Renowned macro investor Raoul Pal offers a compelling perspective on the current cryptocurrency market cycle, asserting that it is not approaching its zenith but rather embarking on a more robust and prolonged expansion. This significant phase is predicted to extend well into 2026, primarily fueled by an overarching global uptrend in liquidity, intricately linked to the dynamics of government debt. During a specialized “Everything Code” masterclass held on September 25th, co-founder of Real Vision, Pal, alongside Julien Bittel, the head of macro research at Global Macro Investor (GMI), meticulously articulated a comprehensive framework. This framework seamlessly interconnects critical macroeconomic elements such as demographics, government debt levels, systemic liquidity, and the broader business cycle with asset class returns. Within this analytical construct, Pal emphatically argues that both cryptocurrency and technology sectors stand out as the only asset classes inherently structured to consistently outperform what he terms the “hidden debasement” of traditional fiat currencies.
Everything Code: Liquidity as Crypto's Master Switch
Pal posits that the most influential macroeconomic variable currently at play is the consistent, annual 8% increase in liquidity by global governments and central banks, primarily aimed at managing their substantial debt obligations. He draws a clear distinction between this ongoing debasement of currency and conventional inflation metrics, urging investors to evaluate their returns against a “hurdle rate” rather than merely headline inflation figures. Pal cautions that a staggering 11% hurdle rate applies to any investment; consequently, if an investor's portfolio fails to achieve this benchmark, they are, in real terms, experiencing a decline in wealth.
The “Everything Code” model, developed by Pal and Bittel, initiates its analysis with trend GDP, which is defined as the aggregate of population growth, productivity advancements, and debt expansion. In an era characterized by dwindling working-age populations and persistently subdued productivity levels, the burgeoning public debt has emerged as the primary mechanism to bridge this economic gap. This structural shift has inevitably led to an increase in debt-to-GDP ratios, thereby embedding a perpetual need for augmented liquidity within the financial system.
“Demographics are destiny,” Pal emphasizes, drawing attention to a declining labor-force participation rate. GMI's research illustrates a striking correlation, where this decline directly mirrors the relentless ascent of government debt as a proportion of GDP. They contend that the crucial link between these two phenomena is the “liquidity toolkit” – encompassing central bank balance sheets, the Treasury General Account (TGA), reverse repurchase agreements, and various banking-system channels. These tools are systematically deployed in cyclical patterns to finance interest costs that the underlying economy is fundamentally unable to sustain organically. Pal concisely summarizes this enduring challenge, stating, “If trend growth is ~2% and rates are 4%, that gap has to be monetized. It's a story as old as the hills.”
The Domino Effect: Financial Conditions and Crypto Performance
Julien Bittel then elaborates on what he describes as the “dominoes” in this macroeconomic sequence. GMI's proprietary Financial Conditions Index, a sophisticated econometric blend of commodity prices, the US dollar's strength, and interest rates, typically provides a lead indication for total liquidity by approximately three months. Subsequently, total liquidity leads the ISM manufacturing index by about six months. In turn, the ISM index plays a pivotal role in setting the trajectory for corporate earnings, cyclical stocks, and, significantly, crypto beta assets. Bittel highlights the forward-looking nature of their analysis: “Our job is to live in the future. Financial conditions lead the ISM by nine months. Liquidity leads by six. That sequence is what risk markets actually trade.”
Within this intricate sequence, cryptocurrencies are not an anomaly but rather operate as high-beta macro assets. Bittel makes a direct comparison, stating, “Bitcoin is the ISM,” underscoring that the same diffusion-index dynamics that influence small-cap equities, cyclical sectors, crude oil, and emerging markets are equally applicable to leading cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH).
As the economic cycle gains momentum, transitioning from an ISM reading below 50 towards the high-50s, risk appetite progressively shifts along the asset curve. This migration typically begins with capital flowing into Bitcoin, then moving to Ethereum, subsequently into larger alternative Layer 1 blockchains, and only in later stages, venturing into smaller market capitalization assets. This pattern generally coincides with a decline in Bitcoin's dominance. Pal offers a word of caution to investors anticipating an “instant altseason,” explaining that such expectations often run contrary to the actual phasing of the real economy. He advises, “It always goes into the next safest asset first… only when the ISM is really pushing higher and dominance is falling hard do you get the rest.”
The recent period of “sideways chop” in asset prices, they argue, was partly attributable to a substantial rebuild of the Treasury General Account (TGA). This exogenous liquidity drain disproportionately affected the riskier end of the market spectrum. Bittel points out that the $500 billion rate of change since mid-July effectively withdrew significant fuel that would otherwise have supported crypto prices, though he stresses that this drain is now nearing a crucial inflection point. He also highlights DeMark timing signals, which indicate a forthcoming reversal in the TGA's contribution to net liquidity. “That should now reverse and work lower into year-end, which then will drive our liquidity composites higher,” he notes, adding that the People's Bank of China's balance sheet, currently at all-time highs, has partially counteracted some of the liquidity drag from the US.
