The Crypto market has been in a slump for over weeks now. Bitcoin is still unable to hit $50K, and ETH has slipped further below 4K. Although there is no specific reason for what is causing the sustained fall, experts and veterans have their opinions.
Raoul Pal, a macro expert, believes there is a reason why crypto markets have essentially halted until the second half of 2021.
Pal speculates in a new Real Vision interview with writer Maggie Lake that the huge crypto surge he and many investors are anticipating has failed to occur because individual traders simply don’t have enough cash on hand.
He says something feels fresh and new. It’s been choppy since March through May when Bitcoin was the first to reach the summit, followed by Ethereum. They haven’t really burst out yet.
As a result, they’ve been in a large, sloppy range that fluctuates a lot. He says he has been thinking about it because one would expect mass retail participation and an explosive run at this point in the crypto cycle. He questions why it has not happened yet.
“Is there a structural change in the market, or is it because cryptocurrency is used for discretionary spending or investment? People will have less money – retail participation – to put into bitcoin if prices are raised.”
Pal points out that we haven’t seen the same level of new wallets and other measures as we did at the recent peak, which leads him to believe that individuals aren’t willing to invest.
Pal dismisses the notion that smaller investors are avoiding cryptocurrency because it is too hazardous. Most individuals, according to the former Goldman Sachs executive, see cryptocurrency as a long-term hedge against currency depreciation.
Because the story is that it is a long-term inflation hedge, they do not consider it a risk asset. This isn’t your typical inflation. It’s all about the debasement of central banks, he added.
“In the end, we’re talking about inflation of 6% to 7% each year, while Bitcoin is up 100% and Ethereum is up 500%.”
The analyst further says what it is, is a long-term strategy for avoiding fiat currency depreciation, as well as, more crucially, a call option on future technology, web3, and all the new things that have been produced.