Macro guru Raoul Pal says that the crypto asset space is currently experiencing a massive stress test typical of new and emerging markets.
The former Goldman Sachs executive tells his 876,000 Twitter followers that while the crypto markets currently look rough, the architecture of the underlying technology that drives cryptocurrencies is running smoothly despite the downward pressure.
“So, we are in the midst of a decent stress test, similar to last year. Outside of some new chains clogging and the partial Maker (MKR) liquidation, any issues? Or all running relatively smooth in DeFi and elsewhere? That is the important thing to me here…”
Pal is referring to a recent liquidation within MakerDAO (decentralized autonomous organization), which ultimately ended up being less severe than originally thought.
The Real Vision CEO compares Bitcoin’s volatility to that of tech giant Amazon in its early days. He shows similarities in the chart patterns of Bitcoin today versus Amazon in 2010.
“Remember how hard it was to hold onto Amazon? This was post-recovery when rates threatened to rise back in 2010…”
“And here is BTC post-recovery when rates threaten to rise.”
Amazon (AMZN) has rallied 3,330% since 2010, reaching an all-time high of $3,773 in 2021.
In a recent episode of Real Vision Finance, the investor says that macroeconomic factors are dragging down the crypto markets and that more downside is possible for both equities and digital assets.
However, Pal says that cryptocurrencies are likely near the bottom of their correction.
“My view is that markets continue to be volatile for a bit. There’s some more downside to come. If we go back and look at the Nasdaq or Amazon and stuff over that period, we would see these kinds of 20% drawdowns, 15% drawdowns and then the market explodes higher again as the central banks start realizing it can’t raise rates as fast, and then the market does, and then everything stabilizes yet again as things move forward.
That’s kind of my base hypothesis here. Could we have further downside? Could we be forming a head and shoulders top on the Nasdaq? Could that knock through to Bitcoin? Sure. I’ve said for a while now that Bitcoin’s downside is probably $30,000. I think we’re in the kind of buy zone. I’m certainly looking at adding ETH myself here into this area between $2,800 and $2,600.”
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