Liquidity Wave Extends Crypto Bull Run Into 2026, Predicts Raoul Pal
Raoul Pal suggests the crypto cycle is entering a prolonged expansion phase, potentially extending to 2026, influenced by global liquidity trends linked to government debt dynamics. In a masterclass on September 25th, Pal and Julien Bittel of Global Macro Investor discussed:
- The interconnected framework of demographics, debt, liquidity, and asset returns.
- Global governments increasing liquidity to manage debt at 8% annually, impacting investment returns with a needed hurdle rate of 11%.
- Structural reliance on public debt due to declining working-age populations and subdued productivity, necessitating liquidity interventions.
- The role of financial conditions in leading liquidity and influencing crypto as a high-beta macro asset.
Pal noted that liquidity influences Bitcoin (BTC) and Ethereum (ETH), with risk appetite shifting from BTC to ETH and then to smaller caps as economic indicators improve. The recent market stagnation was attributed to a Treasury General Account rebuild, affecting liquidity but expected to reverse.
Over the next year, $9 trillion in debt rollover may prompt significant money printing. The expectation is for central banks to lower policy rates while maintaining focus on employment and core services inflation. Pal advocates for concentrated investments in crypto, arguing traditional assets underperform against debasement and inflation hurdles.
Bittel highlighted the interaction between Bitcoin’s price targets and economic cycles, suggesting extended cycles point to higher potential outcomes without specific forecasts. The current cycle is distinguished from 2020-2021 by ongoing liquidity acceleration and ISM index improvements, suggesting a continuation similar to 2017's Q4 impulse.
Crypto's growth is compared to the internet's early stage, with tokens offering unique investment opportunities in digital infrastructure. Pal envisions significant market expansion, potentially reaching $100 trillion by the early 2030s, with Bitcoin playing a gold-like role.
He advises maintaining investments in large-cap crypto networks and avoiding leverage to withstand market fluctuations, emphasizing aligning investment horizons with macroeconomic developments rather than short-term news.
At present, the total crypto market cap is $3.67 trillion.
