Raoul Pal states that the current crypto correction is not merely another dip, but a textbook example of rapid deleveraging, liquidity stress, and forced unwinds. In a detailed breakdown, he describes the last six weeks as "utterly brutal," characterized by relentless liquidations and rumors that market makers weakened after the October 10 shock, causing liquidity to evaporate almost overnight.
Pal emphasizes that nothing materially bearish has changed in the macro environment. Instead, the sell-off feels mechanical, similar to past periods when positioning became overstretched and markets were blindsided by sudden balance-sheet stress.
The Chart That Puts It All in Perspective
The long-term Bitcoin chart he references highlights a clear historical pattern: bull markets always include violent corrections, often far larger than most investors expect. Across previous cycles:
- •In 2021, Bitcoin fell 56% in four weeks, ETH plunged 62%, and SOL collapsed 68%, then everything ripped to new highs shortly after.
- •From 2019–2020, Bitcoin endured a 72% sell-off, amplified by COVID-era panic.
- •In 2016–2017, there were seven separate drawdowns of 30%+ during a roaring bull market.
- •Across all cycles, altcoins consistently fall harder than BTC during fast resets.
The chart underscores one theme: major pullbacks are not only normal, they are integral to Bitcoin’s long-term trend structure.
Why This Drop Feels So Intense
Pal notes that this latest reset is happening despite a highly supportive macro backdrop. That mismatch, strong macro and weak crypto, suggests the driver isn’t fundamentals but positioning and leverage.
He points to:
- •Impaired market-maker balance sheets after 10/10.
- •Sudden drops in liquidity across major venues.
- •Someone "likely blowing up."
- •Cascading forced selling.
- •Emotional exhaustion among traders.
In his view, this situation mirrors earlier cycle resets that looked terrifying at the time but ultimately cleared the path for the next leg higher.
"Massively Oversold" But No Signs of Letting Up Yet
Pal says the market is deeply oversold, but capitulation waves don’t reverse on a schedule. Historically, these phases end suddenly, without warning, once leverage is fully flushed from the system.
His personal strategy involves continuing to add during severe sell-offs while accepting big swings in short-term P&L. However, he stresses that everyone’s time horizon is different, and the stress of a rapid de-risking event can overwhelm even seasoned investors.
The Bottom Line
Pal’s message is simple: the current drawdown looks dramatic, but it fits perfectly inside Bitcoin’s long-term cycle behaviour. Big bull markets always include violent resets, and this one is no different.
His final advice:
Stay grounded, avoid the noise, and recognize that extreme downside volatility is part of the same trend that produces extraordinary upside.