Raoul Pal, founder and CEO of Global Macro Investor, has countered the prevailing narrative that Bitcoin's recent sharp decline signals a broken crypto cycle. Instead, he argues that the selloff is a symptom of a broader macro liquidity squeeze affecting long-duration assets, not a crypto-specific failure.
Bitcoin has plunged nearly 40% from its peak of $126,000, trading just above $77,000 amidst fragile market sentiment. Pal highlights that this price action is mirrored almost identically by the UBS SaaS Index, indicating a shared underlying driver rather than isolated issues within crypto. "Bitcoin and SaaS equities are tracking the same chart," Pal stated, emphasizing that both are long-duration assets highly sensitive to liquidity conditions.
The core issue, according to Pal, is a significant drain in U.S. dollar liquidity. This stems from a confluence of factors: the exhaustion of the Federal Reserve's reverse repo facility in 2024, which removed a key market buffer, followed by U.S. Treasury rebuilds of its General Account (TGA) in July and August without offsetting injections. Two government shutdowns compounded this drain, further restricting cash flow into financial markets.
Additionally, Pal notes that gold's strong rally has absorbed marginal liquidity that might otherwise have flowed into riskier assets like Bitcoin or growth equities, exacerbating the pressure. The ongoing U.S. government shutdown has intensified this environment, creating what Pal describes as a temporary "air pocket" of severe price pressure.
Looking forward, Pal is optimistic that the liquidity pressure is nearing its end. He expects the government shutdown to be resolved soon, calling it the "final major liquidity hurdle." Furthermore, he anticipates a shift in policy that will restore liquidity, including potential interest rate cuts, fiscal stimulus, and regulatory adjustments like changes to the enhanced supplementary leverage ratio (eSLR).
Pal also dismissed market fears of a hawkish turn under incoming Fed Chair Kevin Warsh, arguing that Warsh's approach aligns with policies favoring rate cuts and economic expansion. Despite the current turmoil, Pal remains "strongly bullish on 2026," believing the conditions that suppressed risk assets are set to ease.
