Assuming Bitcoin Cycles Repeat, We’ll See $600,000 Per Bitcoin in 2024 (Raoul Pal)
You’ll see how current events could affect the growth of Bitcoin’s value.
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Raoul Pal is a well-known economist who previously worked as a hedge fund manager.
I write about him mainly because he sticks his neck on the line, articulates his views on the state of crypto, and always uses data or historical references to back up his point.
Pal is a lone voice when it comes to being bullish about the current state of the market. While some of his predictions are accurate, others are not, which can lead to criticism from people who follow him.
If you’re considering investing in Bitcoin, Pal suggests you consider the current stage of the economy’s “liquidity cycle”, which measures the amount of money available for spending.
He says instead of investing all your money at once, start small (DCA) and be cautious, as the economy can worsen.
Pal is bullish for 2023 despite negative sentiment among investors and the possibility of a mild recession.
He sees a massive upside this year due to rapid technological advancements, specifically AI and its potential impact on the job market.
He also believes that the interest rate cycle is out of the way and that investors’ negative sentiment presents growth opportunities.
Raoul Pal — Source
“I think everybody’s looking that way, which usually means the opportunities to look at the other.
But I’m bullish for 2023, despite the negative sentiment among investors and the possibility of a mild recession or a soft landing.
I see a massive upside this year with the rapid advancement in technology adoption, specifically AI and its potential impact on the job market.
We’ve just gone through the rate cycle, so that’s out of the way.
We’ve got the downside rates, the technology, and tons of these coming. The energy situation and investors were so negative.
I think it’s pretty positive.”
You’ll Never Get the Timing Right!
If you’re curious about the best time to invest in the market, you should Stop.
Getting the timing right is never going to happen.
If someone tells you when to expect a bottom, they’re guessing because nobody knows.
Pal says we should expect the market to hit its lowest point in March 2023. After that, the market should improve slowly.
He believes that when this turning point occurs, it will be like a beach ball held underwater that’s suddenly released.
When quantitative tightening or rate rises stop, it’ll quickly bounce back up because more and more people are adopting and using cryptocurrency than ever before.
Raoul Pal — Source
“We are now at the bottom of the macrocycle, and the beach ball is being held underwater.
Remember that new people are building in the ecosystem daily, and there’s new adoption.
The scale of what is happening across crypto is ridiculous.
The Beach ball is held underwater at the moment.When quantitative tightening or rate rises stop, the beach ball will rise above the water.
You can’t hold it down.”
$600,000 per Bitcoin by 2024.
Raoul Pal says he’s found a way to understand the value of digital assets, which can be challenging to measure.
By his calculation, and if previous Bitcoin cycles repeat, you could see Bitcoin reach $600K in 2024.
Pal has said in a series of Tweets that he’s found an approximation method of Metcalfe’s Law, a formula commonly used to value network effects and digital assets.
Raoul Pal — Source
We now know that Metcalfe’s Law is the key valuation model for digital assets, but it’s a hard formula to apply, and I’m a bit of an idiot, so I wanted to find an approximation that helps understand network value.
After a lot of work, trial and error, this is the answer I found:
Tweet 2.
THE VALUE OF A DIGITAL ASSET NETWORK IS DRIVEN BY DAILY TRANSACTION VOLUMES (IN DOLLARS OR UNITS OF VALUE) X NUMBER OF ACTIVE USERS
Tweet 3
This allows us to know if a network is getting true adoption and how it will affect price or market cap.
I’m guessing that we can then build models around rates of change in the network to give signals.
Tweet 4
Bitcoin’s recent slight outperformance can be explained by increased network activity vs others.
Interesting to see the ROC (Rate Of Change) from all picking up, but too early to say that it will be the start of a positive trend.
Tweet 5
Each chain creates value for different reasons — Bitcoin for pristine collateral, security and SOV (Store of value) brings large numbers of users transferring large sums of value.
Hence why, it’s the most valuable network.
Tweet 6
In plain language, Pal says he’s found a way to estimate the value of a digital asset network based on the daily transaction volumes and the number of active users.
It can help you determine if a network is gaining actual adoption and how it will affect the price or market cap.
Bitcoin’s recent performance can be explained by increased network activity and the different values each chain creates.
If Bitcoin continues to create network effects, Pal says his log regression chart is an excellent way to forecast the future. And assuming Bitcoin remains one standard deviation below the previous trend, it gives a price target of $600,000.
The Fed Has Different Ideas.
Jerome Powell is the fed chairman determined to keep rates high for as long as needed to “get the job done” on inflation, even if it causes further damage to the U.S. economy.
Powell says persistent high inflation is a much more severe threat to the economy’s well-being in the long run than some supposedly short-term pain.
When inflation increases, the fed increases interest rates to bring the inflation rate down, but this also negatively impacts Crypto or tech investments that still have some runway to meet their potential.
It’s why every Bitcoin investor suddenly becomes interested in interest rates because it directly impacts price action.
Powell’s stance on interest rates is set out for the long hall and most of 2023, directly contradicting Raoul Pal’s view of a recovery soon.
Jerome Powell — Source
“While higher interest rates, slower growth, and softer labour market conditions will bring down inflation, they will also bring some pain to households and businesses.
These are the unfortunate costs of reducing inflation.
But a failure to restore price stability would mean far greater pain.
Committee participants’ most recent projections showed the median federal funds rate running slightly below 4 per cent through the end of 2023. (Currently 4.4%)
Longer-term inflation expectations remain well anchored.
That is broadly true of surveys of households, businesses, forecasters, and market-based measures.
But that is not grounds for complacency, with inflation having run well above our goal for some time.”
Final Thoughts.
A lot of this is common sense.
Pal thinks interest rates will pivot, causing a rebound, and his model for measuring value will see Bitcoin reach astronomical heights.
It isn’t very likely, in my view.
Jerome Powell has doubled down in his stance of allowing current rate increases to take effect throughout 2023, and given that there’s more room for interest rates to be increased, I know which horse I’m backing.
Interest rates will go up, causing more downward pressure on crypto prices.
While Pal often tries to predict the market and gets things wrong, he does say to Dollar Cost Average to avoid volatility.
Where is the best place to find daily transaction volumes in dollars?