Raoul Pal, a noted macro investor with a focus on market liquidity dynamics, foresees Bitcoin regaining momentum supported by an unprecedented infusion of up to $8 trillion into the global financial system throughout 2026. Speaking in a recent interview, Pal elaborated on the factors that led to the cryptocurrency's lackluster performance in 2025 and detailed why he expects a full recovery for Bitcoin alongside broader growth in the digital asset landscape in the coming year.
According to Pal, the year 2025 held every promise of being exceptionally bullish for Bitcoin, buoyed by an institutional influx and widespread adoption. Contrary to these expectations, however, the price trajectory stalled, and cryptocurrency fell out of favor, becoming metaphorically described as the “really uncool kids at the party.” Pal identifies liquidity constraints rather than shifts in market narratives as the principal driver behind this dismal performance.
He cited a key turning point occurring in July when the U.S. Treasury embarked on a reconstruction of its general account, injecting approximately $700 billion, while concurrently draining funds from the reverse repurchase (repo) facility. This move had the unintended consequence of withdrawing liquidity from riskier assets, including cryptocurrencies, which tend to lie at the far end of the risk spectrum. Further exacerbating the situation was the government shutdown in December, which Pal marks as the definitive blow to market confidence, compounded by renewed tariff threats with China.
Pal emphasizes that liquidity flows explain approximately 90% of market price movements, dismissing other factors as largely noise. His analysis reveals that the U.S. government is faced with a pressing need to generate an astonishing $7 to $8 trillion in new liquidity over the next twelve months, primarily driven by obligations to service existing debt.
Dissecting the sources of this liquidity, Pal points to bank reserve requirement adjustments—specifically the Supplementary Leverage Ratio (SLR) changes—as contributing about $3 to $4 trillion alone. Fiscal stimulus packages are expected to add approximately $1.5 trillion. Meanwhile, balance sheet normalization efforts and drawdowns from the Treasury General Account (TGA) contribute an additional $1 trillion, bringing the baseline total to $5.5 trillion. Should risk weighting requirements be fully eliminated, the cumulative liquidity infusion could surge to $8 trillion.
Looking ahead to 2026, Pal anticipates vigorous economic support from the current U.S. administration, driven by the imperative of securing midterm election victories. Initiatives under consideration include lifting taxes on tips, which would positively impact millions of service sector workers by pumping more disposable income into the economy. Discussions within the administration openly acknowledge the possibility of fiscal dominance—a term Pal notes refers tactfully to currency debasement through expansive monetary and fiscal policies.
In addition to Bitcoin’s prospective rebound, Pal highlights an important narrative shift toward smart contract platforms. He cautions Bitcoin holders fixated on traditional financial market announcements, suggesting that the most meaningful developments will occur in the realm of smart contracts, as opposed to assets used purely as pristine collateral.
Pal references the Depository Trust & Clearing Corporation (DTCC), which projects the tokenization of every global security by the end of 2026. The tokenization process demands blockspace on blockchain networks, thereby increasing utility and value for tokens representing securities. Institutional investors in regions like the Middle East maintain exposure to Bitcoin but remain significantly under-invested in smart contract-based platforms.
He foresees that once these investors recalibrate their strategies to accommodate this narrative shift, demand for leading layer-one platforms such as Ethereum and Solana will escalate sharply. Historical patterns observed by Pal reveal that altcoins typically accelerate following positive data points like an improving Institute for Supply Management (ISM) index. The outlook for 2026 indicates stronger growth fundamentals, implying a rapid and significant upside phase may follow previous corrections.
Pal’s comprehensive liquidity framework and insight into emerging trends underscore a potentially transformative year ahead for cryptocurrencies, contingent on macroeconomic conditions and evolving institutional appetites.