Real Vision chief executive Raoul Pal thinks the institutional forces driving crypto’s recent market volatility are finished taking profits, opening the doors for digital assets to start the new year strong.
In a YouTube interview with The Stakeborg Talks, Pal identifies the marginal drivers of the current crypto markets.
“I step back and look at it and think who is the marginal driver of this market right now?
It is not retail. Why not? The new wallet addresses and stuff are below highs now, and I think it’s to do with this consumption issue.
You’ve raised prices on retail in terms of fuel… energy fixed costs, so their marginal ability to invest has gone down as well as [the ability to] consume.”
The inflation of retail prices, argues Pal, has taken marginal crypto investment money off the table, leaving only institutional players to influence market prices.
As Pal points out, many large investors are incentivized to take profits at the end of calendar years.
“So you’ve taken marginal money out of the market.
If you’ve taken them [retail traders] out of it, and then the institutions are at the year-end, and they’re incentivized differently…
Again, they’re not saying they don’t believe in the market, they’re saying I believe in getting paid.
And so I want to protect my profits.”
The result, says Pal, is an uneven market. However, the macro guru thinks the profit-taking may have ended last week.
“It created a lopsided market.
Now the question is: are they done?
It looks like they’re done because the market has been kind of just chopping around since last week, which was the traditional last week of everybody squaring their books.”
Even so, Pal warns that the crypto market correction may not be complete. Regardless, he still predicts a strong start for crypto in 2022.
“Could have another leg lower, potentially.
Could that come out of Asia, which is where a lot of the selling has also come from?
Again, possibly… but the probability is is that next year ends up being a strong start.”
I
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