Macro guru Raoul Pal says there may be a specific reason why crypto markets have largely stalled out for the last half of 2021.
In a new interview from Real Vision with journalist Maggie Lake, Pal speculates that the explosive crypto rally he and many investors are expecting hasn’t yet materialized because retail traders simply don’t have enough cash on hand.
“Something feels news new… It’s been choppier basically since March to May when Bitcoin topped first, then Ethereum. They really haven’t broken out again. So they’ve been in this big kind of sloppy range that goes up and down a lot. I’ve been thinking about that, because normally at this point in the crypto cycle, you would have seen mass retail participation and this explosive run. I was expecting it, as was many. It hasn’t materialized. Why?
Is there a structural change in the market, or is it because crypto is discretionary spending or a discretionary investment? If you raise prices on people, they have less money – retail participation – to put into crypto.
We have not seen the kind of number of new wallets and all of the other metrics follow when we had the recent high, and it makes me think that people don’t have money to put in.”
Pal discounts the idea that the reason smaller investors aren’t jumping into crypto is that they see it as too risky. According to the former Goldman Sachs executive, most people view crypto as more of a long-term hedge against currency debasement.
“They do not see it as a risk asset because the narrative is like, this is a long-term inflation hedge. It’s not traditional inflation. It’s actually about central bank debasement…
In the end, we’re talking about inflation that’s running at 6% to 7% a year, but Bitcoin is up by 100% and Ethereum’s up 500%…
What it is is a long-term method for side-stepping the devaluation of the fiat currency along with, more importantly, a call option on the future technology and web3 and all the new things that have been built.”
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