- Raoul Pal reassures investors, highlighting crypto’s inherent volatility and potential for both deep losses and significant gains.
- He advises avoiding leverage, resisting FOMO, and sticking to well-established projects to navigate market dips effectively.
- Pal emphasises understanding liquidity’s role in market corrections, underpinning his confidence in crypto’s long-term performance.
Raoul Pal, well-known commentator and analyst in the crypto space, has issued some words of calm for anyone who needs to hear it – especially for anyone who is perhaps going through their first crypto bull run: Don’t fear, the end is nowhere near.
Or so believes the former Goldman Sachs manager, who doesn’t tire of pointing out that crypto is volatile – yes, shocking, I know.
Related: Analyst Jason Pizzino Says Bitcoin Low Incoming, Here is His Take on The Market
Pal said: “It’s a 70% volatility asset class. It has deep draw downs and it has tremendous upside.”
But it’s easy to forget the days of FTX and SBF and the devastating crashes they caused, especially when things have been going so well for so long.
Pal’s Basic Tips to Not F**k this Up!
Pal has some basic tips how to get through times like these, you guessed it: Don’t f**k this up.
But there is more to it:
- Don’t take leverage (seriously, don’t)
- Don’t FOMO into stuff (again, basic but important)
- Stick to the basics (see above)
- Stick to larger projects (less volatility = less potential gains, less potential losses)
- If you must degen into ‘smaller stuff’ understand the risk
Do this and Pal reckons you will be fine, because crypto is, you know, in fact:
The best performing asset class in all recorded history.
Raoul PalAnd after all, drawn downs of this magnitude are normal in crypto.
This is our 5th or 6th 20% pullback in Bitcoin. So, you’ve dealt with this many times before, you just kind of forget it, which is weird.
Raoul PalPal shared an interesting tweet by Coinbase which highlights just how volatile crypto bull markets can be:
It’s the Liquidity Stupid!
So why are we seeing this kind of correction?
Pal says, in a nutshell, due to liquidity, which is crucial across all asset classes, particularly in crypto – and understanding its cycles is key.
Related: Mayday! Mayday! Arthur Hayes Raises Alarm Over Crypto Crash
Pal’s theory revolves around the concept of the “Everything Code Cycle”. This theory suggests that if GDP growth is sluggish and debt levels remain high, there are limited options for financing the debt. The cycle implies that either interest rates need to decrease or economic growth needs to increase to manage the debt burden effectively.
However, he says since long-term trend rate growth has been slowing, there are constraints on achieving sustained economic growth. As a result, GDP must cover the interest payments on the debt, leading to challenges in managing the debt burden.
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Additionally, other major economies like Europe and Japan are also looking at ways to inject liquidity. Overall, while short-term fluctuations may occur, the long-term outlook for liquidity appears positive.
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