Raoul Pal: Global Liquidity Recovery Creates Historically Favorable Conditions for Cryptocurrencies

Renowned macroeconomist Raul Pal shared his analysis on X platform, defending the cryptocurrency market despite widespread skepticism. Despite the current panic sentiment, Pal points to fundamental macroeconomic factors indicating an upcoming recovery. He estimates that global liquidity remains a key driver of the crypto sector’s development and is now on a path of accelerated recovery after a period of contraction.

Macro Liquidity Shows Historically Close Correlation with BTC

According to Raul Pal’s analysis, global liquidity has demonstrated a 90% correlation with Bitcoin’s price movement since 2012 — a figure that confirms liquidity’s central role in crypto asset pricing. In comparison, the NDX (Nasdaq-100) index shows an even higher correlation at 97%. The annual growth rate of global liquidity is around 10%, with no signs of slowing down. The current BTC price is at $73,550, aligning with the overall upward trend predicted by macro liquidity.

Financial conditions tracked by the GMI index typically lead actual global liquidity expansion by about six months. Currently, these conditions remain loose, indicating further liquidity growth in the medium term. Total liquidity in the US was significantly constrained during the contraction period, creating a bearish price range. However, this indicator traditionally precedes crypto market movements by roughly three months, and from a quarterly low, it has begun to show accelerated recovery.

Federal Reserve Deploys Comprehensive Liquidity Support

The business cycle is a key driver of yield dynamics and risk levels in markets. Currently, the cycle is accelerating, creating a favorable environment for risk assets. The eSLR mechanism (lending buffer ratio via government securities) allows banks to actively increase lending volumes, expanding circulating liquidity in the economy. This liquidity, generated through the banking system, is also growing and will continue to accelerate.

Tax rebate inflows are accumulating on the balance sheets of credit institutions, boosting their propensity to extend credit and consequently increasing overall monetary liquidity in the system. The US maintains a course of gradual interest rate cuts, which raises household disposable income and strengthens risk appetite. The passage of the CLARITY law is expected to establish a regulatory framework for the development of crypto technologies. Many banks and large asset managers are ready to adopt crypto tech, and this legislation will remove existing barriers.

Stablecoins as an Indicator of Institutional Demand

The stablecoin market shows impressive growth: issuance volume increased by 50% last year and continues to accelerate. Trading volumes have reached several trillion dollars and are growing exponentially. US government support for crypto innovation has hit record highs. As agencies gradually integrate crypto technologies into their operations, there will be a significant acceleration in market development and the emergence of a completely new service segment.

Cryptocurrency Market Is in Maximal Oversold Condition

Raul Pal emphasizes that the crypto market, by most indicators, is in a panic sell-off, making it the most oversold stage in recorded history. The gap between macro liquidity estimates and actual crypto asset prices has reached historic highs, creating asymmetric risk-reward for investors. The combination of factors — liquidity recovery, favorable financial conditions, government support, and rising institutional demand for stablecoins — suggests that the current price decline could present a rare opportunity for revaluation of crypto assets upward.