Raoul Pal thinks the crypto market is being misunderstood.
In a new video on the Crypto Nutshell YouTube channel, he says the recent weakness isn’t a top, but a temporary liquidity gap that’s hitting crypto first. And if his read on the cycle is right, the bigger move is still ahead, not behind us.
Pal points out that markets look fine on the surface, yet everything feels fragile. Crypto dips, tech wobbles, and every pullback feels bigger than it actually is.
He ties this to a “liquidity air pocket” caused by three overlapping forces: the Treasury rebuilding its General Account, the reverse repo drain, and ongoing QT.
With those pieces pulling cash out of the system at the same time, the assets furthest out on the risk curve, like crypto and small caps, take the hit. Fund managers are still chasing missed AI gains, so even small moves spark outsized reactions.
Pal also describes a K-shaped economy. AI giants keep booming, but Main Street is stuck with weak cash flow and the longest ISM manufacturing stretch below 50 on record. Households and small businesses simply don’t have spare money, which explains why retail investors haven’t returned to crypto.
Heading into the election cycle, he expects policymakers to push toward easier conditions – rate cuts, tax tweaks, and steps aimed at supporting everyday consumers.
Despite the hype, Pal says most ETF activity is arbitrage, not new buying. Total liquidity hasn’t broken to fresh highs this cycle, and crypto usually won’t move sustainably until it does.
That’s why Bitcoin’s price action has felt flat even with ETFs in the mix.
Pal believes liquidity should rise into 2025-2026, setting up a stronger crypto run. The “real danger window,” he says, is more likely in 2027, when the next major liquidity downcycle hits.
For now, this choppy stretch may only be the setup phase for a much larger move ahead.
It’s not a market top. A temporary global liquidity squeeze — caused by the U.S. Treasury rebuilding cash, reverse repo draining, and ongoing QT — is pulling money out of the system. Risk assets like crypto always feel this first and hardest.
Most ETF buying has been arbitrage (institutions swapping spot for futures), not fresh capital entering the market. True sustained rallies in crypto only happen when total global liquidity breaks to new highs — and that hasn’t happened yet this cycle.
Retail usually returns when money feels easy again. With households and small businesses still cash-strapped and manufacturing weak, retail is waiting for clearer rate cuts and pro-consumer policies — likely accelerating into 2026.
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