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The shaky macroeconomic environment of 2022, which included rising inflation, made central banks hike interest rates, which in turn exacerbated the bear market in cryptocurrencies.

Raoul Pal, a former executive at Goldman Sachs, predicts that when macroeconomic conditions improve, risk-on assets like cryptocurrencies and stocks would experience a surge.

In a new edition of the Global Macro Investor newsletter, Pal said that Bitcoin (BTC) is primarily influenced by the available money supply (Global M2) in the global financial system.

“Paul Tudor Jones once said, when the money taps are back on you want to back the fastest horse. In the case of 2020/2021 he was referring to Bitcoin. This time, it will be crypto overall. a chart of BTC vs Global M2. Notice anything strange? Yes, we can’t scale the top of the chart because when M2 goes up considerably, Bitcoin goes EXPONENTIAL.”

According to Pal, the situation is not as serious as most people think. The macro expert claims that risky investments like stocks and cryptocurrencies will still be profitable even if the Federal Reserve keeps raising interest rates.

“Higher rates are not a barrier for technology or the larger market, so I really don’t care whether they remain at, say, 3% (which I don’t think they do).”

Conclusion

The price of Bitcoin had been steady for a long time prior to the FTX collapse which shocked the entire market. Since last Wednesday, when Bitcoin (BTC) initially surpassed $17,000, not much has changed for the cryptocurrency market as the price activity has been sideways.

The fact that investors have moved their money out of high-risk assets like Bitcoin in such a situation is not surprising. But as Bitcoin has often proven, it is resilient, and there is a significant probability that it will rebound in the future.