Raoul Pal: Bitcoin Drop Driven by US Liquidity Shortage, Not Crypto Fundamentals
Macro investor Raoul Pal says the recent Bitcoin decline stems from a US liquidity drought rather than crypto-specific failures. He highlights a high correlation between Bitcoin and SaaS/growth tech stocks—both are long-duration, forward-earnings assets sensitive to liquidity and rates. Contributing liquidity drains include rebuilding the Treasury General Account (TGA), a marked fall in Federal Reserve reverse repo (RRP) usage (about a 40% decline since Dec 2024), depleted RRP balances, temporary government shutdowns and other US "plumbing" issues. Pal cites comparative correlations (BTC–SaaS ~0.78; BTC–gold ~–0.42) and notes rising gold flows as a competing safe-haven. He rejects the narrative that Fed chair speculation (e.g., Kevin Warsh) is the primary cause, arguing policy and personnel shifts could become accommodative and restore liquidity. Supporting on-chain and sectoral signals include record BTC hash rate, ongoing institutional adoption, clearer regulation in some jurisdictions, and Layer‑2 growth. Pal frames the correction as cyclical and liquidity-driven—similar to 2018–2019—and expects a recovery if central banks and fiscal policy renew liquidity, forecasting a possible resurgence by H2 2025 (some commentary said into 2026). Traders should monitor liquidity indicators (Fed balance sheet moves, RRP usage, TGA flows), cross-asset correlations (BTC vs. tech/SaaS and gold), and Fed signalling for short-term volatility and directional clues. SEO keywords: Bitcoin, liquidity drought, reverse repo, TGA, Fed policy, market correlation, SaaS correlation.
Neutral
The reports frame the BTC decline as liquidity-driven rather than a structural crypto failure. That reduces the probability of a permanent bearish outlook; however, the immediate price impact is mixed. Short-term: bearish-to-neutral — liquidity drains, RRP declines and TGA rebuilds can sustain downward pressure and create volatility until reversed. Traders may see further corrections or choppy ranges while liquidity indicators remain weak and safe-haven flows (gold) persist. Long-term: mildly bullish — if monetary and fiscal actions restore liquidity, and supportive on-chain metrics (hash rate, institutional adoption, Layer‑2 growth) continue, BTC could recover toward prior highs by mid‑2025 to 2026. Therefore, the net market effect is neutral: downside risk exists while the path to recovery depends on macro liquidity restoration. Trade implications: monitor RRP, TGA flows, Fed balance sheet moves and cross-asset correlations; consider liquidity-sensitive position sizing, use of time-based entries, and hedges for near-term volatility.