$50 billion Bitcoin ETF Inflow: Pal, Zeberg and Neuner Discuss Launch and Economic Outlook

By Aaron Feuerstein January 15, 2024 In Bitcoin, ETF
  • In discussing the Bitcoin ETF Launch, Raoul Pal and Ran Neuner suggest not to worry about initial market reactions at these early stages.
  • Henrik Zeberg predicts an impending recession driven by misplaced optimism and a fragile labour market, anticipating a complex cycle of deflation, market bounce, and stagnation.
  • Raoul Pal, contrasting that outlook, believes the economy is stabilising, evidenced by indicators like the housing market and ISM survey, and downplays the risk of a systemic recession.

Why Not to Worry About the Early Days

Crypto Banter’s Ran Neuner interviewed macro analysts and trading legends Raoul Pal and Henrik Zeberg about the Bitcoin ETF Launch. Neuner made some calculations beforehand and showed that despite initial reactions – assuming almost USD $5bn (AUD 7.5bn) in inflows – the launch was far from a success.

Spot Bitcoin ETF Volumes, source: Ran Neuner/ YouTube

Neuner argued that in net terms there was an outflow out of Bitcoin, with more people selling Bitcoin in Grayscale’s GBTC, which has higher fees than any of the recently listed ETFs. However, despite the title of the video (Bitcoin ETF Launch Disaster), Neuner said he doesn’t think this is a bad thing and that the ETFs shouldn’t be judged based on their first few trading days.

Raoul Pal agreed and stated that he believes it is all about time frames.

Let’s not worry what happens in the first week, two weeks, three weeks.

Raoul Pal

Pal likens the ETF listing to an IPO (initial public offering), comparing early ETF investors to seed investors in an IPO.


Pal and Zeberg Don’t Agree on Macro Outlook

When it comes to the business cycle both traders hold opposing views. While Zeberg believes a recession is coming, Pal doesn’t think that will be the case.

Zeberg believes that the prevailing optimism in the financial markets, driven by the narrative of a ‘soft landing’ from current economic challenges, is misplaced. He points out that historical indicators, which have been accurate for over a century and even predicted the impact of the COVID-19 pandemic, suggest that we are being overly optimistic about the effects of liquidity in the markets.

The only reason why we haven’t seen the recession so far as I see it is because of the labour market in the US. And the thing is, after Corona, you had all this stimulus coming out and every company around the world was doing fantastic.

Henrik Zeberg

However, as demand hasn’t returned as expected, layoffs have been postponed, resulting in a temporarily strong labour market.

Zeberg predicts a complex economic scenario: initially, a deflationary bust countered by an influx of liquidity leading to a market bounce. However, this will be followed by a phase of stagnation, creating a more challenging economic environment. He suggests that the coming economic phase will be difficult to manage, even with increased liquidity.

Pal’s Thesis 180° Opposite to Zeberg

Pal disagrees with Zeberg’s pessimistic view of the economic situation. He points out that the housing market, which Zeberg cites as a key concern, has actually stabilised. The year-on-year rate of change in housing is showing signs of recovery, and with fixed-rate mortgages dominating the market, he sees less risk in this area.

Pal uses the ISM (Institute for Supply Management) survey as a key indicator for assessing the business cycle. He notes that this survey, dating back to 1947, along with the Treasury survey going back to 1870, provides a reliable gauge of economic trends.

He questions whether there’s a systemic shock that could disrupt the economic cycle beyond what the Federal Reserve’s liquidity measures can address. Pal argues that the business cycle is likely to strengthen moving forward. He believes that any potential recession was already factored into growth assets in 2022 and that in 2023, this adjustment has extended to assets like the Russell 2000 and cyclicals, which he expects to continue rising.

The forward-looking indicator stuff like ISM, new orders, orders to inventories has been rising. That’s always signalled the bottom, the new orders has always been signalled the bottom. So I’m pretty sanguine about the risk of something larger happening here that could derail the economy.

Raoul Pal

Aaron Feuerstein

Aaron Feuerstein

Aaron Feuerstein is a freelance writer based in Melbourne. His focus is on decentralised finance and the regulatory space surrounding blockchain. He holds a Master's in Accounting. When he is not studying the latest legal case, he enjoys his time as a modest but eager hobby cook.

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