Cryptocurrency markets poised to benefit from AI sector rotation, says Raoul Pal

Cryptocurrency markets poised to benefit from AI sector rotation, says Raoul Pal

According to Real Vision's Raoul Pal, cryptocurrency markets stand to gain as AI stocks take a breather, with AI agents expected to drive increased usage of Ethereum and Solana platforms.

According to Real Vision founder Raoul Pal, a declining US dollar has the potential to provide crypto with the "green light" necessary to sustain the industry's ongoing rally.

In an interview with Cointelegraph for the latest Trade Secrets episode, he explains that elevated bond yields coupled with a robust dollar are preventing liquidity from circulating freely throughout the market.

"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."

Nevertheless, he maintains that Bitcoin is unlikely to capture the majority of crypto-related economic activity produced by AI agents, with that activity more likely to benefit smart contract platforms such as Ethereum and Solana.

Among high-profile crypto analysts, Pal stands out as one of the most seasoned professionals, having previously worked in hedge fund sales at Goldman Sachs throughout Europe and served as co-manager of a global macro fund at GLG Partners. He established the research platform Global Macro Investor in 2005 and went on to co-found the financial media company Real Vision in 2014.

According to Pal, his initial Bitcoin purchase occurred in 2013, following his application of a valuation framework based on gold to the cryptocurrency.

An AI pause could help crypto catch up

The recovery phase of Bitcoin's cycle arguably occurred between Aug. 19 and Aug. 25, during which BTC increased approximately 25% to reach $80,000. Notably, during this same timeframe, Nvidia, the AI bellwether stock, experienced seven consecutive days of losses.

According to Pal, periods when the AI trade takes a pause have created opportunities for capital to shift into cryptocurrency markets.

"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.

Although AI has been in competition with crypto for available capital, a collapse in AI stocks would not be a welcome development, as such a bubble burst would signal that liquidity is being "sucked out of the system," while simultaneously threatening the favorable conditions that crypto requires to appreciate.

"Things don't go bust if liquidity is plentiful," Pal says.

His ideal scenario would involve a weakening dollar, a yield curve that steepens, and banking institutions expanding the money supply by increasing their lending activities.

Nevertheless, the cost of borrowing has been trending upward. During September, the US 10-year Treasury yield rose to 5.29%, while the Fed implemented a quarter-point increase to its benchmark rate.

Should those optimal conditions fail to emerge, Pal's "second best scenario" involves AI stocks moving sideways, a situation that would enable capital to flow into cryptocurrency markets.

AI agents could bring more business to Ethereum and Solana

AI agents now have the capability to pay for web content access using stablecoins, thanks to a feature that Amazon Web Services rolled out in June. Payment verification and settlement are managed by Coinbase through its x402 protocol, with USDC on Base included among the supported payment methods.

Pal envisions a future where agents could secure the capital necessary for their operations by issuing tokens to finance projects with varying durations—"a week, a month, a year"—before executing the work and delivering returns.

According to him, Ethereum and Solana stand to benefit from increased activity as software applications utilize their smart contracts for transactions.

"My guess is they'll get more adoption over time as AI uses them," he says.

Solana needs more than activity to overtake Ethereum

The greater concentration of capital within Ethereum makes Pal skeptical about assertions that Solana will surpass it in market valuation, notwithstanding his positive outlook for both blockchain networks.

During a Trade Secrets appearance last month, Multicoin Capital co-founder Kyle Samani made the prediction that SOL would exceed Ether's market capitalization "this market cycle."

Samani "needs to hold his horses a little bit," Pal says, even though he acknowledged that it is possible.

The two networks lead each other on various metrics. On Monday, Solana registered approximately 3.2 million active addresses during the previous 24 hours, while Ethereum recorded 387,000, based on DefiLlama data. However, Ethereum holds roughly $54.4 billion in decentralized finance protocols, significantly outpacing Solana's $6.7 billion.

Pal evaluates the networks using a metric he refers to as "economic density," calculated by dividing total value locked by the number of active users. According to his analysis, Ethereum draws more capital in proportion to its user base, while Solana's activity consists of smaller transaction amounts.

"Solana's core activity is speculation," he says. "It's just smaller clip sizes."

Pal explains that he has discontinued providing public price predictions because his forecasts tend to be extracted and shared repeatedly across the internet. He characterizes the concept of million-dollar Bitcoin by 2030 as a "meme" that represents increasing adoption, ETF interest and Bitcoin's application as collateral.

"Does it make a million bucks? I don't know, but certainly by 2032, yeah, I don't have an issue with that."