Source: Purpose Investments
Original Title: It’s Beginning to Look a Lot Like Market Recap Time 2025: Tech and Crypto Edition
Compiled and Edited by: BitpushNews
It's that time of year again when we gather our product leads and fund managers to review the market performance of 2025 and look ahead to the prospects for the next 12 months.
This year, two major themes have persisted: despite ongoing volatility, the institutional viability of digital assets continues to grow; meanwhile, Big Tech has consistently been at the heart of market conversations. With these thoughts in mind, we interviewed Paul Pincente, Vice President of Digital Assets at Purpose Investments, and fund manager Nick Mersch to discuss the twists and turns of the past year and potential future trends.
Will the AI Boom Continue to Work Miracles in 2026, or Will Investors Face Disappointment After the Hype?
Nick Mersch (Fund Manager) Perspective:
In my view, the AI boom is the shiniest ornament on the market's "Christmas tree" in 2025. More importantly, it's no longer just a bright light. Real revenue, real workloads, and tangible budget items are now steadily flowing towards AI. While hyperscalers are aggressively investing in capacity, this is increasingly being matched by enterprise demand—businesses are moving from pilot phases to formal production. Customer support, code assistance, ad placement, data analysis, and internal productivity tools are all beginning to show measurable benefits. This is key to transforming capital expenditure (CapEx) from a high-stakes gamble into long-term annuity-like income.
Yes, the scale of investment is staggering, from multi-hundred-billion-dollar CapEx plans to massive power procurement. But this might also be building a foundational layer of computing power and energy that the entire economy could rely on for the next decade or more. Every new model, agent, and application launched in 2026 will need an environment to run, and the platforms that built capacity early will be the first to capture this spending. AI is behaving more like a sustained, multi-year wave of infrastructure and productivity, rather than a fleeting party.
Are there bubble risks in individual stocks? Absolutely. Some stocks are priced not just for perfection but for something beyond it. But that's a different statement from saying the entire AI cycle is a mirage. In 2026, investors have the opportunity to engage with this long-term trend while maintaining cautious exposure. We advocate focusing on companies with the following characteristics:
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Possess a clear path to monetization;
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Can transform AI CapEx into recurring revenue and cash flow;
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Occupy key positions in computing power, networking, energy, or distribution.
In my opinion, the magic isn't gone; it's just shifting from "storytelling" to "execution," which will ultimately benefit disciplined stock pickers.
For the Cryptocurrency World, the Volatility at the End of 2025 Was as Bumpy as a Sled Ride Over a Partially Frozen Gravel Road. Will the Journey Be Smoother in 2026?
Paul Pincente (Vice President of Digital Assets) Perspective:
First, that bumpiness isn't your imagination, and feeling nervous doesn't mean you're alone. Cryptocurrency has always been that passenger: insisting the road is fine while your teeth chatter like an overactive woodpecker.
But a rough road doesn't equate to a broken wagon.
In my view, this year-end turbulence is less a solemn funeral knell and more a routine, albeit dramatic, "house cleaning" within a high-beta asset class. After a strong rally, excess leverage must be purged, froth must be skimmed, and the boldest narratives must be tested in the cold light of real positioning. It's the season when the market demands to "see the receipts" for confidence.
So, will 2026 be smooth? We should use that word cautiously. Cryptocurrency isn't a calm lake; it's a churning, forking river. However, I do believe its turbulence may become more mature. Not tamer, but more comprehensible. This might mean fewer "the system is about to collapse" headlines and more recognizable rhythms of a risk asset.
Furthermore, there's a practical reason for optimism. If macro conditions allow for a more supportive policy stance, and inflation behaves well enough to avoid triggering new policy panics, risk appetite has a habit of returning. And when it returns, cryptocurrency rarely tiptoes back into the room; it tends to kick the door down like a band asked for one more encore.
So, yes, we think you can expect drama, tension, expect the market to turn the over-leveraged into cowards and the patient into philosophers. But we don't think you should mistake a bumpy December for a doomed decade. Sometimes, potholes are simply the price of admission to a better road.
