Raoul Pal Says Bitcoin (BTC) Isn’t Broken: US Liquidity Is the Real Culprit
Bitcoin has plunged virtually 40% from its peak of $126,000. While it at present trades slightly above $77,000, costs stay fragile, and buyers are positioning for a deeper drawdown.
Amidst intense bearish sentiment, Raoul Pal, founder and CEO of Global Macro Investor, stated that broadly circulating claims that BTC and the broader crypto market are “damaged” characterize a false narrative pushed by non permanent liquidity circumstances reasonably than a failed cycle.
Bitcoin and SaaS
Pal stated the dominant market story signifies the crypto cycle is over, and costs are collapsing attributable to components corresponding to trade points, institutional actions, or structural flaws. But he described this view as an “alluring narrative entice” which has been strengthened by continued each day value declines. Analysis confirmed that the UBS SaaS Index and Bitcoin have adopted practically an identical value patterns, which basically signifies a typical underlying issue reasonably than asset-specific issues.
According to Pal, that issue is US liquidity, which has been constrained because of a number of technical and financial components. He pointed to the completion of the US Reverse Repo drain in 2024, adopted by Treasury General Account (TGA) rebuilds in July and August that lacked an offsetting liquidity injection, which ended up leading to a liquidity withdrawal.
Pal stated this liquidity scarcity has additionally contributed to weak ISM readings. While Global Total Liquidity usually has the strongest long-term correlation with Bitcoin and US equities, he argued that US Total Liquidity is at present extra influential as a result of the US is the major supply of worldwide liquidity. The GMI founder added that world liquidity has led US liquidity this cycle and is starting to show greater, which is predicted to feed by way of to US liquidity and financial indicators.
Bitcoin and SaaS have been significantly affected as a result of they’re amongst the longest-duration belongings and subsequently most delicate to liquidity circumstances. The rally in gold absorbed marginal liquidity which may in any other case have flowed into riskier belongings corresponding to Bitcoin and SaaS, leaving inadequate liquidity to assist all asset lessons at the similar time, he stated.
The present US authorities shutdown has intensified the liquidity drain, as the Treasury didn’t draw down the TGA after the earlier shutdown and as a substitute added to it. He known as the ensuing surroundings a brief “air pocket,” which has triggered extreme value stress.
However, Pal stated indicators point out the shutdown might be resolved quickly, and characterised it as the ultimate main liquidity impediment. He reiterated that further liquidity components, corresponding to changes to the enhanced supplementary leverage ratio (eSLR), partial TGA drawdowns, fiscal stimulus, and eventual price cuts, stay forward.
Hawkish Fed Fears
Some market commentators have hinted that expectations of a extra cautious tempo of price cuts underneath incoming Fed chair Kevin Warsh have additionally weighed on markets. But Pal rejected claims that Warsh represents a hawkish coverage stance, and as a substitute known as the narrative incorrect and rooted in outdated feedback. He believes Warsh’s method aligns with insurance policies favoring price cuts and financial enlargement, whereas sustaining steadiness sheet stability attributable to reserve constraints.
Despite the current turmoil in the market, Pal stated that he stays strongly bullish on 2026.
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