Former Goldman Sachs Executive Raoul Pal Says Crypto Markets Are About To Reverse Based On Macro Metric

Macro guru Raoul Pal says digital asset markets could be bracing for a major uptrend reversal if any major metric is any indication.

In a new market update on Real Vision, Pal claims that crypto markets are primarily driven by liquidity coming from the M2 money supply.

M2 money supply roughly refers to the total amount of money in circulation, plus quasi-money or highly liquid non-monetary assets that can be easily converted into cash.

While many crypto investors are focusing on the Bitcoin halving, which is when the amount of BTC issued per reward block is halved, Pal says M2 likely plays a bigger role.

“Crypto is not driven by the economic cycle, but it is driven by global liquidity. So this is the overall deviation of M2 from the trend. So it is the rate of change of M2 and its distance from the trend. And it’s about one and a half standard deviations from the trend, and it’s going up.

This time it happened, both up and down, is causing turns in the crypto markets as liquidity drives crypto. Remember that it is not a cyclical asset, so it does not go back to where it was, like oil and commodities. It’s a pattern of network adoption that goes up and up over time with these big volatile bands.

Many people have the narrative that this is driven by the halving. Now, maybe the halving, which is the reduction in supply every four years in Bitcoin, is a factor because it correlates with liquidity. So what you’re doing, you’re putting more liquidity into the markets, that leads to more people being able to allocate capital in a low supply environment which is the halving. You don’t need the halving as a necessary precursor.

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