Raoul Pal: U.S. Liquidity Crunch Is Crushing Bitcoin and Tech Stocks

TLDR:

• U.S. Treasury cash rebuilding reduced Bitcoin liquidity and pressured crypto alongside SaaS stocks in recent weeks.
• Bitcoin and the UBS SaaS Index now show nearly identical price behavior under shared liquidity stress.
• Gold absorbed marginal capital flows that otherwise could have supported crypto and tech assets.
• Policy shifts in rates and bank leverage may restore Bitcoin liquidity later in the cycle.

Bitcoin and high-growth tech stocks have moved in near lockstep during the latest market decline. 

New analysis links both drawdowns to tightening U.S. liquidity rather than sector-specific failures. The shift challenges claims that crypto markets face a unique breakdown. 

Data now points to government cash management and funding mechanics as the primary driver.

Bitcoin liquidity tightens as U.S. funding drains hit risk assets

Raoul Pal shared the findings in a public post published through Real Vision and GMI research notes. He compared Bitcoin price action with the UBS SaaS Index and found near-identical chart structures.

The comparison suggested a single macro force at work across both markets. According to Pal, U.S. total liquidity replaced global liquidity as the dominant influence in this phase of the cycle.

Liquidity pressure intensified after the Federal Reserve completed the drawdown of its reverse repo facility in 2024. Treasury then rebuilt its General Account without a monetary offset, creating a net drain.

That drain coincided with weak readings in U.S. manufacturing activity and reduced capital flows into long-duration assets. Bitcoin and SaaS stocks absorbed the sharpest impact due to higher risk profiles.

Pal also pointed to gold’s recent rally as a competing liquidity sink. Capital shifted toward perceived safety while speculative markets faced reduced inflows.

The U.S. government shutdown added another layer of stress. Treasury avoided drawing down reserves after the last shutdown and instead added to the account balance, further restricting available liquidity.

Pal described the period as a temporary air pocket. He argued that the pressure reflects timing rather than a structural breakdown in crypto markets.

Policy expectations reshape Bitcoin liquidity outlook for 2026

Pal rejected claims that incoming Federal Reserve leadership would tighten policy aggressively. He said current expectations misread Kevin Warsh’s long-term stance on growth and rates.

According to Pal, the policy framework mirrors the late 1990s playbook of lower rates and tolerance for higher economic heat. The approach assumes productivity gains from artificial intelligence will limit core inflation.

He also noted that balance sheet reduction has reached system limits. Any sharp reversal would risk destabilizing lending markets.

Future liquidity expansion could come from partial Treasury account drawdowns and changes to bank leverage rules. Pal cited the expected easing of the enhanced supplementary leverage ratio as one key mechanism.

Fiscal stimulus linked to U.S. political cycles may also support broader liquidity conditions. He tied the timing to midterm election incentives and government spending patterns.

Pal acknowledged misjudging the dominance of U.S. liquidity versus global liquidity earlier in the cycle. He said recent conditions clarified which factor now drives Bitcoin and tech assets.

Despite current weakness, he maintained that the broader macro structure remains intact. He framed the downturn as a delay caused by overlapping fiscal and monetary constraints.