Ex-Goldman Sachs CEO Raoul Pal Says Crypto Markets Are About to Reverse Based on One Macro Scale
Macro expert Raoul Pal says digital asset markets could prepare for a major reversal to the upside if one of the key metrics is any indication.
In a new market update on Real Vision, Pal says the cryptocurrency markets are mostly driven by the liquidity that comes from the M2 money supply.
M2 money supply roughly refers to the total amount of currency in circulation, plus nearby money, or highly liquid non-monetary assets that can easily be converted into cash.
While many crypto investors focus on Bitcoin halving, which is the time when the amount of BTC issued per block reward is halved, Pal says M2 will likely play an even bigger role.
“Cryptocurrencies are not driven by the business cycle, but driven by global liquidity. So this is the global M2 deviation from the trend. So it is the rate of change of M2 and how far away from the trend. It is one and a half standard deviations from the trend, and it is trending upwards.”
It was then that it happened, both at the top and at the bottom, leading to shifts in the cryptocurrency markets because liquidity is driving the cryptocurrency. Remember that this is not a cyclical asset so it does not go back to where it used to be like oil and commodities. It’s a network adoption model that goes up and right over time with these big fluctuating ranges.
Many people have the narrative that this is caused by the halving. Now, perhaps the halving, which is the decline in supply every four years in Bitcoin, is a factor because it is linked to liquidity. So what you do is put more liquidity in the markets, and it leads to more people being able to allocate capital in a low supply environment which is halving. You don’t need the halving as a necessary commodity.”
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