Former Goldman Sachs CEO Raoul Pal says crypto markets could parabolically rise faster than most people think.
In a recent Real Vision Crypto video, the macro guru says the crypto market could be witnessing a steep rise as it shows the vibes of the bull market of 2015-2016, when the entire space grew with more in a matter of months. rose more than 700%.
According to Pal, the macroeconomic backdrop suggests that a crisis is brewing and that the Federal Reserve will have little choice but to step in and introduce rescue packages.
“What is (is) interesting is that it is a similar setup from the 2015-2016 cycle. So we have a similar structure and a similar market.
2019 was kind of weird because we had that big correction all over 2019 after a huge run to start with — 300% up, then a big correction down and then we went parabolic.
I feel like we could get rather parabolic here, because I think we’re getting closer to a banking crisis within the regional banks that will require the Federal Reserve to step in. Interest rates are out of control, so interest rates are going up and the yield curve is inverting, bad news for the banks.
You can use the KRE ETF (Regional Banking ETF) to see where we stand, but if that starts breaking $35, $30, then game up for more cowbell because the Fed will have to bail these people out. And then we have the commercial real estate issues behind it.
So that’s the kind of backdrop why the cowbell will come…”
At the time of writing, the KRE ETF is trading at $43.13.
Pal also says the crisis will give the Fed an excuse to reverse its aggressive stance and provide the government with liquidity to pay off its huge national debt.
“Maybe that’s why the Fed is tightening rates even more, to create a crisis so they can cut rates so they can monetize the debt. Because if they don’t, they’ll have to print more money because interest rates are higher to pay the debt payments, and that’s going to be a total catastrophe.
The main point is liquidity up.”
Traditionally, debt monetization is when a government borrows money from its central bank to fund expenditures. In this case, the US government could sell bonds directly to the Federal Reserve, forcing the agency to issue new liquidity.
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Featured image: Shutterstock/Giovanni Cancemi/Natalia Siiatovskaia
