We’re Heading for a Recession, and Your Crypto Investment Is About To Fall off the Edge of a Cliff (Raoul Pal)
There’s not a person in the world that doesn’t think we’re heading for a recession.
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Raoul Pal is a macroeconomic wizard.
He understands the intricacies of investing.
And he’s a silky-smooth communicator.
Pal can simplify complex topics for a general audience and is known for consistently making accurate predictions.
Occasionally he’ll get it wrong.
When he speaks on YouTube, you slip into a dopamine trance, taking in his price prediction buzzwords, and then brace yourself for the outcome.
It’s how he arrives at his outcomes that engage me the most. His common sense approach gives you confidence.
What he’s saying about the cryptocurrency market’s future and what we can expect in the upcoming months is compelling.
According to Pal, the market has already factored in a recession, and everyone knows it. He predicts we’ll see the teeth of the downturn in April, which the market has already accounted for this shift.
After studying previous market cycles, he predicts the current trajectory closely follow Bitcoin in 2013, which could result in a significant spike and a correction.
Bitcoin experienced a tremendous surge in price, with the value of a single Bitcoin increasing from around $13 in January to over $1,000 in December of that year (2013).
A combination of factors, including increased media attention, growing adoption by businesses and individuals, and speculation by investors, drove this price increase. However, this rapid rise was followed by a significant crash in early 2014, with the value of Bitcoin dropping by more than 80%
Pal says this could be one current outcome because many people are underweight and afraid to invest because of the short-term uncertainty.
He emphasises the importance of accumulating and holding instead of trading in uncertain times.
Let’s dive into the potential scenarios for the crypto market in the next 30 days.
Buckle up, and let’s get into it.
The Economy Is Heading Towards a Recession.
According to Pal, everyone knows a recession is imminent but are crypto prices already factored into the market?
He seems to think so.
And he says the market will hit its lowest point in April, starting a recession already factored into the price because the Crypto market looks forward by 6–9 months.
Raoul Pal — Source
“I’m expecting a bottom in this cycle in April. That’s the tip of the recession.
The market has already priced it in.
Everybody knows there’s a recession. There’s not a person in the world who doesn’t know that right now.
We are just going to go off a cliff now.”
Pal says the market closely follows Bitcoin’s patterns in 2013 and 2018 and that a significant correction may happen after the FED starts cutting rates again.
With 18% of the market in stablecoins, Pal says everyone is now short on the upside, waiting to see what will happen.
When someone is “short” on something, they usually bet against it.
In this case, Pal is saying that because 18% of the market is in stable coins (cryptocurrencies pegged to a stable asset like the US dollar), people are betting against the market going up.
And as we’ve seen recently, stablecoins are only somewhat stable.
People are waiting to see what will happen before making any moves. Stablecoins are usually a safer haven during market volatility, so their increased usage suggests that investors are cautious about the market’s future.
Raoul Pal — Source
“Everybody is underweight.
Every hedge fund is gun-shy.
It feels that everybody’s short the upside because the more it goes up, the more they think they need to pull the trigger.”
Pal believes everyone is underweight or short on the upside, waiting to see what happens next.
He mentions several potential scenarios, including a rally that forces everyone in or a stabilisation period that lasts for a year.
Despite the uncertainty, he sees 2023 as a year of great reset and accumulation but acknowledges that many different outcomes could happen.
Ultimately his approach is to observe the market and not try to trade it too much, as he believes that playing the long game of accumulation is the easiest path forward.
Buy the Rumour, Sell the Fact.
Raoul Pal reminisces about the 2018 crypto market rally, spurred by the Powell pivot when the Fed stopped raising rates.
He says that although the Fed didn’t cut rates until August 2018, the market rallied aggressively in anticipation of the rate cuts and then corrected itself when the Fed started implementing rate cuts.
He says it’s a classic case of “buy the rumour, sell the fact,” but the market gained traction later, giving rise to the two-halves idea. And Pal suggests the same could happen now.
Raoul Pal —Source
“When I reflect on 2018, the rally in crypto was triggered by the Powell pivot — when the Fed stopped raising rates.
However, it’s important to note that the Fed cut rates in August and stopped Quantitative Tightening in September. Until around June, the crypto market rallied aggressively but corrected as the Fed began implementing rate cuts.
Essentially, it was a ‘buy the rumour, sell the fact situation, and the market started gaining traction later.
It leads me to believe in the two halves idea.”
Bitcoin Is Floundering and Getting Narrower in Its Focus. If You’re an Asset Allocator, You’ll Choose Ethereum.
Raoul Pal suggests that there is a possibility of a gigantic crypto bubble in the future.
As an asset allocator, if given a choice between Ethereum and Bitcoin, he would choose Ethereum due to the green narrative and the yield it offers.
He points out that ETH gives you a 5% actual yield after supply, which has better potential for technology adoption. In contrast, Bitcoin seems floundering and narrowing its focus amidst current market uncertainty.
Raoul Pal — Source
“I think if you’re an asset allocator and given the choice of ETH versus Bitcoin and the green narrative stuff, you’re always going to take ETH because it yields you get a 5% actual yield after supply and, um, you’ve got the access.
You know you’re betting on the technology being adopted. Why would you not?
So yeah, I feel like Bitcoin’s floundering, and it’s going narrower in its focus with the current level of uncertainty in the market.”
Final Thoughts.
I can’t entirely agree with Raoul Pal’s remarks about the Bitcoin narrative losing steam.
The Bitcoin narrative is stronger than ever due to the recent de-pegging of stablecoins and the current bank runs in the traditional finance world.
With no CEO or board to muck things up, Bitcoin’s decentralised and trustless nature remains one of its greatest strengths.
Pal is right about the impact of Ethereum’s network adoption. Its potential is enormous if the next killer app is built on top of ETH.
Short term, people have yet to determine what will happen in terms of price.
It’s why sometimes it’s better to think long-term and accumulate.
And not worry about daily price fluctuations.