CoinMarketCap: What are the Biggest Opportunities in Crypto?

0:00People are going to lose their minds. This is a moment in history unlike anything humanity has gone through. It's a very different world for humans to come. Take a step back and see the broad picture, which is the way all these technologies are interlinked. Because this is all about exponentiality, and humans can't think in exponential terms. How consequential do you want to say machine intelligence is? It's almost certainly as consequential as writing. How long did writing take to disseminate through the human population? You know, hundreds, thousands of years. And we're dealing with it now on a scale of months.

0:33But in this kind of world, you're compounding 100 % growth every year, and the numbers become astronomical. AI is going to spot patterns in the world that were just completely invisible to us. Even if you think that the AI and the robots are your demise, you might as well bloody invest in them and make some money out of it. If not, you're just going to be angry man shaking your fists at the clouds.

1:05it's time to officially kick off another cmc live here on coinmarketcap app what are the biggest opportunities in crypto unveiling everything you should be looking at during the next bull cycle with not only me your host gabriel but also alice liu which is our head of research here on coinmarketcap you guys know her very well already but also role paul alice i mean i think you should be the one voice to ask for introduction for Raul. So first of all, thanks for joining me today in this interview, and then you can pass the word on to Raul. Amazing. Thanks for everyone tuning in today. I'm very excited to have Raul Paul with us.

1:44We have a lot planned for today. So we have three sections. Firstly, we'd like to go through a year-end review, talk about some key events, what's driving the market. The everything code discussion is going to be very interesting as well. Institutional investors, the second part, we will look at different narratives, indicators, trends. And last but not least, I would love to ask Raul in the last section about what are you holding, sir, your portfolio? And also we have some very interesting fire questions as well for you. 100 % Raul. Officially then, now welcome to CMC Live. It's a pleasure to have you here.

2:25We are very much excited for this conversation. Fantastic. I'm excited for it too. 100%. Ro, before we get started, I know a lot of people know you. I mean, a lot of people know Real Vision, know you, know your takes on crypto, etc. But I feel like not a lot of people, and myself, I do not know that. And I'm eager to know your first crypto experience, like how you actually got into crypto, how you heard of crypto the first time. And a little bit, not long story, but a little bit of a background for the people that don't know you. But I'm actually very excited for that story about your first crypto experience that is definitely going to be something for the ages, I guess.

2:58So my story is I was working in finance, working for Goldman Sachs, selling equity derivatives and equities to the world's biggest hedge funds. And I ran that business for many years and then eventually decided to move to Spain and started writing Global Macro Investor, which is my institutional research service, which I've been writing for 19 years. While I was in Spain, I saw the financial crisis coming in 2008. I was very worried about the debt burden in the global economy and the banking system. And I was worried it was going to blow up. And I managed to predict that and actually do quite well out of it.

3:39Then in Europe, we had a second crisis in 2010, 11, 12, which was the European financial crisis where we almost lost not only the banking system in many countries in Europe, from Spain where I was living, to Italy, to Cyprus, to Greece, obviously, but we almost lost governments as well. They almost went bankrupt. And it was over that period, and again, I was lucky enough to forecast that as well, but over that period, I had started to think, okay, what can I do about this? Because people come up to me in the street and said, why don't we know? Why don't we know about this? What can we do about it?

4:17Because now we've realized that everything, that we don't own anything in the financial system. If you were in Cyprus, they took the money from your bank to bail out the bank, from your cash bank account. And so everybody started to realize they owned nothing. And the whole industry, the finance industry realized that nobody owned anything because everything got rehypothicated, re-lent out many, many times in the system. And that was one of the big problems of 2008. So two parts of that journey. In about 2012, I started thinking about, well, how can I help people in their journey? And that was the start of Real Vision.

4:53So we thought, okay, let's bring the world's best analysts, strategists, hedge fund managers, and let them have deep dive conversations and let people listen in. That was the kind of information nobody got at the time. The other side of the equation is I went around the world trying to start the world's safest bank with a bunch of famous hedge fund guys and family offices to try and get a bank that didn't use leverage. But we eventually got told by the US authorities that they didn't want that because it would take all of the deposits from the banking system because everybody else was levered and this would be totally secure, which was quite a shock.