Tech Stock Valuations Have Been Shining Like a High-End Department Store Window Display. Are They Durable, or Will the Chill Wind of Reality Freeze the Sector?
Nick Mersch Perspective:
Tech stocks were indeed in full "holiday window" mode in 2025, but beneath the glittering surface, we believe there's more substance than the pessimists acknowledge.
Earnings revisions for key AI beneficiaries are generally trending upward, margins are improving as cloud and software scale, and many balance sheets remain net cash or low leverage. I believe we are witnessing the largest CapEx cycle in tech history, with hyperscalers guiding for annual AI spending in the hundreds of billions of dollars. Yet, they are starting from a position of dominant market share and strong cash flow engines, which may provide a greater buffer than past cycles.
The key differentiator for 2026 is: is this shine supported by fundamentals, or is it just hope-based gloss? I think some software and smaller AI names are clearly expensive relative to current earnings. However, within core infrastructure, cloud services, and specific platform companies, valuations seem to me more "high but deserved" rather than purely speculative.
Rather than framing it as a binary "bubble or not" debate, we think investors can view 2026 as a filtering mechanism. Companies demonstrating clear operating leverage on AI investments and rising marginal returns on capital can sustain or even expand their valuation premiums. Those merely talking about GW and GPUs without a roadmap for unit economics may be the most vulnerable when a chill arrives. We believe the shine can persist, provided there are earnings underpinning the lights.
With ETFs, Regulation, and Institutional Inflows Finally on Track, Is Cryptocurrency Ready to Join the "Adults' Table" This Holiday Season?
Paul Pincente Perspective:
There's an interesting thing about markets: they often grow in the most unassuming ways. Not through fireworks, but through plumbing; not through poetry, but through the slow calming of policy, filings, and institutional nerves.
So, when someone asks if crypto is ready to join the adults' table, I hear a question dressed in formal wear but wearing practical shoes.
The "adults' table" isn't reserved for the loudest believers, but for assets that can be held without constantly inventing new rules. Investors want to know what the rules are, who enforces them, and where the exits are when the room gets crowded. That last point is crucial. Liquidity is always amiable in sunny weather; the true "adult test" begins when it turns cloudy.
ETFs help, not because they perform some magic that sanctifies the asset, but because they translate the asset into a language institutions already understand. Regulation, even if belated, alleviates the famous "we are waiting for clarity" excuse. Custody and operational standards, though dull, have become the dividing line between curiosity and actual allocation.
The story extends beyond Bitcoin. Stablecoins are quietly proving they are more than just a convenience tool for crypto; they are becoming rails for actual payments in real-world, real-scenario use. Tokenization is moving step by step from pilot projects towards a future that looks less like marketing theater and more like infrastructure.
Will 2026 become genteel? No. Crypto still loves a grand entrance; it might show up to the adults' table in a sequined gown. But the seating arrangement has changed. The guest list now includes more rule-followers, more long-term allocators, and more capital that won't panic at the first sign of volatility.
That's how a market becomes hard to kill: not by becoming boring, but by becoming reliable enough to survive its own excitement.
Are AI Models the Star on Top of the Christmas Tree, or Just Cheap Tinsel?
Nick Mersch Perspective:
If the past three years were about model breakthroughs, 2026 might evolve to be about what these models can actually *do* in the real world. Tech companies are shifting from the race to "build the biggest system" to the race to "deeply embed systems into workflows." This means agentic AI capable of handling multi-step tasks, multimodal systems integrating text/image/audio/video, and vertically tuned products that understand specific industry jargon. The opportunity lies not just in clever demos, but in sustained productivity gains across white-collar work.
As we argued in July, the message for companies and investors is simple: adapt now or risk being left behind. We believe the winning organizations won't be those releasing the coolest models, but those quietly replacing manual processes with AI-first workflows, redesigning products around intelligent assistants, and building governance, security, and data quality pipelines. This is where high-stickiness revenue and higher switching costs are generated.
For investors, we believe this shifts the focus upward in the stack. Model providers remain important, but value may increasingly aggregate towards three areas:
