Amidst a flurry of animated discourse on the platform known as X — a new digital avatar of the erstwhile Twitter — Raoul Pal, a luminary in high-stakes trading and the pioneering mind behind Global Macro Investor and Real Vision, brought forth a pivotal concept. The famed financial aficionado delineated the emergence of a phase he described as the “Macro/Crypto Summer”. In Pal’s purview, this phenomenon extends beyond a mere transitory spell, representing instead a significant epoch in the intertwined worlds of finance and cryptocurrency, deeply embedded in the cyclical rhythm of the global economy.
Exploring the intricate workings of this much-anticipated “Macro Summer,” Pal points towards its positioning as a critical juncture in what he dubs “The Everything Code” cycle. Falling on the heels of the Financial Conditions Index, a pattern based largely on liquidity fluctuations and the debt refinancing cycle, the Macro Summer emerges typically about ten months later. Coinciding with this milestone is when the ISM (Institute for Supply Management) index — a vital measure of economic vitality — is at its nadir, signaling an upswing in GDP growth.
Drawing focus on the remarkable cyclicality occurring every three-and-a-half years within the ISM business cycle, Pal illustrates how the ebb and flow of liquidity plays a cardinal role. Forecasting the rise of liquidity in the latter half of 2022, Pal predicates the impending Macro Summer and Fall seasons upon this anticipated surge in liquid financial assets in the market.
With tech stocks often flourishing amid these liquidity influxes, Pal articulates an even more profound riposte within cryptocurrency markets. Accentuating the substantial growth observed in previous Macro Summer and Fall seasons, Pal showcased striking data from the performance of Bitcoin and Ethereum. In their respective cycles, Bitcoin saw increases of “2012/2013: +146x, 2016/2017: +30x, 2020/2021: +8x…” and Ethereum generated remarkable gains of “2016/2017: +1,770x, 2020/2021: +41x”.
Underlining the gravity of these patterns, Pal draws a parallel with the popular meme coin, DOGE, which experienced exponential growth in the designated cycles, further bolstering his theory on the impact of macroeconomic cycles on cryptocurrency valuations. He also keenly observes the synchronicity of these cycles with Bitcoin’s halving events, stating that Crypto Summer typically unfolds in full swing post-halving, tying the fortunes of cryptocurrency intimately with overarching financial trends.
Looking forward, Pal extrapolates this pattern into the future, suggesting a continued rise in liquidity until the end of 2025. This expectation hinges on the interplay of global financial mechanisms, including the potential for an increased flurry of money printing by the US in response to a dramatic upswing in interest payments in tandem with anticipated shifts in Fed Net Liquidity and Treasury General Account (TGA).
Pal remains confident that the US isn’t the lone player set to inject liquidity into the global financial sphere in the forthcoming months. Speculating on the role of other major economies, he posits: “I’ve no idea whether it’s China, the EU, Japan or the US that drives this or maybe a bit of all. Time will tell”.
In anticipation of this burgeoning Macro Summer, Pal asserts his investment strategies, particularly in tech and cryptocurrency, have been shaped by the insights derived from The Everything Code. With his gaze fixed on the altcoin market and the incoming “Banana Zone,” Pal paints an intriguing picture of the future, where patience may yield immense wealth generation.
As the crypto world found itself on the brink of this exciting new era, Bitcoin was trading at a remarkable $67,003 at the time of Pal’s commentary.
