Crypto Banter: The Brutal Truth About These Altcoins with Raoul Pal

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2:30All right, let's get to the meat and potatoes of the show. And today it's a Friday. We've got Raul Paul with us. I've got a lot to speak to him about. As I said to you, let's get Raul into the studio. Raul, welcome, my friend. Good to see you, my friend. Are you in Big Cayman or Small Cayman? I'm in Big Cayman. I'm in my house in Big Cayman. Oh, awesome, awesome. Listen, good to see you, my friend. I've got so much to talk to you about. I think a good place to start this is to talk about these tokens. In fact, I want to actually start this with an exercise that I did yesterday. on Twitter. And what bothered me was we spend a lot of time researching what we think are the best altcoins on the market.

3:06We look at the fundamentals, we look at the usage, we look at the network effects, we look at everything else. And hopefully we then invest in these tokens. But then when the market bounces after a massive dip like the one that we had, the tokens that performed the best were the meme coins. Pepe went up 80%. Stacks went up 70%. NIO, a blockchain that I haven't heard about since 2017 or 2018, recovered 50%. And Solana, which I think is a very, very, very good token, didn't even recover. I mean, hardly even recovered. So then I went on to Twitter and I did a little poll and I said, look, if you were buying these for two-year hold and no selling is allowed, what would you rather buy?

3:49Solana or Stax? Solana or Pepe? Or Solana or NIO? and everyone said over 70 or 80 percent of people said Solana that buy Solana how do you explain that with all of the sentiment and everyone thinking that Solana is a better token all these meme coins actually recover quicker what am I missing here I'm you know I'm not sure the vagaries of the market I think a lot of it is that Solana is more of an investment it's a larger cap token it takes more to move it and it's less driven by crazy punters who are the dgens who are looking for the next you know thing that goes up 50 in a couple of days so i just think it's a different bunch of participants really because i think you're i mean i answered your survey as well and i answered solana um and i'm long solana and i think really the bigger tokens are going to be driven by money coming into the space overall and then we had the regulatory issues where you know, people are concerned.

4:48What does it mean? Solana and some of the others still have overhangs from FTX days and other stuff, while stuff like NIO doesn't have it. So it's part of that. And a lot of the time, I just tell people it's all noise. So, you know, I think you drive yourself crazy looking for the next big thing when in front of your eyes over time, if I look at my screen bitcoin's up 82 this year eth's up 57 and solana's up 70 i mean that's pretty decent yeah that is that is a decent return but i just i don't know i get a little bit demotivated when i spend my whole day researching what i think are the best tokens out there and i use the models and i use all the fund the fundamentals and all the good foundations and then the tokens that run are the dumb money fred came into the office two days ago and he said i'm following the dumb money you haven't and you haven't got the investors so what you're doing is proper analysis that needs kind of fresh capital into the space what we've got is actually churning you know people flipping out of nfts into pepe that kind of stuff but what you're doing is saying well if new capital comes into the space they're going to look for these fundamental proper opportunities we're just not seeing new capital yet what do you think what is the thesis for new capital coming into the space?

6:02Is there light at the end of the tunnel when it comes to new capital coming out there? I mean, you've had Operation Chokepoint, you've got Gary Gensler going crazy against all of the tokens and all of the providers and Binance and Coinbase. What's your thesis for new capital actually flowing in here? So my thesis has been always based on the liquidity cycle and macro. And the liquidity cycle for me bottomed in June last year, which is what ETH bottomed. and then the confirmations came from other liquidity cycles that I used that bottomed in November, October, November. So I think liquidity rises from now on and people just want a little bit more macro certainty.

6:46The Fed like we're stopping. No, we're not stopping. We're kind of stopping. Maybe we're not. Doesn't help people. But I think capital is soon to come. I think the And so that's the real issue is just it's a dead market right now. And it's just us lot moving money around. And until you bring in new people. Now, I have a different view on the U.S. regulations. I kind of don't care. You're in South Africa. I'm in the Cayman Islands. It makes no difference to us. I mean, zero. Well, it does make a difference. It does make a difference because the U.S. is one of the biggest markets for or the biggest potential markets for crypto buying, crypto trading, crypto building.

