Raoul Pal: The Macro Caught Crypto By Surprise

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Raoul Pal, the founder and CEO of Global Macro Investor, appeared in the Wolf of All Streets podcast explaining how the macro environment has affected the cryptocurrency market over the last few months. During the podcast, he talked about inflation, interest rates, and wages, among other things. 

The Macro Caught Crypto By Surprise Says Raoul Pal

Since November 2021, Bitcoin (BTC) and the whole cryptocurrency market have been in a bear trend that pushed the price of the largest cryptocurrency lower from $69,000 to $17,500 a few months ago. This bear trend has been very hard for the crypto market, as we have seen the NFT market shrink, decentralized finance (DeFi) protocols disappear, and recently released tokens fall into oblivion. 

During the podcast, Raoul Pal explained how the macro had a very large impact on cryptocurrencies. On that matter, he mentioned:

“I think the macro was the big thing that actually caught most of us by surprise (the impact it has on crypto). Firstly, you have negative real wages, people have less money to dollar cost average (…), and central bank liquidity is being withdrawn. (…) It tells you that as money is coming out the system, there’s less money around.”

Therefore, Raoul Pal shows that there have been two main factors pushing Bitcoin lower: inflation and liquidity. Inflation has been moving higher and central banks have been withdrawing money out of the economy. Meanwhile, wages have been growing slower compared to inflation rates, which means that there is less money to be used to invest in digital currencies. 

He went on to talk about inflation and how he thinks that it has already peaked. Mr. Pal mentioned that inflation could come down very fast and that this fear narrative (about higher inflation rates) is already gone. When it comes to liquidity, he says that the FED could pivot at any time. The question is when and how. 

Raoul Pal has also talked about Bitcoin and Ethereum, the two largest cryptocurrencies in the market. He focused on Ethereum explaining what could happen with ETH in the near future and how he thinks that The Merge could affect the price of this digital currency. During the conversation, he said that post-merge, Ethereum could move higher towards $2,300 and then correct this price increase coming back to its previous range. 

This would create a narrative in which several investors would see Ethereum’s correction as a negative thing. Nevertheless, Mr. Pal believes that this would be a simple pullback for ETH to start moving even higher in the coming months after the merge. 

Let’s not forget that Ethereum is going to experience a hard fork in which the virtual currency will become a Proof of Stake digital asset, transitioning from a Proof of Work virtual currency. In order to do so, the current Ethereum network will merge with the Beacon network and help ETH become a more efficient and reliable virtual currency in the coming months. 

At the time of writing this post, Ethereum is being traded for close to $1,575 and it has a market capitalization of $189 billion. 

Jonathan Gibson

Jonathan Gibson