- Raoul Pal, CEO of Global Macro Investor, says the current crypto market decline is driven by a U.S. liquidity shortage
- He believes that Fed official Kevin Warsh is unlikely to implement rate hikes.
The crypto market has already lost about $400 billion in value over the last ten days, with roughly $800 million being liquidated in the last 24 hours, as the major cryptos, such as Bitcoin, Ethereum, and leading altcoins, have continued to suffer severe losses.
In this market situation, Raoul Pal, founder and CEO of Global Macro Investor, published an article on his X handle today, and said, “The big narrative is that BTC and crypto are broken. The cycle is over.” He argued that crypto alone did not contribute this downfall, because even the Saas( Software as a Service) stocks have also fallen largely, both happened together.
With that, he explains that two different asset classes are traveling together, as it happens, not because of those sectors, but because of macro-factors, which is a shortage of U.S. dollar liquidity.
Pal mentioned that the main problem right now is a lack of U.S. liquidity, caused by repeated government shutdowns and issues in the financial system. He said the Fed’s Reverse Repo Facility (RRP), which once helped balance liquidity, was mostly drained in 2024, leaving no buffer when the U.S. Treasury rebuilt its cash reserves.
While the global liquidity typically correlates most closely with Bitcoin and tech stocks. He noted that a strong gold price rise absorbed much of the remaining money, leaving riskier assets like cryptocurrencies under pressure.
Pal Dismisses Warsh Hawk Fears
Pal dismissed the notion that Kevin Warsh is a rigid “hawk” on interest rates, calling it a misleading narrative based on comments made over two decades earlier. He said, “Warsh’s job and his mandate is the run the Greenspan era playbook. ”
As Pal believes Warsh won’t tighten policy further, to boost spending, investment, and growth, even if the economy heats up, and believes that AI-driven productivity gains will occur. Pal added that broader liquidity decisions would likely be driven through treasury and banking channels.
So, overall, his post underscores that macro liquidity constraints continue to influence crypto price movement, even as the industry matures, and he believes the current liquidity hurdles are temporary and expects things to ease once the latest U.S. government shutdown is ended. He ends with a positive note, he wrote, “It is almost over. FINALLY. Soon we can return to normal business.”
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