5:32But at the same time, an old friend of mine called Emil Woods, who was a Global Macro Investor subscriber, another ex-Goldman guy, he tapped me on the shoulder and said, have you looked at Bitcoin? So this is 2012. So I wrote the first ever, I saw it and realized immediately that not only was Bitcoin an answer to kind of the system of money and new digital gold, but I also realized that blockchain rails were going to be the rails for the new financial system when it gets built that it had to be built because it was totally broken. And so I wrote the first macroeconomic strategy paper on Bitcoin in 2013.

6:10Nobody had ever written one before. And I started investing in 2013. So it's been a big part of my journey. It's been a big part of Real Vision's journey. And our first ever video in 2014, we talked about Bitcoin and the opportunity it's going to give people in the future. I think it's up 250 ,000 % since that first video. So that's my crypto journey. I was very early. I kind of saw the bigger picture back then. That's my job as a macro guy and have been involved in the space ever since. I would say that you were as early as we can be probably in the space. And definitely sounds like an OG there.

6:46Just like a crazy background. A lot of experience, like in many big places, big names, as you mentioned, for example, Goldman, etc. So I just feel like it adds a lot of experience to what you've been doing and just like know, I mean, how much you're into crypto and stuff. just like for the people that don't have a financial background that are just getting started and get a feel for crypto, it helped them, I think, to just see that are very, I mean, a lot of people that are very much into the markets way before them that are still here and that are very well succeeded, not just into crypto, but also doing other stuff before.

7:16That kind of like adds a layer of, yes, I think I'm doing the right thing. You know that? What do you think, Alice? Do you agree with that? Yeah, definitely. And also just a quick thing on Real Vision, I watch it religiously. It's a really good podcast. thank you thank you i started when they had 10 000 subscribers and today i think uh sir your youtube channel has something close to 700 000 so it's really nice to see the community grow yeah that's amazing and then we've got you know we've obviously got subscription-based services and a whole bunch of other stuff and it's actually free to join at realvision.com just people can go there and you can use our everything from our ai tools to our pricing and charting through to all the videos the transcripts tons of stuff it's an amazing platform definitely and thanks for doing that also since we have you here today i would love to uh use this opportunity to do a year in review almost because what a crazy year uh if we look back in november last year bitcoin was something between 16 000 us dollar and just right before we start the live today we are above 38 000 So it's even Bitcoin alone this year has gone up like 130 percent.

8:31And if we look back this year, so many different things happened, key events. So I was wondering, what are the key things that have left a mark if you look back for this year for the crypto journey? so for me it's the thing that i've learned since 2012 is that almost everything all of the news that kept people scared or excited most of it is all noise you know if you've been around in the space as long as i have you've seen exchanges go bust you've seen legal issues regulatory issues you've seen so much stuff and it's all noise of a maturing space and the key driver of all of this I got incredibly bullish at the end of last year based on global liquidity in the business cycle, which we'll come on to a bit in the exponential into the everything code stuff.

9:22But I started seeing that. And so I had not sold anything from the previous cycle, but I just started to add as much as I could, suggesting that was the low. And that whole thesis has played out with all of the noise, all of the screaming and shouting, all of the drama over Twitter. the markets have just gone higher and i think that was a shock to many many people but overall if i look back and say what was last year about last year was you know a lot of people getting over their scars from the previous year you know 2023 was a year of getting over the scars from 2022 people lost a lot of money in you know ftx and blockfire and celsius and all of these things.

10:04But what was happening in 2023 is the signs of people saying, okay, well, that's way of doing decentralized exchanges didn't work, let's work on new things. The space kind of got together and tried to figure out, okay, where are the problems in the space? How can we solve them? And how can we iterate and improve? And that was something that I've always seen in this space, they kind of learn every time something goes wrong, because they're building an entirely net new financial system here. That's what everybody's building. It's the value system of the internet. Nobody's got all the answers. So you have to make mistakes to get the right answers.

10:40So I saw that and I saw the regulators around the world changing their tunes between Singapore, Switzerland, Europe, and then the UK and the Middle East, all becoming much more proactive in regulating the space and realizing where the space is going. The US is further behind, but that battle is ongoing and it'll get sorted out in the end. But so we saw this kind of maturing of the space overall, learning from the past cycle. There'll be mistakes in the next cycle too, but learning from the past cycle, building upon it, and then getting the regulators to realize that crypto is not going away. Also, if I step back and observe, we saw a lot of big brands using Web3.

