Bitcoin Drops Below $100K, Raoul Pal Says “Liquidity Flood” Will Spark Crypto Rally

Bitcoin has slipped below the $100,000 mark, signaling a significant shift in market sentiment. The fall has dragged the Fear & Greed Index down to 23, indicating extreme fear in the market. Despite widespread concern, Raoul Pal, founder of Global Macro Investor, offers a contrasting perspective. He sees this downturn as a potential prelude to a transformative global liquidity surge over the next year.

In a recent post, Raoul Pal highlighted that the U.S. government shutdown has triggered a notable liquidity squeeze. The Treasury General Account (TGA) has accumulated cash, which remains unspent, effectively draining liquidity from the financial system. Adding to the issue, the Federal Reserve’s quantitative tightening (QT) is still active, and the reverse repo facility, a key liquidity buffer, is already depleted. These conditions have heavily impacted the market, particularly crypto, which is highly liquidity-dependent.

Meanwhile, traditional finance managers are underperforming benchmarks, though tech stocks have fared slightly better due to consistent 401(k) inflows.

Pal suggests that once the U.S. government shutdown ends, a reversal in liquidity trends is likely:

• $250–350 billion in Treasury spending could flood the financial system.
• Quantitative tightening may conclude, potentially expanding the Fed’s balance sheet.
• The U.S. dollar could weaken as global monetary flows increase.
• Possible rate cuts may follow as economic data softens.
• The CLARITY Act might improve regulatory confidence in crypto markets.

Additionally, global factors such as China’s balance sheet expansion and Japan’s yen support are expected to further enhance liquidity.

According to Pal, the GMI Total Liquidity Index, a model tracking money flow across global markets, is nearing a critical uptrend. Historically, such movements have fueled rallies in risk assets like stocks and crypto. Pal emphasizes that liquidity is "the only game in town," forecasting an upcoming rollout of $10 trillion in global debt over the next 12 months. This influx could inject fresh capital into financial markets.

While many analysts focus on short-term price dips, Pal believes in looking ahead to the liquidity narrative as the key driver of the next bull market. As of now, Bitcoin trades near $101,331, marking a 3% decrease in the past 24 hours, with a market capitalization of approximately $2.02 trillion.