Former Goldman Sachs executive Raoul Pal says he’s very bullish on Ethereum (ETH) and the crypto markets despite the uncertain price action unfolding in recent months.
In a new interview with crypto analyst Scott Melker, Pal says that crypto hedge funds who took big losses during the recent market turmoil are underweight ETH as The Merge – Ethereum’s transition to a proof-of-stake consensus mechanism – approaches.
The Real Vision founder says that markets take the path of most pain, and for ETH right now, that means upward.
“I think everybody’s underweight The Merge still. People will get into the merge or post-merge, we’ll get this spike [and] we’ll probably get a pullback. A lot of people will say ‘See it’s going back to the low.’ My guess is it corrects sideways, does something, goes back into the range for a bit and then we explode higher.
So I’m very bullish right now. Short term, we’re getting close to overbought, but I think we just had a correction, and my guess is we go again. What’s fascinating is to see the forwards market and the futures markets is everybody’s hedging ETH merge risk so that buying ETH and selling futures now, somebody’s going to lift that hedge off at some point.
I find that setup really interesting, and know that crypto hedge funds are all underweight because they all got beaten up so badly. So they’ve been buying calls as the way of having something over The Merge so they don’t beaten up by their investors. So when you see that kind of setup, the path of pain is still higher.”
The macro guru says that crypto’s relative underperformance this year can be attributed to an unexpected tightening in central bank liquidity, which he has previously predicted will change.
“From my perspective… I think the macro is the big thing that actually caught most of us by surprise. Not that the macro caught us by surprise, but the impact it has on crypto. Firstly, when you have negative real wages, people have less money to dollar cost average. It’s still a retail investment market. So then the other thing is central bank liquidity being withdrawn, and if you look at the year-on-year charts of M2 against Bitcoin, they’re basically the same thing. It tells you that as money is coming out of the system, there’s less money around.”
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