11:25So I thought that was still interesting. A lot of the big car companies, you know, Starbucks using loyalty points, Ticketmaster using ticketing and other stuff. There was a lot of interest in blockchain technology. And also, if you filter out the noise, you can see the entire financial system is getting behind this. Many big financial firms are testing blockchain rails for settlement of securities. We're seeing real world assets come on chain so we're seeing what i call crypto spring and that's what i call 2023 was crypto spring and that's the whole point that's why it went up in price as crypto spring you know it thaws winter the days get warmer a bit sunnier but not all the time you know one day it's raining next day it's got frost but every day over time over spring things get warmer and that's what it's been like anything to see yeah go ahead alice you're going to add to it yeah no i think this is a very good narrative because exactly how we feel about the market right now given how however much happened last year November time last year was just right after FTX bankruptcy and then we've gone through the ordinals the meme coins the AI FTX trial finance now shifting CEO and then a lot of the different narratives and developments as you said so definitely echo that not just that I feel like just before jumping roll just to give people more perspective on that like on november 28th of 2022 exactly one year ago btc price was like 16k we are now like 38k so if that not gives you that gives you kind of like a at least something to look at and say hey it has some perspective like me we are not probably in the best shape or in the best moment that we ever been but definitely things are moving in the right path i think right yeah and look this is the whole game in crypto it It is a long-term time horizon.

13:16I'm not a big fan of trading it because the long-term trend is so strong. And so when you get these cyclical sell-offs driven by the economy, the interest rate cycle, the business cycle, is when you should be buying. And what happens is everybody panics and sells. And it's having the discipline to say, listen, I'm in this trade for five years or whatever the length of time is. And so if I've got any cash and I see these really ridiculously discounted prices at the bottom of the business cycle, NASDAQ was selling off, it was recession talk everywhere. Those are the opportunities. And if you buy in those opportunities, you compound your returns much higher than if you wait for a bull signal to happen wherever that is because you end up buying so much higher.

14:03So if you've got that long term time horizon, you have that fundamental belief that crypto is going to keep growing. You know, the number of wallets, the number of active wallets in crypto in 2022, when the market was down 80 percent, grew 42 percent. And it tells you that this is not going away. So you use information like that to give you confidence to add to your investments when everybody else is panicking out. 100%. And since you have been just kind of mentioning it here and there, I want to start to dive deep with you into the Everything Code discussion because I feel like that helps people understand a little bit.

14:43And, of course, I don't know exactly what is the Everything Code, but you have been giving some hints here and there to people. In terms of indicators, like things that you look at, for example, mentioning the liquidity cycle, et cetera, if you can just unpack a little bit the concept of liquidity cycle as well and also how those macro affect crypto. Because I think one of the things that you mentioned that for me makes a lot of sense is just like not necessarily the halving being the main catalyst for crypto cycles, but actually the halving very well time it into macro cycles that actually kind of like helps to set up that halving narrative, let's put it like this.

15:23So I wanted you to just like chime in a little bit and I mean, help people to understand what the everything code is about and your take also on the halving liquidity cycle and all that, which I think will open the mind of a lot of the listeners here. Of course. So it's actually pretty simple. It's 2008. All of the major governments, the UK, Europe, the US, Japan, China, everybody hit 100 % of GDP in debt or more. and that led into the financial crisis because the private sector was in debt as well so there was way too much debt and economic growth was not growing fast enough to service the debt so if you don't have the income to pay your interest payments you go bust and that's what happened so what happened was a lot of people talk about something called a debt jubilee which is when all debts get forgiven that's kind of a biblical thing that's happened over centuries where you know, some benevolent leader says, we don't, you don't need to pay your debts.

16:27People will say, well, we're going to have to reset the debts. But what we did in 2009 was something different, or 2008. What we did was say, you know what, instead of forgiving all the debts, because it's too much, and we can't do it, we're going to let you not pay interest rates. And that is what zero interest rate policy was. And then behind it, they said, well, not only that, But we're going to print dollars and all currencies so there's enough currency in the system. And that is debasement of currency. And what that does is optically make asset prices rise. So this was the story of 2008, 2009.

