Former Goldman Sachs executive calls for high conviction on crypto bottom amid changing macro backdrop

Macro guru Raoul Pal says he believes with a high degree of certainty that the bottom for the crypto markets is in.

In a new interview with asset management firm Arca, the former Goldman Sachs chief says the macroeconomic environment that has kept the crypto market bearish for most of the year is beginning to change.

“For me, the macro rolls over. By that I mean that we are entering a recession. We should see things like the ISM (Institute for Supply Management) survey and other things start to fall apart pretty quickly. The forward-looking elements are already falling apart. We see it globally. So it is the growth that evaporates.

Next to that, the narrative has not caught up, most commodities are down between 30% and 50%… Everyone is long and expects oil to go to $200. I think there is a washout coming and it goes down to $60. So that’s the latest inflationary story.”

According to Pal, the change in the macro background will trickle down to companies and then the labor market.

“People built huge inventories after Covid. These inventories are now unsold as the economy slows down and inflation eats away at disposable income. So we’ve seen that from Walmart [and] Amazon. They are going to start reducing inventory to try to replace it. People lay off employees. So the macro cycle is going to get to the ugly phase.”

Pal emphasizes that the bad news on the horizon for the economy is good news for the financial markets.

“Why does that make Raoul bullish? Because the outcome of that is that inflation falls and bond yields fall, liquidity conditions improve. And what drives financial markets the most on a macro level is liquidity conditions.”

As for crypto, Pal says the shift in the macro landscape could trigger a tidal wave of demand from institutional investors.

“The other big players in the area now – the hedge funds, the macro funds and then the institutions – well, they’re also a function of liquidity. When liquidity is more available and cheaper for them, they can use more leverage in their portfolios.”

The macro guru also says that with better liquidity conditions, he believes crypto is about to start a new market cycle.

“My view is, let’s give it a probability, 70% probability. So there’s a pretty high conviction that the bottom is in, and so we start the upside cycle.”


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