Macro guru Raoul Pal describes “very optimistic” outlook on Ethereum and crypto markets in terms of merger approaches

Former Goldman Sachs manager Raoul Pal says he is very bullish on Ethereum (ETH) and the crypto markets, despite the uncertain price action that has unfolded over the past few months.

In a new interview with crypto analyst Scott Melker, Pal says that crypto hedge funds, which have suffered big losses during the recent market turmoil, have been underweight ETH as The Merge – Ethereum’s transition to a proof-of-stake consensus mechanism – nears moves.

The Real Vision founder says markets are taking the most painful path, and for ETH that means up at the moment.

“I think everyone still underweighted The Merge. People will get into the merge or post-merge, we’ll get that spike [and] We will likely get a pullback. A lot of people will say, “See, it’s going back to bottom.” I suspect it corrects sideways, does something, goes back into range a little bit, and then we explode higher.

So I’m very optimistic at the moment. We’re almost overbought in the near term, but I think we just had a correction and I guess we’re going again. It is fascinating to see how the futures and futures markets are hedging the ETH merger risk that if you buy ETH now and sell futures someone will eventually remove that hedging.

I find this setup really interesting and know that crypto hedge funds are all underweight because they’ve all been beaten up so badly. So they bought calls to have something on The Merge so they don’t get beaten up by their investors. So when you see this kind of setup, the path of pain is even higher.

The macro guru says crypto’s relative underperformance this year is due to an unexpected tightening of central bank liquidity, which he has predicted will change.

“From my point of view…I think the macro is the big thing that actually surprised most of us. Not that we were surprised by the macro, but the impact it is having on crypto. First, when real wages are negative, people have less money compared to the average dollar cost. It is still an investment market for private investors. So the other thing is that central bank liquidity is being withdrawn and if you look at the yearly charts of M2 versus Bitcoin they are basically the same. It tells you that when money comes out of the system, there is less money.”

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