‘So my view is that where we’re going from here over the next five years is up. Everything else is noise,’ as a macro investor and CEO with real vision. From a macro standpoint, Raul Pal sat down with Bitboy Crypto to update his thoughts on where we are in the crypto market. Raul believes that crypto is more correlated to the global economy than most would think. The previous narrative was that cryptocurrency, particularly Bitcoin, is a hedge against inflation.
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Many are now starting to see less of a correlation in the short term as Bitcoin has traded sideways with inflation sharply rising and geopolitical affairs increasing. Even though Bitcoin and the crypto market at large have taken a dive from their respective all-time highs and have not reached the expected prices as many analysts predicted. Raoul believes that the sideways action is more of a positive than a negative. In the face of rising inflation, Chinese bans and other bearish events, crypto has held its ground relatively speaking, which Raoul believes is a big win and gives him a very bullish feeling in the long term.
He also went on to discuss how the crypto market is mimicking the rise and fall of Amazon stock in the early days, which experienced a roller coaster of some very steep declines and very big rallies before massive adoption took place and the stock began to stabilize.
‘Last year, the market fell 50 points, then rose to new highs, then fell 50 points again, retesting the low but failing to make a new low. ‘s kind of been slopping around. It tries to go higher and then doesn’t do it, tries to go lower and doesn’t do it, and my general view is that I think it’s the economy that’s doing this, so this is where macro and crypto come together. A lot of people don’t realize that macro has a big impact. What I’m talking about is the fact that inflation has gone up, so a bunch of people will have noticed that their wages haven’t gone up as much as costs, so they’ve got less money to spend. So if you’re dollar cost is averaging in or you want to buy NFTs or whatever you’re doing in the crypto space, you don’t have as much money, so that takes money out of the market and then interest rates are going up. So people who’ve got mortgages or rents have gone up as well, so there’s less money coming in. So when I look at the kind of volumes in crypto and the value exchanged, it’s not going up, it’s just trading sideways, which is where the market’s in this big sloppy range. There’s nothing really happening, so that’s what I think’s going on.
A bear market is a sideways consolidation. You know, I don’t really know. I think the low was in last year and I don’t think we go back to that. I actually think that we’re still probably still in kind of the first phase of the next full leg up. That’s what it feels like to me, but we need to see something change.
What is the thing that’s going to change to do that? My guess is if the U.S. economy or the global economy starts weakening then the market’s going to say ‘oh there’s going to be less rate hikes than expected’. Therefore that tends to be good for crypto or technology kind of Cathie Wood style technology investments. I think at the margin it’s those kinds of things. But the market’s still struggling with how do we deal with this and the stock market’s the same right. It’s up and down and it just can’t figure out how long is this inflation going to last. What does it really mean? How much interest rates going to go up? How much have they already been priced in i.e. the rates have gone up?
So you know, it’s a really complicated macro situation, but I think crypto’s done pretty well considering you’ve thrown a war, 8.5% inflation, you’ve thrown Russian and Chinese bands, you’ve thrown all sorts of stuff at it and it’s kind of in a big range just generally. You know, the oil price hasn’t been making new highs and stuff like this and the economy is weakening. All my forward-looking data says the economy is weakening, so inflation should start coming off anyway, but I think they are more if the economy is weakening and inflation is still at 4%. That’s what we had in 2008. The Fed started cutting it depends on how weak the economy gets, so that’s the key thing. Everything else is a red herring.
If the economy starts looking like it’s weak, then all bets are off and the whole narrative is going to shift. So if you’ve got to think of it with rates at their highs now and maximum fear and maximum pessimism, the outcome most likely to happen is not everybody’s fear, it’s actually the bond market’s call off, inflation lower, interest rates will start falling and that’s very bullish. So I’m actually more bullish overall and I’ve been buying technology stocks for the same reason. I just started to think everyone’s so bearish They all despise it when the child begins to rise.
I think the markets change because of the institutions and hedge funds that are in the market. There are people like Michael Saylor in the market. People like Dokwan and Terra are in the market that didn’t exist before. So before it was retail, retail rushes in, gets overly euphoric, retail rushes out, panics at the lows, but here we have different participants, which I believe has dampened the downside. Let’s say you’re right and we are in a bear market. There’s no reason to assume it’s going to go down 80%. Is this right? I agree.
So I looked at this with Amazon. Right, this is a network model much like crypto is. Amazon, like Bitcoin, plummeted 95% after its initial public offering in 2001. it goes up to new highs, then it falls down 65%, then another 60%, and then after that, the corrections are much smaller because more people are participating in the market and before you know it, the corrections are 30% and now 20%. I think that’s true, so you could still be right that we’re in a bear market, but maybe the downside is 50% to 60% as opposed to 70% to 80%.
That kind of makes sense, but retail came out in May and the reason they came out in May was because inflation started rising. So people had less money in their pockets, so we just saw less activity from retail, but the institutions have been there and I’ve set up a fund of hedge funds that invest in crypto hedge funds. That money goes directly into the market because you give it to a hedge fund and they invest it, so I know I’m seeing institutional asset allocation I’m speaking to all the biggest pension funds, family offices, banks, everybody and they’re all setting themselves up. People are starting to allocate capital. People keep thinking there’s going to be a wall of money where one day everybody comes in at once. Don’t work that way. It’s like a tide that comes in and out.’
There’s plenty of red on the charts as all the top 20 coins except Terra Luna are in the red for both the past 24 hours and the past seven days.
At the time of writing, Bitcoin still sits below the $40,000 resistance at the time of writing, trading for $39,043, down 1.7% in the past 24 hours and 1.4% in the past seven days.
Ethereum is faring worse, down 4.5% in the past 24 hours and down 2.8% in the past seven days, trading at $2,859.
At the top 20 coins, XRP has taken the biggest hit, falling nearly 10% in the last 24 hours after news broke that the XRP case with the sec is now set to end in 2023, causing the price to fall to 67 cents.
The only bright spot, or green spot, we should say, is Terra Luna, being up 15% in the past 24 hours, trading at $89.5.
[This article is a transcription of a video made by Only The SAVVY]
Original video: https://youtu.be/6798kInANX8 ]