In a new interview with asset management firm Arca, the former Goldman Sachs executive says that the macroeconomic environment that has kept the crypto market bearish for most of the year is starting to change.
“For me, the macro is rolling over. By that, I mean we’re going into recession. We should see things like the ISM (institute for supply management) survey and other things start falling apart pretty quickly. The forward-looking elements are falling apart already. We’re seeing it globally. So that’s growth evaporating.
Alongside that, the narrative hasn’t caught up, most commodities are down between 30% and 50%… Everyone’s long and expecting oil to go to $200. I think there’s a washout coming, and it goes down to $60. So that’s the last inflation story.”
According to Raoul Pal, changes in the macroeconomic backdrop would affect enterprises and then the labor market.
“People built massive inventories after Covid. Those inventories are now unsold because of the economy slowing down and inflation eating disposable income. So we’ve seen it from Walmart and Amazon. They’re going to start discounting inventories to try and shift it. People are laying off staff. So the macro cycle is going to get to the ugly phase.”
Pal emphasizes that the bad news for the economy on the horizon is good news for financial markets.
“Why is that making Raoul bullish? Because the outcome to that is as inflation comes down and bond yields fall, liquidity conditions improve. And what drives financial markets at the macro level the most is liquidity conditions.”
The macro expert also feels that, with liquidity conditions improving, crypto is preparing to start a new market cycle.
“My view is, let’s give it a probability, 70% probability. So that’s pretty high conviction that the low is in, and therefore, we’re starting the upside cycle.”
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