Macro expert Raoul Pal once more reiterated that the crypto markets could be on the verge of a new rally. That is, if one metric turns out to be decisive.
Speaking with Maggie Lake on his own Real Vision YouTube channel, Pal asserts that crypto markets are largely relying on M2 liquidity, which roughly refers to the total currency in circulation with the addition of quickly convertible assets.
Pal believes the beforementioned M2 to play a bigger role and that crypto’s main driver is the ease of which eventually cash can be converted to digital assets. He said:
“Crypto isn’t driven by the business cycle, but it’s driven by global liquidity. So this is the global M2 deviation from the trend. It’s the rate of change of M2 and how far away it is from the trend. And it’s about one and a half standard deviations away from the trend, and it’s turning higher.
That time it ever happened, both at the top and the bottom, leads to the turns in the crypto markets because liquidity drives crypto. Remember, this is not a cyclical asset so it doesn’t go back to where it was like oil and commodities. It’s a network adoption model that goes up and to the right over time with these big volatile bands. “
While crypto investors are looking at the Bitcoin halving to set off a new rally, the macro guru explains this is not such a key event as it is believed to be:
“A lot of people have the narrative that this is driven by the halving. Now maybe the halving which is the reduction in the supply every four years in Bitcoin, is a factor because it’s correlated with liquidity. So what you’re doing, you put more liquidity into the markets, it leads to more people able to allocate capital into a low supply environment which is the halving. You don’t need the halving as a necessary precursor.”
Demand in crypto beating supply, hands down?
Pal recently echoed similar sentiments on Twitter where he highlighted that the value of a currency and the ease of which cash can be converted into assets like Bitcoin seem to have the upper hand over the supply side:
“That suggests that liquidity and currency debasement are the predominant drivers, as opposed to supply. I have always erred on the side of demand being more important than supply in market prices of all goods. It is the demand ebb that causes the outflow and the denominator.”
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Source: Igaming
