Cointime

Download App
iOS & Android

Stop — You Might Be Making an Enormous Error Going All In on Cryptocurrency Now

Raoul Pal before is a popular figure in economics.

He used to work as a hedge fund manager and now likes to predict the economy on YouTube.

Sometimes he gets things right, but other times he gets them wrong, and people on the internet get upset.

For the record, the title of this blog does not entirely express Raoul Pal’s thoughts, but they are my thoughts as the author, based on Raoul Pal’s predictions.

Where Raoul Pal has expressed his thoughts, you will see that written in quotation marks.

Buckle up, strap yourself in, and let’s get into it.

Pal is currently saying that we’re getting close to the lowest point in the economy’s “liquidity cycle,” which is a fancy way of saying how much money is available to be spent.

If you’re considering investing your money, Pal advises that if you’re going to have a “nibble,” perhaps it’s best not to go all in Because things can get far worse.

You may have heard about the “liquidity cycle,” which helps you figure out the best time and type of investment for your money.

This cycle shows you which sectors of the economy are doing well by looking at how much money is available to be spent. When the economy is uncertain, and prices rise quickly (inflation), people often invest in commodities like gold or oil.

This is why we’ve recently seen many selling in tech stocks and cryptocurrency.

Raoul Pal is an expert on this stuff, and he thinks we’re getting close to the bottom of the sell-off in cryptocurrency. He looks at three specific things to come up with this conclusion:

  • The rate at which interest rates are changing.
  • The speed at which the value of the dollar changes.
  • The rate at which commodity prices are changing.

Pal says that these three things tell you how “tight” money is, and they need to go down for us to see a bottom in the cryptocurrency market.

He thinks this will happen within the next six months, and when it does, it will take the pressure off the markets and signal a turning point.

Raoul Pal:

“Those things give us a growth shock ahead that is quite sharp and severe.

The narrative you will see is that Marco is about to be terrible, so all assets must fall.

Look for the turn. In the next six months, the central bank will say, unemployment is coming up. Inflation is coming down.

If the rate of change stops, you stop the pressure on markets.”

Leverage Will Blow You Up.

Have you heard about leverage?

It’s when people or businesses borrow money to invest and try to make a profit. However, things can go wrong if the cost of borrowing money goes up.

Raoul Pal, an expert in economics, says that businesses and people who have borrowed too much money (overleveraged) are at risk of “blowing up” if this happens.

It’s essential to be careful with leverage and not borrow more than you can handle.

Raoul Pal:

“Getting to the bottom of the liquidity cycle is like having a bunch of people in the street saying,

“hey buddy, can you lend me a buck? You’ve only got five bucks.”

If ten people are asking, well, five people aren’t going to get it.

And that’s what happens at the bottom of the liquidity cycle. Those who need money don’t get it, and they blow up.”

Leverage is when you borrow money to buy assets, hoping that they’ll increase in value and you’ll make a profit.

Pal says using leverage in cryptocurrency is like gambling.

He believes that people will realise that using leverage in cryptocurrency is a bad idea because, eventually, you’ll get caught.

It’ll be clear who took unnecessary risks (like “swimming naked” when the tide goes out).

It’s essential to be careful with leverage and only borrow what you can handle.

Timing The Market Is Impossible.

Have you been paying attention to the market and wondering when the best investment time might be?

Pal has some thoughts on this.

According to Pal, if his six-month prediction comes true, we should expect to see the bottom of the market (the lowest point) in March 2023.

After that, we should see a slow improvement (uptick) in the market. Pal thinks that when this turning point (pivot) happens, it will be like a beach ball held underwater and suddenly released — it will bounce back quickly because the rate at which people are adopting and using cryptocurrency is faster than ever before.

Raoul Pal:

“We are now at the bottom of the macrocycle, and the beach ball is being held underwater.

Remember that new people are building in the ecosystem daily, and there’s new adoption.

People like ticket master have released 10,000 NFTS without anyone realising the scale of what is happening across crypto.

It’s ridiculous.

So the Beach ball is held underwater at the moment.

When quantitative tightening or rate rises stop, the beach ball will rise above the water.

You can’t hold it down.”

Pay Attention To The Economy.

Have you been paying attention to the economy and wondering what might happen next?

Pal says we’re getting very close to a point where economic growth could suddenly stop or decrease (implode).

We’ve already seen two negative periods of GDP (a measure of a country’s economic output) in the U.S., and we’ve also seen drops in house prices and commodity prices.

Pal thinks that the turning point in the market is very close and that the potential reward for investing in cryptocurrency is between 20 and 50 times the risk.

However, he’s not putting all of his money into Bitcoin because he thinks other cryptocurrencies, like Ethereum, still have a lot of room for growth.

After all, they are in the “discovery phase” (when many people are learning about the tech). Pal thinks that the growth of Ethereum could be exponential because of the large number of people using and building on its network.

Final Thoughts.

You might be familiar with Raoul Pal, who bases his investment decisions on Metcalf’s Law.

He values networks with many users over those with just good technology.

