A weakening US dollar could help extend crypto's rally by allowing liquidity to flow more freely into the sector, according to Real Vision founder Raoul Pal. He told Cointelegraph that higher bond yields and a strong dollar have been restraining capital movement, but dollar weakness would provide favorable conditions for continued crypto gains.
"If they can engineer the dollar lower, then we get a green light for further movement in crypto," Pal said. The US Dollar Index has been trading at year-high levels, currently limiting the liquidity available to digital assets.
AI Pauses Drive Capital Rotation
Pal identified capital rotation between AI stocks and crypto as a key dynamic. Between August 19 and 25, Bitcoin rose approximately 25% to $80,000 during a period when Nvidia, a key AI bellwether stock, recorded seven consecutive losing sessions. Pauses in the AI trade have allowed funds to move into crypto.
Pal's preferred scenario remains a weaker dollar combined with a steeper yield curve and expanded lending by banks. However, borrowing costs have risen, with the US 10-year Treasury yield climbing to 5.29% in September and the Federal Reserve raising its benchmark rate by a quarter-point.
If ideal conditions do not materialize, Pal's "second best scenario" would be AI stocks trading sideways, which would allow capital to continue rotating into crypto.
Ethereum and Solana Stand to Gain From AI Agents
AI agents now have the ability to pay for web content using stablecoins through a feature Amazon Web Services introduced in June. Coinbase handles payment verification and settlement through its x402 protocol, with USDC on Base among supported payment options.
Pal said AI agents could eventually raise operating funds by issuing tokens and using smart contracts on Ethereum and Solana to transact. "My guess is they'll get more adoption over time as AI uses them," he said. Bitcoin, by contrast, is likely to miss much of the economic activity generated by AI agents.
Solana's Path to Ethereum Parity Remains Uncertain
While Pal expressed enthusiasm for both Solana and Ethereum, he cautioned against predictions that Solana's market capitalization will surpass Ethereum's this market cycle. Ethereum's greater concentration of capital makes such a scenario less likely, despite Solana's higher user activity.
Solana recorded approximately 3.2 million active addresses over a 24-hour period on Monday, compared with Ethereum's 387,000 active addresses, according to DefiLlama. However, Ethereum hosts approximately $54.4 billion in decentralized finance protocols, far ahead of Solana's $6.7 billion. Pal characterized Solana's core activity as "speculation" involving smaller transaction sizes.
Pal noted he has stopped providing public price targets, saying his forecasts are often clipped and recirculated online.
