Zinger Key Points
- Crypto outperforms tech with positive liquidity cycle turn, but trading altcoins outside top 10 could be risky.
- Raoul Pal advises focusing on established cryptocurrencies like Bitcoin, Ethereum and possibly Solana for safer investment gains.
- Get Monthly Picks of Market's Fastest Movers
Former Goldman Sachs executive Raoul Pal shared insights about the business cycle's impact on various asset classes, including cryptocurrencies, emphasizing the risks associated with trading altcoins outside the top 10.
In a series of tweets, Pal presented "Raoul's Easy Guide to the Business Cycle," outlining the relationship between the ISM Index and GDP growth.
He noted the current ISM levels suggest low GDP growth for the fourth quarter and first quarter, affecting cyclical stocks, the Russell 2000 (RTY), and commodities.
Looking ahead, Pal's lead indicator for ISM has been rising sharply, which typically benefits the S&P 500 (SPX), a mix of cyclical and growth stocks.
This rise explained the SPX's strength compared to RTY or commodities.
Further into the future, using the GMI Financial Conditions Index, Pal predicted a strong year in 2024.
Growth assets like the NASDAQ (NDX) and cryptocurrencies, which tend to bottom out earlier in the cycle, are poised for recovery.
Extending his analysis to the end of 2025 using the "Everything Code" framework, Pal foresaw good economic growth on the upside of the business cycle.
He highlighted that global liquidity, a crucial factor in this framework, was expected to rise, driving asset growth.
Pal emphasized the importance of investing in "the fastest horses" or the secular trending assets during these times. He identified technology, specifically the Exponential Age and cryptocurrency, referred to as the "Super Massive Black Hole," as key areas of focus.
Also Read: Analyst Predicts This Altcoin Set To Outshine Bitcoin
He noted crypto tended to outperform tech as the liquidity cycle turned positive.
However, Pal issued a caution regarding altcoins.
While altcoins begin to outperform Bitcoin BTC/USD for the remainder of the cycle, he warned trading altcoins outside the top 10 is challenging and carries significant risk.
He suggested that investors can achieve the most gains by holding onto established cryptocurrencies such as Bitcoin, Ethereum ETH/USD, and potentially Solana SOL/USD or other proven projects with adoption.
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