• Sun. Aug 14th, 2022

Macro Guru Raoul Pal Says Bitcoin (BTC) and Crypto Markets Are Controlled by One Big Driver

ByHazel R. Lang

Jul 12, 2022

Real Vision CEO and macro expert Raoul Pal says that Bitcoin (BTC) and crypto markets are largely influenced by a macroeconomic factor.

Buddy recount his 965,100 Twitter followers, he believes that Bitcoin and the rest of the crypto markets closely follow the global money supply or M2.

M2 is a measure of the current money supply that takes into account cash, checking/savings deposits, money market securities, and other readily convertible assets.

“So I like growth tech but I like bonds, but clearly there are always risks from that point of view. That’s how I see the balance of probabilities. What about are digital assets? From a macro perspective, the main driver is global M2 growth.”

Source: RaoulGMI/Twitter

Pal, a former Goldman Sachs executive, also notes that M2 growth is roughly inverse to the ISM manufacturing index. The index is considered an indicator of the health of the US economy.

Said Buddy,

“As the ISM falls, M2 should start to grow…. An ISM of 38, according to the model, brings M2 growth down to 13%.”

Source: RaoulGMI/Twitter

Looking at Pal’s chart, US M2 YOY is currently below 10%.

Pal too predicted there will be a recession in the next 12 to 18 months.

“Monetary conditions will be much weaker. Just to be clear – I think risky assets will likely drop before reversing, but not 100% sure. Yes, there is a risk of a prolonged recession like 2001/2 or 2008/9 but I don’t really think that’s the highest rating. I always use 1947, 1974 and 2018 as a mixed hypothesis.

Macro strategist Lyn Alden also highlighted the correlation between Bitcoin and M2 growth.

“There are different types of inflation. There’s monetary inflation and then there’s price inflation which often comes with a lag after that monetary inflation, and what we’ve actually seen for the most part is that bitcoin is very highly correlated to money supply growth, global M2 especially measured in dollars, and so over the last two years when we’ve had this huge increase in broad money supply around the world, bitcoin has done very well behaved.

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