Macro guru and founder of Real Vision Raoul Pal says that crypto is one of the opportune trades in the current macroeconomic conditions.
The former Goldman Sachs executive tells his 901,000 followers in a tweetstorm that a surge in food and energy prices, plus a hit on liquidity stemming from sanctions on Russia are weighing down on the global economy.
Because of these factors, Pal says the likelihood of interest rate hikes is diminishing as central banks get pushed into a corner, forced to maintain a more accommodative economic policy to avoid a recession.
“The odds of rate hikes are falling fast because hiking rates into a supply shock just exacerbates what is likely to become a global recession as the Russia situation will not get solved fast. Demand will erode fast at these prices too.”
The macro investor also says that Europe has economically become a “hot mess,” highlighting that there is a very good chance that governments issue stimulus payments to help people pay for the surging cost of living.
“I think there is a decent chance of MMT (modern monetary theory) style handouts to cover food and energy costs. This could be a global thing. It was the new trick that the governments and [central banks] learned in 2020. How else do they deal with the obliteration of household finances?”
Pal says that with all these macroeconomic conditions in play, precious metals, digital assets, bonds and the US dollar are the best assets to be positioned in. He also says the current climate is reminiscent of March 2020, when most major financial markets capitulated dramatically before strong V-shaped reversals.
“The right trades here remain gold and crypto (no one’s liability), bonds and dollars. One sniff of a change in [central banks] use of balance sheet and crypto explodes again but patience is required.
The entire setup is very similar to March 2020 for crypto. Let’s see if it makes a new low.”
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