Former Goldman Sachs executive Raoul Pal says he is very bullish on Ethereum (ETH) and crypto markets despite uncertain price developments in recent months.
In a new interview with crypto analyst Scott Melker, Pal says crypto hedge funds that suffered big losses during the recent market turmoil are underweight ETH as The Merge approaches. Ethereum towards a proof-of-stake consensus mechanism.
The Real Vision founder says the markets are taking the most painful path, and for ETH right now, that means up.
“I think everyone is still underweight The Merge. People will go into the merger or the post-merger, we’ll have that peak [and] we will probably have a withdrawal. A lot of people will say, ‘See, it’s going all the way back.’ I guess he corrects laterally, does something, gets back in range a bit, and then we explode higher.
So I’m very optimistic right now. In the short term, we are getting closer to overbought, but I think we just had a correction, and I imagine we will start again. What is fascinating is to see that the futures market and the futures markets are everyone hedging the risk of ETH meltdown, so by buying ETH and selling futures now, someone is going to lift that blanket at some point.
I find this setup really interesting and I know the crypto hedge funds are all underweight because they have all been beaten so badly. So they bought calls as a way to have something on The Merge so they wouldn’t get beat up by their investors. So when you see this kind of pattern, the path of pain is even higher.
The macro guru says crypto’s relative underperformance this year can be attributed to an unexpected tightening of central bank liquidity, which he expects will change.
“From my perspective…I think the macro is the big thing that actually surprised most of us. Not that the macro surprised us, but its impact on crypto. First, when you have negative real wages, people have less money relative to the average cost. It is still a retail investment market. So the other thing is central bank liquidity is being pulled out, and if you look at the year-over-year charts of M2 versus Bitcoin, they’re basically the same thing. This tells you that as more money leaves the system, there is less money around.
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