Capital starting to rotate back to crypto from AI: Raoul Pal

A weakening US dollar could give crypto the “green light” and help extend the industry’s rally, says Real Vision founder Raoul Pal.

He tells Cointelegraph on the latest episode of Trade Secrets that higher bond yields and the strong dollar are keeping liquidity from flowing freely.

“If they can engineer the dollar lower, then we get a green light for further movement in crypto,” he says. “I don’t want to get overly excited, so I haven’t got a full green light on everything.”

The US Dollar Index has been trading at the year’s highest levels. Source: TradingView

However he believes Bitcoin will miss out of much of the crypto economic activity generated by AI agents, which is likely to flow to smart contract platforms like Ethereum and Solana.

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Pal is among the most experienced high profile crypto analysts, having worked in hedge fund sales at Goldman Sachs in Europe and co-managed a global macro fund at GLG Partners. He launched the research platform Global Macro Investor in 2005 and co-founded financial media Real Vision in 2014.

Pal says he first bought Bitcoin in 2013, after applying a gold-based valuation framework to the cryptocurrency.

An AI pause could help crypto catch up

Bitcoin’s cycle recovery arguably came between Aug. 19 and Aug. 25 when BTC rose about 25% to $80,000. Interestingly, over that period, AI bellwether stock Nvidia notched up seven consecutive losing sessions.

Pal says pauses in the AI trade have allowed capital to rotate into crypto.

“You can tell there’s this sort of rotation for liquidity that’s around right now, which means it’s not abundant yet,” he says.

Bitcoin rallied while Nvidia shares fell in August. Source: TradingView

While AI has been competing with crypto for funds, an AI crash would be an unwelcome prospect, as a bursting bubble would indicate that liquidity is being “sucked out of the system,” while threatening the conditions crypto needs to rise.

“Things don’t go bust if liquidity is plentiful,” Pal says.

His preferred outcome would be a weaker dollar, a steeper yield curve and banks expanding the money supply through increased lending.

However, borrowing costs have been moving higher. The US 10-year Treasury yield climbed to 5.29% in September, while the Fed raised its benchmark rate by a quarter-point.

If those conditions don’t materialize, Pal’s “second best scenario” is for AI stocks to trade sideways, which would allow capital to rotate into crypto.

AI agents could bring more business to Ethereum and Solana

AI agents can now pay to access web content using stablecoins through a feature that Amazon Web Services introduced in June. Coinbase handles payment verification and settlement through its x402 protocol, with USDC on Base among the supported payment options.