Bitcoin’s fall below $100,000 shook market confidence and drove the Fear and Greed Index down to 23, a sign of extreme fear. But as panic spreads, Raul Pal, founder of Global Macro Investor, sees it differently. He believes the latest drop could be the lull before a major rise in global liquidity that could reshape markets over the next year.
Global liquidity tightens before the flood
In a recent tweet, Pal explained that the recent government shutdown in the United States has caused an acute liquidity squeeze. Although cash is accumulating in the Treasury General Account (TGA), liquidity has effectively dried up from the system as there is nowhere to spend it.
The situation is exacerbated by the Federal Reserve’s continued quantitative tightening (QT), which has already exhausted its reverse repurchase facility, a critical liquidity buffer. These combined forces are negatively impacting the market, especially cryptocurrencies that rely heavily on liquidity.
Traditional financial managers are also struggling to underperform their benchmarks, but tech stocks are holding up a bit thanks to steady 401(k) flows.
What happens next?
Pal is hoping for a big turnaround once the shutdown ends.
- Between $250 billion and $350 billion in financial spending could flood the system.
- QT is over and the Fed’s balance sheet could expand again.
- The US dollar may weaken as global capital flows increase.
- While interest rate cuts may come as economic indicators soften, the CLARITY Act could finally bring regulatory confidence to the crypto market.
Pal also believes other global forces, such as China’s expanding balance sheet and Japan’s support for the yen, will further increase liquidity.
Global liquidity surge could trigger crypto rally
Additionally, Pal’s data on the GMI Total Liquidity Index, a model that tracks the flow of money across global markets, is approaching a key uptrend that has historically fueled gains in risk assets such as stocks and cryptocurrencies.
He called liquidity “the only game” and explained that the next 12 months could revolve around the development of $10 trillion of global debt and the injection of new money into financial markets.
While most analysts are focused on short-term price declines, Pal argues that the real story is liquidity and its potential to drive the next bull market. Bitcoin is currently trading around $101,331, down 3% in the past 24 hours, giving it a market capitalization of nearly $2.02 trillion.
Trust CoinPedia:
CoinPedia has been providing accurate and timely cryptocurrency and blockchain updates since 2017. All content is created by an expert panel of analysts and journalists following strict editorial guidelines based on EEAT (Experience, Expertise, Authority, and Trustworthiness). All articles are fact-checked against trusted sources to ensure accuracy, transparency, and authenticity. Our review policy ensures unbiased evaluations when recommending exchanges, platforms, or tools. We strive to provide timely and up-to-date information on everything cryptocurrencies and blockchain, from startups to industry giants.
Investment Disclaimer:
All opinions and insights shared represent the author’s own views on current market conditions. Please do your own research before making any investment decisions. Neither the author nor the publication is responsible for your financial choices.
Sponsors and advertising:
Sponsored content and affiliate links may appear on our site. Ads are clearly marked and our editorial content is completely independent of our advertising partners.