• Raoul Pal says shutdown is delaying liquidity boost and that crypto is in the final pain phase.
• Pal expects $350 billion injection into crypto and broader financial markets after the shutdown ends.
• He says rising liquidity, a weaker dollar, and regulation are signs that the crypto market is now at a major turning point.

The crypto market may be close to the end of its current downturn, according to macro investor Raoul Pal. He said the market is now entering a final “window of pain” before a major liquidity reversal.

Shutdown Threatens Liquidity Rebound

Heavy selling and rapid outflows are characteristic of a late-cycle shakeout, as explained by Pal. In his opinion, the coming end of the shutdown will provide an influx of money in financial markets from the United States government.

Raoul Pal attributed the current stress in the crypto market as an expected response to a tightened financial condition. Liquidity keeps dropping at a time when the Federal Reserve is maintaining quantitative tightening and the Treasury expenditure is slowing down.

This is a mix that has limited the circulation of money in crypto and other financial markets. According to him, this is a compression phase and has a tendency to force traders into panic selling.

Pal further stated that the greatest hindrance to a liquidity turnaround is the shutdown. He believes a political tradeoff will happen soon after the election day. He added that legislators will have to free withheld money and reopen stalled government services.

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Raoul Pal Says Liquidity is Rising Soon

Pal estimates that the release could inject between $250 billion and $350 billion into the crypto market and other financial markets. This injection would fuel risk assets, including crypto.

The macro investor also said the Global Liquidity Index, which tracks money flowing through major economies, is already turning higher. Pal described the latest decline in the crypto market as noise caused by sentiment.

According to him, liquidity is the force behind long-term value, and a rise in this factor is more significant than panic in the short term. According to the investor, such circumstances were experienced in 2020 and 2022 in the run-up to big rallies.

As Raoul Pal pointed out, the dollar continues to weaken, and this tends to favor crypto prices. He remarked that a weaker dollar would enhance liquidity in the world and lower any emerging market pressure.

He also predicts a reduction in the Federal Reserve rates within the next few months. Pal mentioned that a challenging year can be made better with favorable monetary policy, which will encourage risk-taking.

Crypto is Near a Major Turning Point

Raoul Pal believes investors should focus on the bigger cycle in the crypto market rather than day-to-day swings. He said the crypto market moves in powerful waves linked to liquidity expansion.

The investor described the current decline as the final clearing event before money returns to the system. He added that this moment often creates strong buying conditions for long-term holders.

He also pointed to progress on the CLARITY Act, which aims to create regulatory rules for digital assets. Raoul Pal said regulatory progress will help institutions enter the crypto market once liquidity improves.

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