Amid the ongoing devaluation of fiat and the prolonged banking crisis, cryptocurrency will outpace other asset classes. This was stated by former Goldman Sachs executive and macro investor Raoul Pal.
MOAR COWBELL AS ANOTHER ONE BITES THE DUST…
Well, it looks like $FRC will bite the dust this weekend, either ending up in the hands of the FDIC or a major bank (with FDIC/Fed support).
In an over leveraged world, where GDP isn’t growing fast enough to pay the interest on the…
— Raoul Pal (@RaoulGMI) April 29, 2023
The view was voiced against the backdrop of the California-based First Republic Bank (FRB). The institution’s problems began with collapse of Silicon Valley Bank, and after the publication of its first-quarter report, its share price declined. According to documents, deposits for January–March decreased from $176.4 billion to $104.5 billion.
In a tweet on 29 April, Pal outlined three possible developments: FRB would collapse, or come under the control of FDIC or another large bank.
On May 1, the regulator объявил the closure of First Republic Bank. It was placed under external management by the corporation. Deposits and other assets will be acquired by JPMorgan Chase Bank.
As of writing, First Republic Bank’s securities traded at $3.51, down 74.75% for the week.
According to Pal, in the face of an impending collapse, the Fed will commence a new round of dollar printing to service the country’s external debt.
“In a world of excessive indebtedness, where GDP grows too slowly to service government and private-sector debt, the interest payments are pushed onto the Fed’s balance sheet and magically never paid back,” the macro-investor explained.
However, in his view, tech stocks and “high-quality cryptocurrency” are the only assets that can survive the expected devaluation of the currency.
“Digital assets have the highest beta on the balance sheets of global central banks. Not real estate, not gold, not the SPX, not bonds, not emerging-market equities. All of them depend on central banks’ balance sheets or worse,” Pal said.
He also noted that Bitcoin was literally designed for such circumstances, while Ethereum provides additional tools to increase yield.
Earlier this April, Gemini co-founder Cameron Winklevoss accused US regulators of hypocrisy during the First Republic Bank crisis. In his view, if this had been a crypto-friendly bank, it would have been killed weeks ago.