Crypto selloff tied to US liquidity squeeze

The sharp crypto selloff that wiped about $250 billion from total market value over the weekend is being driven by a shortage of US liquidity rather than any crypto-specific weakness, according to analyst Raoul Pal.

Pal, founder of Global Macro Investor, said Bitcoin’s decline mirrors losses in software-as-a-service stocks, undermining claims that the crypto cycle is broken.

“The big narrative is that BTC and crypto are broken,”

Pal said, adding that the parallel selloff in SaaS stocks shows the real driver is macro liquidity, not problems unique to digital assets.

He said both Bitcoin and SaaS stocks are long-duration assets sensitive to interest rates and liquidity, meaning they tend to fall together when financial conditions tighten.

Pal argued that gold’s rally has absorbed marginal liquidity that would otherwise have flowed into riskier assets such as crypto and growth stocks, leaving insufficient capital to support all markets.

He also pointed to US government shutdowns and Treasury cash rebuilding as additional liquidity drains, noting that the Federal Reserve’s reverse repo facility no longer provides an offset.