Fear has taken hold in the crypto markets.

I’m watching even some vets — the “HODLERs” — get shaken out.

Long-time crypto trader Tone Vays suggested a critical low is coming for Bitcoin.

Another crypto analyst, Capo, told his 270,000 Twitter followers that Ethereum looks like it could drop another 50%.

The NFT market appears to have fallen off a cliff, with several mainstream pundits pronouncing it “dead.”

Maybe I’ve been hardened over the years by my fair share of whiplashing crypto cycles, but I haven’t lost a millisecond of sleep lately.

Our long-term crypto thesis laid out in the Big Book of Crypto remains intact.

Nevertheless, the big question on everyone’s minds: Are we headed for a prolonged “crypto winter?”

While some mainstream pundits are nodding yes…

Raoul Pal, former Goldman Sachs executive, has a much different take, even in the short term: You should be a buyer in this market, not a seller.

Citing historical data comparing crypto adoption rates versus the early days of the Internet, he wrote:

“Crypto adoption is now massively outperforming the internet. It’s been growing at about 165% a year versus 85% for the internet for the same period of time now. This is the fastest adoption of any technology in all human history.”

But that’s just the beginning.

Before we dive deeper, Pal admits that times are rough:

“We are in an extraordinarily complex world right now, where we're seeing supply shocks that we haven't seen since possibly World War II, or certainly since the 1970s. We've just had a pandemic, and everybody's scrambling to figure out what the hell is going on.”

The Difference Now?

Pal argues that our inflation is nothing like the 70s, which, he argued, was largely driven by demographics. When the Baby Boomers, the largest generational population boom in history, turned 30, there was a demand shock.

They all rushed out to get their first house, cars, and everything else. We also had supply shocks from the Arab oil embargo in 1973, exacerbating inflation. And then, of course, the Iran crisis in 1979, which was a double-whammy of demand and supply shock.

“This time around,” says Pal, “I think it’s different. This time around, we have a supply shock because the pandemic shut a lot of things down. That was the supply shock of trucking and moving goods around and manufacturing. Factories weren’t open and so you had to bid for higher prices to get stuff.”

And then, of course, “throw in the Russian crisis, the war in Ukraine, and we’ve taken commodities out of the market. It’s created this very heavy mix that is really scary right now for everybody.”

After parsing through a series of graphs — on everything from containers in Long Beach to the rail carloadings to total inventories — Pal believes we’re seeing peak inflation.

Inflation will come lower than the market expects, he says, driven by demand destruction — when prices go higher, they tend to curb demand as people pull back their spending.

How will this affect crypto? Investors should be prepared, he says, to weather a small bear market. But a crypto winter doesn’t seem in the cards.

“If inflation numbers are falling and growth is falling,” he said, “that’s when you want to own crypto.”

Pal ended with this:

“This is one of the greatest macro markets of all time. There are some great opportunities coming out of it.”

When Adoption?

James and I have our sights set on real-world adoption.

With Ethereum 2.0 in the cards this year, the adoption phase could be closer than most think.

In fact, for many, this slowdown could be a blessing — it might be the last big opportunity to get in.

James and I have been preparing Early Stage Crypto Investors for the inevitable adoption phase of crypto for months. In total, we have 15 crypto recommendations in our portfolio — and a new pick coming each month. (Last month, we recommended two.)

If you’ve been sitting on the fence, now might be the best time to become a member.

Click here to see if ESC is right for you.

Chris Campbell
For Altucher Confidential