be the best strategy, and it signals that one side is running out of options. To be clear, the other side could be in even worse shape, but for now this remains to be seen.

There is a silver lining though, and that’s the war is shifting from a kinetic one to an economic one. Make no mistake, an economic war is painful as well - price spikes in food, fuel, and water are certainly concerning. However, they pale in comparison to the presence of a drone or missile flying overhead. Even so, an economic war has a bigger impact on the markets.

It’s believed that shifting the war from kinetic to economic is Iran’s strategy, as it knows that it cannot win a kinetic war against the US and Israel. If this is the case, then it foreshadows more disruption to supply chains and infrastructure in the Middle East, particularly around the Strait of Hormuz. The longer this disruption continues, the more the economy will be put under pressure.

In practical terms then, this war may not be decided by how long the US and Israel or Iran can last, but how long the global economy can hold up against a critical supply chain disruption. So far, the global economy seems to be the weakest combatant in this fight, and it may give out before the weapons or manpower are depleted on either side. Crypto would crash accordingly.

🤖 AI Revolution 🤖

Artificial Intelligence has been the single biggest topic of discussion for the past few months, if not years.

From concerns around its impact on the labour market to the emergence of terms like “agentic engineering,” the discussions are wide-ranging.

To be clear, we believe its current mindshare is well deserved. After all, the AI industry has been maturing at breakneck speed. Recent advancements have made agentic AI (AI bots/systems that take autonomous actions rather than passively responding to prompts) more capable and viable at scale. Companies and power users are now moving beyond chatbots and content generators towards these AI agents.

If you didn’t know, agentic AI refers to AI systems that can autonomously navigate software interfaces, manage workflows, and make decisions with minimal human prompting. The most notable example of this is the recent hype around Peter Steinberger’s OpenClaw (formerly Clawdbot and Moltbot) project. For context, OpenClaw allows users to run an AI assistant on their local machines. By integrating it with apps like calendars, email, home automation, and messaging platforms like Telegram or Slack, users could set up these bots for 24/7 task management.

OpenClaw’s virality has been one of the first tangible markers of retail demand for agentic AI. It saw several users spend hundreds and thousands of dollars on hardware and AI subscriptions. In fact, Mac Minis were nearly sold out across stores in the US.

That said, beyond the OpenClaw craze, AI has also been at the heart of several major partnerships and commercial agreements between players in Big Tech. For instance, Apple and Google announced a multiyear partnership integrating Gemini models into Siri and Apple Intelligence. Google DeepMind went on an acquisition spree. It snapped up Common Sense Machines for 3D AI models, struck a licensing deal with Hume AI to boost Gemini's voice and emotion capabilities, and partnered with Sakana AI for Japan-focused research. On the physical infra side, trillions of dollars are projected to be invested in data centres over the next five years.

Yet for all the excitement, a reckoning is underway. As AI gets increasingly better, the discussions around potential abuse get louder. And nowhere is this tension more visible than in the military's embrace of the technology.

Notably, one of the biggest stories this month has been the standoff between Anthropic and the US Department of War (DoW) over the military’s potential use of Claude in situations that Anthropic deems to be “against American values.”

Specifically, the situations in question are the potential use of AI in mass domestic surveillance and fully autonomous weapons, which is possibly even more scary than it sounds. Though if you ask the US government, they claim they don’t intend to surveil citizens but rather protest the notion of a private corporation being able to impose limitations on the military’s use of technology.

As of the time of writing, Anthropic’s refusal to comply with the DoW’s demands have resulted in the Pentagon terminating its $200 million contract with the company and imposing a supply chain risk (SCR) designation on Anthropic.

For context, a SCR designation effectively prevents government agencies from using Anthropic's technology in specific DoW contracts. Secretary of War Pete Hegseth even claims the designation would require all US military contractors to sever all commercial ties to Anthropic, not just in contracts related to the DoW.

Legal interpretations aside, Anthropic’s designation as an SCR is massive for a few reasons. First, this designation had never been applied to a US company before. Second, it’s never been used to punish a company for not agreeing to contract terms the military desired. Third, it has been historically reserved for foreign adversaries posing risks to defense systems.

The implications of deeming this SCR designation lawful are far-reaching and potentially authoritarian. There’s no better proof of how damaging it is to the industry than to have OpenAI (Anthropic’s business rival) join in protest against the DoW’s decision – especially when it comes at risk of forfeiting the government contract it stole away from Anthropic.

For what it’s worth, Anthropic’s hesitation to cave into the government’s demands is well warranted. According to CEO Dario Amodei, the surveillance risk is very real. You see, the government can already purchase detailed records of Americans' movements, browsing habits, and associations from commercial data brokers without a warrant. The use of AI will supposedly make it possible for the state to automatically create a profile of anyone based on this previously scattered and individually innocuous data. In fact, we’ve already seen reports of ICE contracting with firms that use AI to scan millions of social media posts.

Thankfully, at the state level, lawmakers are pushing back. There are already several AI-related bills advancing across the country, regulating everything from algorithmic pricing to chatbot interactions with children.

Despite the Trump administration’s efforts to label these efforts as “onerous,” over 50 Republican state lawmakers have written a letter expressing concern about federal pressure on states to abandon legislation aimed at protecting constituents from abuse of AI technology. This balancing between advancing AI and implementing reasonable safeguards could well be the single biggest determinant of societal progress in the years to come.

In our opinion, regardless of the outcome, the uncertainty around policy and regulation will cause open-source technology (including crypto) to re-emerge in popularity. Maybe this AI drama is exactly what we need to reignite the cypherpunk ethos?

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📖 Quote of the Week 📖

“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” - Stan Druckenmiller

Team Coin Bureau

Disclosure: Authors may own cryptoassets named in this newsletter. These are unqualified opinions, and a Coin Bureau newsletter, is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor.