Real Vision CEO Raoul Pal thinks crypto has “probably bottomed” and that the biggest macro influence on crypto is the global money supply.
In a new video, Pal predicts economic growth will soon fall “off a cliff,” which will spur an increase in the money supply.
The former Goldman Sachs executive shares a chart comparing the ISM Manufacturing Index and the US M2 Money Supply year on year.
“In this chart, ISM is inverted and the money supply looks like it should start bottoming out and going higher. If it goes higher, crypto should go with it. Now, that makes sense because as economic weakness comes, the central banks start coming into play, liquidity starts being pushed into the system.
We’re already seeing it in China, that’s probably picking up the money supply growth already. But I think we’ll see it globally. So, that becomes interesting.
The US dollar situation, maybe we see swap lines, that helps money supply. So, I think we’re going to see the turn in money supply. So, that’s the macro for crypto improving as growth goes slower. It’s kind of counterintuitive, because you think, well, if growth’s slow, then crypto is going to be bad. It’s the opposite. As growth slows down, bond yields fall, inflation falls, money supply starts increasing, crypto starts doing well.“
M2 is a measure of the current money supply that takes into account cash, checking/savings deposits, money market securities and other easily convertible assets. The ISM Manufacturing Index is viewed as an indicator of the health of the US economy.
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