Macro investor Raoul Pal said Bitcoin (BTC), Ethereum and Ripple’s (XRP) have likely formed their final lows, arguing that a sharp liquidity squeeze earlier this quarter flushed excess leverage from the crypto market and set the stage for a recovery driven by renewed global liquidity. Pal noted that the October downturn produced forced liquidations across crypto markets and exposed leverage-related weaknesses, triggering a cascade of selling. Since then, several major assets have held above those lows or recovered quickly, a pattern he views as consistent with a market bottoming process.
Pal pointed to recent sharp single-day rallies across parts of the crypto market as a signal that the selling phase may be exhausted. In his view, Bitcoin, Ethereum and XRP are now basing around levels established after the October drawdown, suggesting that downside momentum has weakened materially. The core of his thesis rests on liquidity conditions. He argued that the recent market stress reflected a shortage of liquidity in the banking system rather than a deterioration in crypto fundamentals.
According to Pal, constraints in bank funding markets forced authorities to halt quantitative tightening, and he expects additional liquidity measures to follow as year-end funding pressures intensify. Pal highlighted recent regulatory and balance-sheet changes affecting U.S. Treasuries, particularly adjustments to bank leverage requirements, which he said could encourage banks to absorb more government debt. That dynamic, he argued, would effectively shift a greater share of debt management from the central bank to the government, expanding credit creation through the banking system. Over time, Pal said, this process could translate into trillions of dollars of additional liquidity flowing into the broader economy. He also cited expectations for interest rate cuts, fiscal measures that could increase disposable income, and incoming deposits into the banking system as overlapping forces that may support risk assets. In parallel, Pal pointed to pending digital asset legislation as a potential catalyst, saying clearer rules could expand crypto usage across financial markets. He said the combination of a completed liquidity-driven selloff and an approaching wave of monetary and fiscal support suggests the market has already seen its worst levels for this cycle. While he cautioned that volatility will likely persist, Pal maintained that the broader setup favors higher prices as liquidity conditions ease and crypto adoption widens.
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