Raoul Pal has stated numerous times that the cryptocurrency market is primarily driven by two factors: network adoption, which is a long-term trend, and the liquidity cycle, which operates in the short to medium term.
The liquidity cycle bottomed out in June, and we started seeing positive indicators. The central bank balance sheet, led by China, Japan, and the United States, is now fully operational and is expected to remain so until 2025. This is why we are currently experiencing a cryptocurrency spring.
On the other hand, it should be noted that the current tightening is primarily about liquidity, not interest rates. While interest rate changes are a component of the liquidity cycle, the central bank balance sheet and M2 are the primary drivers. The price of crypto assets has a strong correlation with a global liquidity index, which is a function of the G5 central banks' balance sheets plus their M2. The recent injection of liquidity into the banking system caused a surge in all assets, including cryptocurrency.
At this point, the current rise in interest rates is not the primary driver of the market. When Bitcoin was introduced, global interest rates were zero, effectively resetting the entire debt burden for every Central Bank, country, and corporation. The majority of the debt is three to five years old, resulting in a three-and-a-half-year cycle that is a global phenomenon. This is the Bitcoin halving cycle, which coincides with the liquidity cycle, which is the market's primary driver. The liquidity cycle is a complete structural change to the world that occurred following the 2008 financial crisis, resulting in a three-and-a-half-year cycle driven globally by the debt refi cycle.
The cryptocurrency risk curve is where people tend to move along the curve based on their confidence in the cycle. People seek out the safest and most secure assets during times of uncertainty, such as Bitcoin. As people gain confidence in the cycle, they move further out of the curve, and Bitcoin's dominance diminishes. Metcalf's rule Two factors explain network effects: the number of active addresses and the value exchange on the chain. As long as there is activity on the chain, the network's value grows over time. The money market curve in Ethereum allows people to stake and reduce risk in the system. As computing costs rise, there may be less burning over time, which could pose a problem for Ethereum. When compared to traditional yields, staking in Ethereum has a high-quality asset with a decent yield.
Source:
Money Talks, 22 April 2023, "I Have Never SEEN This In Bitcoin Before | Raoul Pal Bitcoin Prediction",
