Macro expert Raoul Pal feels Bitcoin is in a strong buy zone

While things might still worsen, Pal assures his Twitter followers that Bitcoin is reaching a huge “buy zone” over the long term.

 

Why is Pal so bullish on Bitcoin?

“But can things get worse? Absolutely. But for my investment framework, we are in the buy zone…right near the 2 standard deviation log regression channel.”

BTC chart
BTC chart nearing second standard deviation. Source: Raoul Pal/Twitter

According to the former Goldman Sachs executive, two factors suggest that Bitcoin is nearing a reversal or, at the very least, a bottom. He mentions the relative strength index (RSI) and the DeMark indicator, which use a mathematical formula to identify price inflection points.

“With the weekly RSI at 31 and the lowest ever at 28, that too suggests the low is within striking distance. Don’t ever expect to nail the low” 

Pak said that as per DeMark’s weekly charts, the low will be next week or in the next five weeks.

“DeMark weekly charts suggest low is next week or in next 5 weeks.” 

DeMark weekly charts
DeMark weekly charts. Source: Raoul Pal/Twitter

 

Pal is long-term bullish on Bitcoin.

Even though indicators are seldom 100% accurate, the macro specialist believes the odds are currently in favor of the bulls. He claims he will deploy more funds next week and next month.

“Can all of these fail? Sure. Can crypto trade sideways for a year or two? Sure, but we are in the probability game, not the certainty game. I am comfortable with the odds and it plays exactly into my framework, just as it did in March 2020.

I am getting ready to add to my crypto positions significantly. Probably starting next week and into July.”

Pal’s revised view strengthens his long-term bullish attitude on cryptocurrency. He revealed late last year that he had “irresponsibly long” Ethereum (ETH) bets that were larger than anything else in his career.

 

How to handle drawdowns?

Pal talked about his experience with drawdowns citing an example from 2014. He says that one should invest if they have a long-term investment perspective and have some spare money they might not need urgently.

“Having worn an 82% drawdown in 2014 and then 10x upside after, I know how it feels only too well. But it should feel like opportunity if you have a long time horizon, don’t need the capital and can stomach larger losses without flinching (much).”

Pal also talked about a key metric of five year exponential moving average. As per him, Bitcoin always respects this key metric, and a bounce is imminent. 

“In fact, the best way to optimize returns is to add significantly when the market tests the key trend. I use the 5-year Exponential Moving Average for this. It hasn’t spent longer than a month or so below it ever…”

 

Pal’s thoughts on taking leverage while investing in volatile assets

Pal also warns about taking leverage in volatile assets(like Bitcoin and other crypto tokens). 

“Leverage is your enemy in a volatile asset. I never use leverage in crypto. Waves of margin calls are hitting those silly enough to use it and that is forcing the markets lower and causing more margin calls… This is not just a crypto thing. All collateral is being liquidated.”