The shaky macroeconomic environment of 2022, which included rising inflation, made central banks hike interest rates, which in turn exacerbated the bear market in cryptocurrencies.
Raoul Pal, a former Goldman Sachs executive, has predicted that risk-on assets such as cryptocurrencies and stocks will boom when macroeconomic conditions improve.
In a new edition of the Global Macro Investor newsletter, Pal said that Bitcoin (BTC) is primarily influenced by the available money supply (Global M2) in the global financial system.
“Paul Tudor Jones once said, when the money is back you want to back the fastest horse. In the case of 2020/2021 he was referring to bitcoin. This time, it will be total crypto. Chart of BTC vs Global M2. Noticed something strange? Yep, we can’t get to the top of the chart because when M2 goes high enough, bitcoin goes exponential.
According to Pal, the situation is not as serious as most people think. The macro expert claims that risky investments like stocks and cryptocurrencies will still be profitable even if the Federal Reserve keeps raising interest rates.
“The higher rates are not a hindrance to the technology or the larger market, so I don’t really care if they stay at 3% (which I don’t think they do).”
Conclusion
The price of Bitcoin had been steady for a long time prior to the FTX collapse which shocked the entire market. Since last Wednesday, when Bitcoin (BTC) initially surpassed $17,000, not much has changed for the cryptocurrency market as the price activity has been sideways.
The fact that investors in such a situation have pulled their money out of high-risk assets like bitcoin is not surprising. But as bitcoin has often proven, it is resilient, and there is great potential that it will rally in the future.
