The post Liquidity Drought Not Crypto Breakdown Behind BTC Drop: Pal appeared on BitcoinEthereumNews.com.

A major market downturn that saw crypto markets lose $250 billion in total capitalization over the weekend is due to a shortage of US liquidity, rather than any crypto-specific problem, argues Raoul Pal, founder and CEO of Global Macro Investor.  “The big narrative is that BTC and crypto are broken. The cycle is over,” Pal said on Sunday, explaining that this can’t be the case because Software as a Service (SaaS) stocks have fallen in tandem.  SaaS stocks and Bitcoin (BTC) have moved in lockstep recently, both dropping significantly, which is notable because both are “long-duration assets,” as their value is based heavily on expected future cash flows and adoption, making them sensitive to liquidity conditions and interest rates, he said. This means the same narrative applies: people say “crypto is dead” and that AI is replacing software firms. It also supports the same common cause, since two completely different asset classes are moving in lockstep, suggesting the real driver is macro liquidity, not sector-specific problems.  “The rally in gold essentially sucked all marginal liquidity out of the system that would have flowed into BTC and SaaS. There was not enough liquidity to support all these assets, so the riskiest got hit.” UBS Saas Index and BTC are highly correlated. Source: Raoul Pal Government shutdowns add to liquidity drain  The temporary US liquidity drain has been exacerbated by the two government shutdowns and “issues with US plumbing.” The Reverse Repo drain was essentially completed in 2024, said Pal.  The Reverse Repo Facility (RRP) is where banks and money market funds park cash overnight at the Federal Reserve. Related: Bitcoin price forecasts tap sub-$50K levels as BTC copies old bear markets Previously, when the US Treasury rebuilt its cash account (TGA), the negative liquidity impact was offset by the draining of…

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Filed under: News - @ February 2, 2026 11:23 pm