The phrase “don’t fight the Fed” gets chucked around a lot. But the real battle for the crypto market isn’t against Jerome Powell’s rate-setting committee.
It’s with the monumental wave of global liquidity that makes or breaks every risk asset on the dance floor. That’s the message ringing loud from macro maven Raoul Pal.
His conviction that crypto prices will continue their march to record highs hasn’t waned, and he urges traders to be patient, reminding them:
“Drawdowns like this are common place in bull markets and their job is to test your faith.“
So, forget the doom and wait out the volatility:
“BTFD if you can.”
The global liquidity spigot is about to swing open once more. And the crypto market pain window may soon morph into a runway for the next melt-up.
The Real Game: Rolling $10 Trillion into the Crypto Market
Echoing his “Road to Valhalla” Twitter musings, Raoul Pal hammers home the single most important thing driving the macro stage: $10 trillion in global debt. Everything else, from failed market rallies to day-trader drama, is just a noisy sideshow.
His argument pivots on one core metric: liquidity. And right now, it’s trapped in a vice grip thanks to the US government shutdown.
With spending frozen, the Treasury General Account (TGA) swells, but nothing trickles into the real economy.
Reverse repo has already been drained bone-dry, while quantitative tightening (QT) keeps siphoning capital out of the market.
Why the Crypto Market Got Singed and What’s Next
This liquidity drought hits hardest in the crypto market, Pal explains. It’s the asset class that’s most hypersensitive to minute swings in capital flows, because it’s the most liquidity-driven.
TradFi managers are limping behind benchmarks after a brutal year. Equity indexes have managed to tread water, propped up by relentless 401(k) contributions and the resilient tide in tech.
But Pal warns: if this government-induced squeeze persists, equities will find themselves caught in the downdraft too.
Here’s where things flip: Pal argues the imminent resumption of Treasury spending, ranging from $250 to $350 billion, will blast liquidity back into the ecosystem and pump crypto prices.
QT slows to a crawl; the Fed’s balance sheet effectively expands. With spending set to resume, the dollar looks primed to weaken and market uncertainty fades as tariff negotiations wrap.
Bill issuance ramps up, fattening bank balance sheets and pushing money through money market funds and stablecoins alike.
And about those recession fears? Pal’s not buying.
“We will have economic weakness from the shutdown,” he says, “but no, there is no recession.”
He expects ongoing rate cuts, a sharp dip, then the kind of macro inflection point that leaves crypto market bears flatfooted.
New Catalysts and a Bullish Election Engine
Pal highlights below-the-radar structural levers now primed to spark a credit renaissance. Changes to the Supplementary Leverage Ratio (SLR) can free up bank balance sheets, opening the door for fresh lending and asset buying.
The much-buzzed CLARITY Act will finally deliver regulatory certainty for crypto. That alone will unlock a tidal wave of institutional and bank adoption that’s been bottled up for years.
Then there’s the so-called “Big Beautiful Bill” looming on Capitol Hill. With the system set for a midterm election crescendo, the playbook now gears toward a strong economy and surging asset prices by 2026.
Meanwhile, China and Japan ramp up fiscal stimulus and balance sheet expansion. They’re both playing their own liquidity cards to support the global risk bid.
The ‘Window of Pain’: Why Drawdowns Test the Faithful
Pal feels crypto investors’ pain. He knows it’s hard, but:
Pal isn’t alone in his stance. Bitcoin and macro investor Dan Tapiero echoes the sentiment. He flags that the bull phase in BTC and crypto prices ends only when “no one thinks it’s ending (ie not now).” Bad price action is meant to shake out weak hands, that’s markets 101, he argues.
Global capital markets expert, The Kobeissi Letter, also reminds investors that the crypto market fundamentals are strong. The main culprit for the brutal $1 trillion shakeout is leverage.
Don’t Miss the Forest for the Trees
Zoom out. The “Liquidity Flood” Pal foresees isn’t just about bullish charts; it’s a full-frontal macro reversal powered by policy shifts, fiscal injection, and global stimulus.
Ignore the shrieks and “poo-flinging” in the comment threads. If liquidity (the “only game in town”) starts moving up, expect risk assets across tech, crypto, and stocks to follow suit. As Pal insists: