Former Goldman Sachs executive Raoul Pal says that a Bitcoin (BTC) bull run will occur when the macroeconomic conditions improve enough to produce a wave of liquidity.
The macro guru tells his 990,400 Twitter followers that Bitcoin’s market will explode exponentially when investors return to the digital asset space.
“When liquidity returns (the biggest driver of institutional allocations), the value of the network should rise, which then brings in more investors (or vice versa – # of investors rising will bring in more investors) which creates a multiplier effect, giving exponential returns.”
Pal says Bitcoin is set up for an explosive rally with the number of active users currently on the network.
“In bear markets, the value transacted goes down but the number of active users remains more elevated (ongoing adoption). When adoption rises (users) x value rises (uses), prices go exponential due to the mathematical multiplier.”
Pal says his Bitcoin model based on Metcalfe’s Law, which states that a network grows in value as the number of users on the network gets bigger, shows that network users have not declined as sharply as in previous down markets.
“Network activity peaked in 2020 and again in 2021 and has been drifting lower. The slow trajectory in decline in network activity is why this liquidity cycle correction in magnitude has so far been less than previous examples thus far.”
He says the number of active users on the network has remained relatively flat but the decline in the current bear market is less than the drop off of active users in the 2019 bear market, showing a wider adoption.
“For the network value to rise from here, we need to see the total value transacted increase or the number of active users increase…
The number of active users is pretty flat on average. Note how big the number of active users was in 2018 and the number who left in 2019.
This bear market is very different as users have remained broadly stable as deeper adoption takes hold vs pure speculation.”
He also says the transfer of value on the Bitcoin network tells a similar story of wider adoption than in years past.
“The total value transacted is down as bigger institutional players remain on the sidelines but on average it has remained around peak 2018 levels.
2018 was a retail boom but 2020 onwards was retail plus institutions, suggesting deeper adoption.”
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