Raoul Pal expects the current crypto liquidity cycle could continue into 2027 as governments face large funding needs while companies continue investing in artificial intelligence infrastructure.
The current debt cycle is around 5.8 years old. Under a normal cycle, liquidity would be expected to reach its later stages by the first or second quarter of 2027. However, he believes the current cycle could last longer because government borrowing and AI-related capital spending are creating additional demand for funding.
“The debt cycle is now 5.8 years. That would give us that we should be ramping up the final aspects of liquidity now into Q1, Q2, 2027, and then normally it would stop,” Pal said.
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Raoul Pal Sees Two Major Sources of Liquidity Demand
The current environment is different because governments need to finance their debt while companies are spending heavily on AI infrastructure. He described this as two major funding requirements happening at the same time: government borrowing and the AI capital spending cycle.
“So my guess is it continues,” Pal said. “I do think ahead of us is the increase in liquidity. That has to come to fund this debt.”
Pal also pointed to changes in Treasury financing and the increasing use of short-term debt as part of the broader funding environment. For crypto, his argument is that continued liquidity could provide a more supportive environment for the market.
Pal Says the Dollar Is the Key Chart to Watch
Pal identified the US Dollar Index, or DXY, as the main indicator to watch for signs of another crypto market expansion. He said the dollar needs to turn lower again for his liquidity thesis to become more relevant to crypto.
“If you’re watching one thing, just watch the dollar,” Pal said. “It needs to roll back over and start moving lower. And that’s kind of your signal it’s happening.”
Pal pointed to the DXY moving toward an important area after previously breaking down from a channel. He also discussed the possibility of a larger head-and-shoulders pattern developing on the chart. If the dollar is rejected at the current level and moves back toward its previous lows, Pal believes it could signal stronger liquidity conditions.
Dollar Weakness Could Support Another Crypto Bull Market
Pal connected falling dollar values with previous periods of stronger crypto markets. He said a deeper DXY decline would be important for confirming his outlook.
“If we start seeing DXY breaking down back towards the lows and beyond, okay, the game is really on,” Pal said.
For Pal, the key combination is a weaker dollar and increasing liquidity. He believes both conditions could support another major crypto market move.
AI is a Major Economic Force
Beyond liquidity, Pal expects artificial intelligence to significantly change the global economy. He said AI adoption is developing at a speed that is difficult to compare with previous technologies.
“AI is the most powerful technology we’ve ever discovered. It is the big one. We’ve just created intelligence,” Pal said.
Pal believes the rapid development of AI agents could eventually create a new type of economy in which autonomous systems carry out economic activity with limited human involvement. He expects the impact to become more significant around 2030.
Agentic Economy to Grow
A major part of Pal’s outlook is the development of an economy powered by AI agents. These systems could eventually interact with one another, perform tasks and conduct transactions without requiring a person to initiate every action.
Pal believes this could create an economic system that is difficult to measure through traditional indicators. He also expects AI-driven productivity to potentially result in much faster economic growth during the early 2030s. He sees the emerging agentic economy as potentially larger than the traditional physical economy over time.
US-China AI Competition Could Keep Investment High
Pal also discussed the competition between the US and China in artificial intelligence. He believes neither country can afford to fall significantly behind because AI development is advancing so quickly.
According to Pal, even a relatively short period of falling behind could create a significant gap between the leading countries. He expects this competition to encourage continued spending by governments, companies and AI research laboratories.
Pal Believes AI Could Expand Crypto’s Market
Pal also connects the growth of AI agents with the long-term potential of crypto. As autonomous systems become more common, they could require infrastructure for payments, coordination and transactions. Pal believes this could expand the potential market for crypto beyond its current financial applications.
He argues that the number of potential economic interactions could increase substantially as autonomous agents become part of everyday economic activity.
“The TAM of crypto has gone to infinity and people don’t understand it,” Pal said.
His broader argument is that crypto could eventually serve an economy in which large numbers of autonomous systems interact and conduct transactions.
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