The Road Ahead: Debt Rollover and Investment Implications
Against this backdrop, Pal and Bittel contend that the upcoming twelve months will be particularly critical for the financial landscape. “We've got $9 trillion of debt to roll over the next 12 months,” Pal reveals, signaling that “This is the 12 months where maximum money printing comes.” Their baseline scenario anticipates policy rates to decrease within a still-subdued but gradually improving economic cycle. Central banks, they suggest, will likely prioritize their lagging mandates, specifically addressing unemployment rates and core services inflation. Concurrently, early-cycle inflation breadth is expected to remain contained. Bittel further dissects the internal sequencing of inflation itself: commodities typically lead, followed by goods, while shelter disinflation mechanically lags. This staggered progression provides central banks with sufficient justification to implement rate cuts even as underlying economic growth begins to accelerate.
The implications for portfolio construction, Pal argues, are profound and necessitate a radical approach. “Diversification is dead. The best thing is hyper-concentration,” he declares, reframing the investment choice not as a preference for volatility but as an essential strategy for arithmetic survival against currency debasement. GMI's long-horizon analyses demonstrate that most traditional asset classes fail to outperform the combined hurdle of debasement and inflation. In stark contrast, the Nasdaq consistently yields excess returns over liquidity, and Bitcoin, in particular, dwarfs both. Pal poses a rhetorical question, “What is the point of owning any other asset?” He concludes that “This is the super-massive black hole of assets, which is why we personally are all-in on crypto… It's the greatest macro trade of all time.”
Bittel overlays Bitcoin's log-regression channel, which Pal refers to as the “network adoption rails,” onto the ISM index to vividly illustrate the dynamic interplay between time and cycle amplitude. The inherent characteristic of adoption steadily elevating price targets over time implies that longer economic cycles naturally lead to higher potential outcomes. He presented illustrative channel levels, linking them to hypothetical ISM prints, to elucidate this mechanism. For instance, if the ISM ascends into the low-50s, potential targets could be in the mid-$200K range, escalating materially higher if the cycle extends towards the low-60s. These figures were explicitly presented not as definitive forecasts but as a strategic map to comprehend how the strength of the economic cycle translates into definable, range-bound fair value bands for Bitcoin.
Macro Liquidity Extends The Crypto Bull Run
Crucially, Pal and Bittel distinguish the present cycle from the 2020–2021 period, during which both liquidity and the ISM peaked in March 2021, prematurely curtailing that bull run. Today, they contend, liquidity is once again accelerating into a critical debt-refinancing window, while the ISM index remains below 50, with forward-looking indicators pointing unequivocally upwards. This confluence of factors is setting the stage for a strong Q4 impulse, reminiscent of 2017's performance, further bolstered by seasonal tailwinds. Importantly, unlike 2017, there is a significantly higher probability that this market strength will extend well into 2026, primarily because the debt refinancing cycle itself has been structurally lengthened. Pal confidently states, “It is extremely unlikely that it tops this year. The ISM just isn't there, and global liquidity isn't either.”
The outlined framework also embeds cryptocurrencies within a broader, secular S-curve adoption model. Pal contrasts the effects of fiat debasement, which inherently inflates asset prices, with GDP-anchored earnings and wages, which characteristically lag behind. This explains why traditional valuation metrics often appear stretched and why owning long-duration, network-effect assets becomes an existential imperative for investors. He estimates crypto's user growth at approximately double that of the internet during a comparable developmental stage and argues that digital tokens uniquely empower investors to own the fundamental infrastructure layer of the next iteration of the web. Regarding total addressable value, Pal applies the same log-trend analytical framework to the entire digital asset market, envisioning a trajectory from roughly $4 trillion today towards a potential $100 trillion by the early 2030s. This projection hinges on the space successfully tracking its “fair value” adoption channel, with Bitcoin ultimately assuming a role analogous to gold within a substantially larger and more complex digital asset stack.
Pal concludes with practical operational guidance aligned with a prolonged, liquidity-driven expansion. He advises investors to maintain consistent exposure to established, large-cap crypto networks, to meticulously avoid excessive leverage that often forces capitulation during routine 20–30% market drawdowns, and, crucially, to align their investment time horizon with the broader macro clock rather than being swayed by fleeting headlines. “We're four percent of the way there,” he remarks, underscoring the early stage of this profound shift. “Your job is to not mess this up.” At the time of this publication, the total cryptocurrency market capitalization stood at $3.67 trillion.
