Raoul Pal: “Crypto slump driven by a drain in US liquidity”

An analysis said the roughly $250 billion in crypto (virtual asset) market capitalization that evaporated over the weekend was not due to crypto-specific problems, but to a shortage of US dollar liquidity.

According to Cointelegraph on the 2nd (local time), Raoul Pal, CEO of Global Macro Investor, said, “A narrative is spreading that the Bitcoin and crypto cycle is over, but that is not true,” adding, “The fact that software-as-a-service (SaaS) stocks are also falling along the same trajectory shows this.”

Pal pointed to the recent simultaneous weakness in Bitcoin and SaaS names. He explained, “Both asset classes are ‘long-duration assets’ whose valuations depend on future cash flows and growth expectations, making them highly sensitive to changes in rates and liquidity conditions.” The fact that two entirely different assets are moving in the same price pattern suggests the common driver is macro liquidity rather than an industry-specific issue.

Pal in particular noted that the recent surge in gold prices absorbed marginal liquidity in the market, dealing a blow to relatively riskier assets such as Bitcoin and SaaS stocks. “As the gold rally sucked up marginal liquidity, the riskiest assets were the first to correct,” he said.

He also cited the US government shutdown as a factor that intensified liquidity pressure. Pal said, “With the Fed’s reverse repo (RRP) balance already depleted in 2024, the rebuilding of the Treasury General Account (TGA) is no longer acting as a buffer as it did in the past, and is instead functioning as pure liquidity absorption.”

He also dismissed concerns raised in some quarters about the next Fed chair potentially being hawkish. Pal said, “Whoever leads the Fed next, the basic strategy is rate cuts,” adding, “The Trump administration and the Treasury will operate a structure that supplies liquidity through the banking system.”

He added, “This phase of liquidity depletion is nearing its end,” and said, “My bullish outlook toward 2026 remains unchanged.”