In a thread on This period, according to Pal, is not just a fleeting season but an important phase in the financial and cryptocurrency markets, deeply rooted in the cyclical nature of the global economy.
Why macro/crypto summer matters
Pal develops the concept of the “Macro Summer”, explaining it as a pivotal phase of “The Everything Code” cycle, closely tracking the Financial Conditions Index, which historically precedes the cycle by around ten months. The ISM (Institute for Supply Management) index, a key indicator of economic health, often reaches its lowest during this period, marking the start of GDP growth.
Pal's thesis draws attention to the “near-perfect 3.5-year cyclicality” of the ISM business cycle, propelled by liquidity dynamics and the debt refinancing cycle at its core. He highlights the importance of liquidity: “And this is driven by liquidity, which has bottomed out at the end of 2022… the macro summer and fall are focused on increasing liquidity and constitute an essential element of the thesis of The Everything Code. »
This influx of liquidity is crucial for technology stocks, which historically thrive during these phases. However, it is Bitcoin and, more broadly, the cryptocurrency market that presents the most spectacular reactions. Pal presents staggering growth figures from the last summer and fall macro seasons to underline his point:
- Bitcoin: Saw increases of “2012/2013: +146x, 2016/2017: +30x, 2020/2021: +8x…”
- Ethereum: As an altcoin during the 2016/2017 and 2020/2021 cycles, it reached “2016/2017: +1,770x, 2020/2021: +41x”.
- Altcoins (excluding ETH): We have seen an overall increase in market capitalization of “+24x” over the last cycle.
“Wild! If we just look at ex-ETH Altcoins (we only have shorter data for the last cycle), the total market cap increased by +24! And that includes thousands of worthless tokens that haven't increased, so I'm not just picking winners here,” Pal remarked.
DOGE, a popular meme coin, is mentioned by the expert as another great example of the “power of crypto summer and fall,” with its value experiencing significant multipliers – “2016/2017: +136x, 2020/2021: +370x” – in the cycles mentioned above.
These figures highlight the significant influence of macroeconomic cycles on cryptocurrency valuations, with Pal highlighting the alignment of these cycles with Bitcoin halving events. “The crypto summer has started and is fully developing after the halving,” he says, emphasizing the interconnectedness of these cycles with the broader financial landscape.
Notably, Pal’s analysis does not stop at the past; it looks ahead, suggesting that liquidity is expected to increase through the end of 2025. This anticipation is rooted in a complex interplay of global financial mechanisms, including the potential for increased money printing in the United States. United in response to a massive acceleration in money production. interest payments and changes in Fed Net Liquidity and Treasury General Account (TGA).
“Will the United States Join the Summer Party?”. (…) I know it seems impossible now, but the United States is about to massively increase interest payments. (…) at some point the balance sheet will stop shrinking, which is enough to release liquidity into the system. (…) I don't see how they wouldn't massively increase liquidity, one way or another.
At the same time, Pal predicts that the United States will not be alone in injecting liquidity into financial systems in the coming months. “I don't know if it's China, the EU, Japan or the US that is behind all this, or maybe a little bit of all of this. Time will tell,” he remarked.
Pal attributes his investment strategies, particularly in technology and crypto, to the knowledge gained from The Everything Code. This approach has prepared him for the Macro Summer that is unfolding, with a keen eye on the altcoin market and the so-called “Banana Zone.” He concludes :
But the biggest game remains to be played as Alt Season arrives and we fully enter the Banana Zone. The Banana Zone is coming, and it's a huge wealth-generating machine. Patience will be rewarded. In the meantime, don’t screw this up. #DFTU
At press time, BTC was trading at $67,003.
Featured image from Shutterstock, chart from TradingView.com
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