Cryptocurrency will outperform other asset classes due to the continued depreciation of fiat and the protracted banking crisis. Former Goldman Sachs top manager and macro investor Raul Pal said.
This opinion was expressed by the expert against the background of the situation with California’s First Republic Bank (FRB). The problems of the institution began with the collapse of Silicon Valley Bank, and after the publication of the report for the first quarter, the fall of its shares accelerated. According to documents, deposits fell from $176.4 billion to $104.5 billion at the end of January-March.
In an April 29 tweet, Pal allowed for three developments: either FRB would collapse or be controlled by the FDIC or another major bank.
On May 1, the regulator announced the closure of First Republic Bank. It went under the external management of the corporation. Deposits and other assets will be purchased by JPMorgan Chase Bank.
At the time of writing, First Republic Bank securities are trading at $3.51, down 74.75% for the week.
According to Pala, amid the impending collapse, the Fed will begin a new round of printing dollars to pay off the country’s foreign debt.
“In an over-leveraged world where GDP is not growing fast enough to pay the interest on government and private sector debt, interest payments are transferred to the Fed’s balance sheet and magically never come back,” explained the macro investor.
However, in his view, tech stocks and “high-quality cryptocurrency” are the only assets that can survive the projected currency depreciation.
“Digital assets have the highest beta on the balance sheets of the world’s central banks. Not real estate, not gold, not SPX, not bonds, not emerging market stocks. They all depend on central bank balance sheets or worse,” Pal said.
He also noted that bitcoin is “literally invented for such cases,” while Ethereum provides additional tools to increase returns.