By
Chimamanda U. Martha
April 25th, 2024
Pal predicted that the next four weeks would be “highly unsettling.” He said positions will get taken out and shot, and there may be no safe place for investors.
The founder and CEO of Global Macro Investor Raoul Pal has stated his “macro views” on the ongoing crypto bear market. Pal compared the crypto market fall to the bear market that occurred in June 2021. He also related the panic within the market to the flash crash of March 2020. Notably, the global markets, including tech stocks and crypto, are bleeding. While the tech market has been recording billions of losses, crypto investors complain as the market trembles.
Raoul Pal did an analysis of the current market condition, which is also affecting crypto. In his opinion, there is about to be a “pretty nasty recession (or are in one). Layoffs are coming as are house price falls. Demand destruction is everywhere due to the largest monetary tightening in history.”
In an attempt to fight inflation, the Federal Reserve announced a 0.5% rate hike. The increase is the largest hike since May 2000, and the markets have been reacting unpleasantly to it. Meanwhile, Fed Chair Jerome Powell promised multiple equivalent hikes in the coming months.
Raoul Pal Blames the Crypto Market Crash on Fed’s 0.5% Interest Rate Hike
Following the “largest monetary tightening in history,” Pal said the equity markets had priced this in. He added that the credits markets have also started to price this. He continued:
“The bond market and oil are the two assets not pricing in the future recession yet (due to the supply issues in energy). Bonds finally decided to join the party and the trend of higher yields, lower equities has probably ended. Lower stocks now equal lower yields….”
Explaining further, oil could break lower, and its fall with bond yields falling will give the Fed a reason to stop tightening by July. Pal predicted that the next four weeks would be “highly unsettling.” He said positions will get taken out and shot, and there may be no safe place for investors.
Despite acknowledging that “crypto is in full panic mode,” Raoul Pal still considered crypto assets as long-term investments. Still, Pal opines that the crypto market crash is not yet at its lowest. He said a mass liquidation stage is coming, and crypto and legacy assets would be involved. When this happens, the Federal Reserve could ease its grip on monetary policy. Ease on the tightening policy would allow liquidity flow in the financial markets, and this could trigger the next crypto bull market.
Another development that could put an end to the crypto bear market is the approval of a Bitcoin-based ETF.
Bitcoin is trading at a 10-month low of around $30,000 while ETH is at $2,069.47 at press time.