17:10Now, when you reset all government debt at zero interest, what they all did was kind of go out three to five years and borrow money in three to five year bonds. That means every four years they have to repay the interest and reset because they never pay off the debt from the previous cycle. what they do is they have to issue more bonds to pay the interest in the previous bonds, which is what's been going on recently, which is why the bond market got upset. So that creates a business cycle every four years like clockwork, because it's the debt refi cycle of all the major governments. And so the economy follows that cycle, because, you know, as the economy is growing, interest rates end up rising, the economy starts slowing down because the interest payments are too big.

18:02And before you know it, we end up with stimulus. They cut rates or they keep rates flat, but they end up using the balance sheet. And the everything code was the discovery that the use of the balance sheet, so the Fed balance sheet, the ECB balance sheet, all of these things, was exactly just the payment of interest rates on the debt of the previous four-year cycle. So when you understand that, you also see that those cycle dates, 2008, 2012, 2016, they're all the halving years. Why? Because Bitcoin was born out of the financial crisis. So it has the same birth date as zero interest rates and this whole debt cycle.

18:51It also happens to be the election cycle. Why? Because as you come into this point in the election cycle, so we're coming into a US election next year, the incumbent government tends to stimulate to try and stimulate growth, and a new government tends to stimulate to start winning points for the next midterm elections. So there's this incredible cycle that exists. And what you can do is using a lot of the forward-looking indicators we've got based around the interest payments, for example, from the pandemic, you can start to extrapolate where the central bank balance sheets are going. And what we found is, if you look at some global liquidity forecast that we've got, it actually explains like 97.5 % of the entire movement of the NASDAQ and about 87 % of crypto.

19:46The reason why it's less of crypto is crypto bull markets tend to be exponential, so it lowers the correlation. so basically the crypto cycle is the macro cycle and it's driven by the liquidity created by the central banks to service their own debts and for me if this continues now this is you know it's still a thesis even though it's been going on for a while but i only discovered it two or three years ago is two years ago if this continues then it is a gift of an opportunity because we understand the world with which we're living, which is nobody can pay the debts, nobody can pay the interest on the debts, and therefore it ends up becoming expansionary monetary policy, which debases the currency and causes assets to rise.

20:36Now, this is exactly the reason why crypto exists. It was to stop, it was to find a way out from this. And so that's why it tends to do very well, because it's a massive adoption of a technology, the fastest ever adoption of a technology and the fastest moving asset price in all history. And what you find is that over time, people start to understand that this liquidity cycle and the debasement of currency, the answer is migrating across to the new financial system. I called it in the past, the Bitcoin life raft. It's the life raft to save you from losing your savings and also the life raft to save you from the debasement of currency and the fact that wages don't go up as much as asset prices so you kind of get poor all the time you can't afford a house so the average millennial is struggling to buy a house because their wages don't match the increase in asset prices and crypto is the levelizer for all of that yeah i think that's definitely a very good analysis it's a very um it's interesting to hear this based on how it also the trend of crypto market is very much linked to the traditional market and the liquidity and the monetary policy and I think right now given how complex the market is and not just the different economic policies but also geographical risks that we're seeing with the wars going on it's very confusing for traditional investors so I think that's why some of them are looking at crypto into this space and see if there are any opportunities here.

22:16So naturally, I actually want to tap on that a little bit to talk about institutional investors, because first thing first is definitely I want to ask about your view on the spot BTC ETFs. Do you see any potential SEC approval? What do you think the magnitude of this? Okay, so I'm going to frame how to think about this in a different way. So, yes, I think it gets approved, whether it happens before Christmas or in January, who knows, but either way, it's coming. But what does this mean? So you've got to understand a framework of, OK, we have this TradFi fiat world, which is the regular economy we live in, that's ruled by dollars or yuan or yen or euros, whatever.

23:05And then we have this new crypto land, which is this new digital economy that is borderless and growing incredibly fast. So when you think about economies, you look at economies and economic growth is driven by population growth, productivity growth and debt growth. so in fiat world population is now shrinking or slowing down in most countries around the world major countries productivity has been low because of an aging population and debt growth blew up in 2008 and debt growth now is just servicing of old debts so lo and behold you've got a slow economy crypto land we had a massive recession in 2022 down 80 percent in prices and what we saw was a 42 in percent increase in population new active wallets and it's now it keeps growing so we've got a massive increase in population this new emerging economy it's growing faster than any economy in history and it's generating enormous return on investment for anybody involved in it who's got a long enough time horizon.

