Raoul Pal, CEO of Real Vision and former Goldman Sachs executive, believes that crypto has probably bottomed out and that the biggest macro impact on crypto is the global money supply.
In a new video, Pal predicts that the growth of the economy will soon fall off a cliff, which will lead to an increase in the money supply.
The former Goldman Sachs executive shares a chart comparing the ISM Manufacturing Index and the US M2 Money Supply year after year.
“In this chart, the ISM is inverted and the money supply looks like it should start bottoming out and rising higher. If it goes higher, crypto should go with it. Well, this makes sense, because when the economic weakness comes, the central banks begin to come into play, liquidity is pushed into the system.
We are already seeing it in China, which is probably already boosting money supply growth. But I think we will see it all over the world. So this is going to be interesting.
The US dollar situation, maybe we see swap lines that supports the money supply. So I think we’re going to see the turnaround in the money supply. So this is the macro for improving crypto when growth slows down. It’s kind of counterintuitive because they think, well, if growth is slow, then crypto is going to be bad. It’s the opposite. When growth slows down, bond yields fall, inflation falls, the money supply starts to rise, crypto starts to run well.”
M2 is a measure of the current money supply, which takes into account cash, current/savings deposits, money market securities and other easily convertible assets. The ISM Manufacturing Index is considered an indicator of the health of the US economy.