Think about social media or the telephone — each new person who joins makes the network more useful and valuable for everyone else.

Raoul Pal is particularly interested in cryptocurrencies with applications built on top of them because he believes they’ll be more successful as more people use them.

For example, Bitcoin is a store of value and a digital commodity, but other cryptocurrencies like Ethereum, Solana, Avalanche, and Algorand have more potential for widespread adoption.

It’s worth noting that Raoul Pal is very successful and has a lot of money to invest, which allows him to take risks on unproven assets.

He also has the time and resources to research these investments carefully and try to predict when the market will be suitable for them.

I prefer to stick with Bitcoin and Ethereum and have a small investment in Solana, using a dollar-cost averaging strategy to spread out my purchases over time.

It’s hard to say when the market will hit a low point.

Pal thinks it could be in 6 months. At the time of the YouTube video, that would make the bottom around March 2023.

It’s impossible to know.

One investing strategy that Pal often advocates for is dollar cost averaging. This strategy involves investing a fixed amount of money at regular intervals, regardless of the asset’s price.

This approach aims to smooth out the impact of price fluctuations over time and potentially increase the overall return on investment, and can benefit risk-averse investors who need more time or expertise to monitor the market constantly.

https://medium.datadriveninvestor.com/stop-you-might-be-making-an-enormous-error-going-all-in-on-cryptocurrency-now-raoul-pal-9bdf3e4bb686

Comments

All Comments

Recommended for you

  • U.S. July Nonfarm Payrolls Fall by 23,000, Missing Market Expectations

    On August 7, U.S. nonfarm payrolls decreased by 23,000 in July, compared with market expectations of an increase of 80,000, and the previous value was an increase of 57,000.

  • US May and June Nonfarm Payroll Additions Revised Down by 103,000 Combined

    On August 7, the US Bureau of Labor Statistics: May nonfarm payroll additions were revised down from 129,000 to 63,000; June nonfarm payroll additions were revised down from 57,000 to 20,000. After the revisions, the combined additions for May and June were 103,000 lower than previously reported.

  • U.S. Rate Futures Market Sees Lower Odds of Fed September Hike

    On August 7, the probability of a Fed rate hike in September as priced by U.S. interest rate futures declined.

  • New York Gold Futures Top $4,400 per Ounce

    New York gold futures topped $4,400 per ounce, up 2.36% on the day.

  • Japan Finance Minister: FX Market Affected by Moves Not Driven by Actual Demand

    Japanese Finance Minister Satsuki Katayama said she and U.S. Treasury Secretary Bessent agreed that the foreign exchange market has been affected by moves not driven by actual demand.

  • BTC Breaks Through $65,000

    Market data shows BTC has broken through $65,000, currently reported at $65,007.44, with a 24-hour increase of 0.6%. The market is highly volatile, please exercise risk control.

  • Brent Crude Drops 2.00% Intraday to $81.07/Barrel

    Brent crude oil fell 2.00% during the day, now at $81.07 per barrel. (Jin Shi)

  • Trump: Data Centers May Be More Important Than Oil

    August 7 news, U.S. President Trump said in an interview with Punchbowl News, "I saw the other day that Texas seems to be opposed to building data centers. I think that's a mistake. I'm not taking a position—I just think it's a mistake, because there are other communities that want to build data centers. When a community is willing to accept data centers, it means a lot of money will flow into that community. I don't think they're ugly. Some of the data centers I've seen are the most incredible buildings I've ever seen. They are very important to the economy. If Texas says no to data centers, that's a mistake, because data centers may be more important than oil."

  • Trump to Meet with Mining Executives

    On August 7, according to CCTV International News, US President Trump will convene executives from some of the world's largest mining companies at the US State Department on August 7 local time, in an effort to take action to 'secure critical mineral supplies for the US and its allies.' Reuters reported that the US urgently needs critical minerals to replenish weapons inventories depleted during the war against Iran. During the more than five-month war with Iran, the US military expended large quantities of precision-guided missiles and air defense interceptors. US defense officials and lawmakers have warned that given existing production capacity constraints, replenishing some stockpiles could take years—although the Trump administration has denied reports of a so-called 'severe shortage of ammunition stockpiles.' According to Pentagon officials and defense companies, supplies of minerals such as rare earths, tungsten, germanium, and scandium are essential for manufacturing precision-guided missiles, fighter jets, armored vehicles, infrared sensors, and other advanced weapons systems. Expected attendees include industry giants such as global mining giant Rio Tinto Group, Australia's BHP, US Freeport-McMoRan, US Mountain Pass Materials, US Rare Earths, US Energy Fuels, and Canada's Metals Company. According to sources, the Trump administration plans to announce multiple deals and memorandums of understanding.

  • US Regulators Systematically Review Chinese AI Firms' Third-Country Computing Power Leasing

    August 7 news, according to Bloomberg, people familiar with the matter revealed that the U.S. government department responsible for investigating chip export control violations is reviewing Chinese AI companies' leasing of computing power in third countries to obtain Nvidia advanced chips.