24:19So the ETF is, you need to think of it as a trade deal between Fiat World and Cryptoland. So it doesn't guarantee that people are going to make investments into Cryptoland, but the trade agreement means that they can. Now, the question is, all of the Fiat World investors are going to say is, am I going to get a higher return on my investment in crypto land or fiat world. And with a year like this year, it's very clear that when the business cycle is going to recover, crypto land will do better. So we will see, I think, both the Bitcoin and ETF when they come over time, seeing a lot of money pouring into crypto land.

25:07We're also seeing in crypto land, Fiat world companies setting up offices. And what I mean by that is people like Fidelity, Franklin Templeton, BlackRock, all of these people, Goldman Sachs, JP Morgan, they're all kind of setting up offices in this new world and being involved with it. That's really interesting. On the flip side, we've got Coinbase, for example, which is a crypto land company that's got its main offices in Fiat world. So we've got this new economy that's global, frictionless, and growing at an astonishing pace. And the ETFs are going to be a way to allow people to invest out of the Fiat world into this world in a way that is easier for them to manage.

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27:05I was wondering, because we already have existing BTC products out there like MicroStrategy. So I don't know, with this ETF approval, what do you think is going to happen with the existing products? Well, you know, MicroStrategy is not a product. It's a corporation with a lot of Bitcoin on its balance sheet so my guess is that unless their traditional business grows it will trade at maybe a discount like much like the gbtc uh trusted it'll end up trading at a discount because there's other options so it probably trades at a discount um now what does it do to the crypto miners i think they're probably fine they're under invested anyway I think, you know, stuff like Coinbase does very well in this environment.

27:56But the Bitcoin ETF, really, how I think of it is, yes, there's some traditional market companies that will not have the flows, because there's more access now. But really, it's that money that flows into the crypto economy and gets recycled out the risk curve in the crypto economy that can have an astonishing impact. Because what happens is as soon as people start making gains in Bitcoin, it starts spreading into ETH and in Solana and then down the risk curve and out to NFTs and all over the economy. And that's typical of a trade deal. If the US does a trade deal with China and they start building factories, those factories, workers, they get money, they start buying stuff and it becomes this multiplying process.

28:43So yeah, look, yes, it makes some issue for some companies, but over time, it's net good for everybody. As I like to say here, Alice, not sure if you agree with that and also your role, but just like being here to see all that play out and all that just like in front of our eyes, just like being in the crypto space during this unique time, I'll say, because let's face it, it's only going to happen like one time. The first Bitcoin ETF approval in the US is only going to happen one time. The first ETF, same thing. And just like getting to, I mean, to feel, to be here, to have our skin in the game when all those things take place is going to be very valuable because as you said, Ro, like you're in the market since 2013.

29:21So you have experienced a lot of things in the market. You know stuff that a lot of people that are listening to us right here don't know about. There are many people that have been in the market as long as you or even a little bit longer, maybe who knows. But like, I think that experience just adds value to it in many, many different ways. And I think that is just a special time that we're living in. So guys, make sure to enjoy it and take advantage of the opportunities. And I think I have a question for you exactly when I talk about opportunities, Ro, because as you mentioned before during our initial part of the chat today, a lot of narratives go around in crypto, right?

29:56But we do have the fundamental indicators as well. So how do you think people can actually navigate narratives versus indicators, et cetera? Like any tips for the audience? Because I do know, for example, you do take a lot into consideration Metcalfe's law, for example. So do you think that is something that people should be looking more at? Which type of indicators do you look to make, let's say, a correlation between Metcalfe's law and assets in the crypto space, etc.? So just help people that are completely lost here, like what they should be looking at. OK, so here's the weird thing about Metcalfe's law.

30:33So Metcalfe's law, for people who don't understand, is how you value networks, because we live in this digital network age. is how you value kind of the value of a mobile phone network or something like Facebook, whatever it may be. And it's basically the number of people on the network and the number of connections between them or the amount of value that gets exchanged on that network. And so I started thinking about this and started trying to build out some models for cryptocurrencies on this. And I found out that the best fit was the number of active users in a week or a month. You take the period and then the amount of value transacted on that protocol over that same period of time.