Former Goldman Sachs executive Raoul Pal said the macro backdrop is starting to look attractive for risky assets like Bitcoin (BTC) and crypto.
In a new AMA (ask me anything) session on Real Vision, Pal said investor sentiment is currently extremely scared and this could be the catalyst for risk assets to cause an unexpected surge.
“Pain trading, I think, is all about fooling everyone into thinking there’s a big glory bust coming, the ‘I told you so’ moment, and profits are going to be revised to all I know is that people register negative feelings. They’re more negative than I’ve ever seen in any story… They’re super negative. People are super covered. Volumes of sale have been incredibly high.
So I think the path to pain is to go lower, suck shorter and then rip higher. It would rise because bond yields would begin to fall as they finally begin to recouple for the business cycle. Bond yields have massively decoupled from the ISM (Institute for Supply Management) survey. It’s a relationship that goes back 50-60 years.
According to Pal, the bond market is broken as sellers are currently overwhelming buyers, but the macro expert says the setup could motivate the Federal Reserve to finally ease monetary policies.
“It’s now an illiquidity function because nobody is involved in the market, and there are only sellers. I think this is going to cause huge problems. This will eventually create the answer, and the answer to everything is always more bells and whistles. The UK showed it: no more bells, print more money [and] get us out of this problem.
When people say they’ll keep walking until it breaks, well when it breaks no more bells. The whole system is now set up for a scream that’s more of a cowbell, turn the taps back on.
Pal points out that once central banks reopen the taps, that’s when assets like Bitcoin and crypto can rally.
“It’s a sad situation, but that’s the way it is, but you can trade this to your advantage. Trading to your advantage is understanding when that change is happening and what it does to risky assets. It’s very attractive.
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