7:31And if they're out, it sends a clear message to the rest of the world. Well, A, we're not getting their liquidity and their money into crypto, which we're already starting to feel. There's a lot less liquidity as a result of the fact that the US is kind of out. And it's just not a great environment. It's not a great look for crypto. Yeah, it's not a great look. But, you know, I haven't been in this since 2013. I've gone through this so many times. and everybody feels miserable. I can't believe people still feel miserable now and the space is up 80 % this year. And everyone's still like, oh, it's the end of the world.

8:04Nobody loves us. Everybody hates us. Everybody on crypto Twitter is turning on each other, trying to destroy each other. I mean, it's madness. And it's actually boredom that does it while waiting for the cycle to turn. The US stuff, I just think it's noise over time. There will be a regulatory outcome. And I talked about this. I think about maybe a year and a half ago on your show is these professional negotiators like Genza. Genza has the political side, but he's also a negotiator here for where this space is going to get regulated. He's going to start with no, no, no, no, no. I hate you all.

8:40And we're all going to go. We want total freedom to do anything we want. And the answer will be somewhere in the middle. And it depends which side of the middle we go. But hold on. So he's come out and declared Solana, Cardano, Coty, and many other of our favorite tokens securities. Up until the point that he's proven otherwise, for people in the US, and I say this because exchanges are now following this and saying, look, we're delisting these tokens because we just don't want to get into a spat with the SEC. This is not our fight to fight. but up until that has changed and that could be five years from now i mean at least five years from now if you look at any type of president for anyone in the u.s those are actually securities i mean does that not kill solana in the u.s cardona in the u.s any kind of other proof of last time i checked tesla last time i checked tesla was a security yeah but but you can't use but but the difference is that you don't need to use tesla to power a network you need to use solana to pay fees on a network.

9:43Now, it's not practical for anyone in the US to use, if it's a security, it's not practical for anyone in the US. Have Coinbase delisted it? Coinbase haven't delisted it, but Coinbase haven't delisted it very, very, very specifically. Why? Because what Coinbase are saying is, we're going to take on this fight. We have no choice but to take on this fight. But everybody else, Robinhood, Etaro, all the other guys basically delisted it. and all have and what percentage of the us volume is coinbase probably the majority probably the majority so you believe there's that as well right okay so how do you see how do you see the coinbase fight playing out i mean first of all do you think that it goes to court do you think it do you think they get their day in court or do you think they resolve this before court my guess is congress resolves this first it's becoming a political issue and gensler is under pressure i think that's why he's approved the blackrock etf we assume he's approved it which is why everybody's filing because he's going to say well look bitcoin i'm going to throw them a bone and i'm going to give them a bitcoin etf and that will shut them up because he's under a lot of political pressure now um and so i don't think they want the massive political pressure going into the election.

11:04So that's what I think is going on. I think Congress are going to try and force some sort of ruling. If not, we've got Brad Garlinghouse's case for Ripple that still has to go through. I think there's a decent chance that they will get some more positive outcome. And Coinbase are going to go to, if they don't, if Congress doesn't change anything, they're going to fight to the bitter end. So that means if you're right, and it's a five-year thing, well Coinbase is going to list Solana for five years or these other tokens. Let me ask you another question. One of the feces that I had and I shared with my community this week is I said, look, if you're scared of playing altcoins but you want exposure to altcoins, for me probably the best altcoin to be exposed to is Coinbase.

11:46And the reason why I say that is because Coinbase is a proxy for the crypto market and specifically the crypto market in the United States. It's got a$13 billion market cap right now. if there's any player that's actually gonna win this it is coinbase because they have five billion dollars in cash they're quite well capitalized um and instead of picking the old coins instead of worrying about which ones are securities not just buy coinbase you've got yourself a proxy for every single old coin that will ever trade in the united states um and possibly beyond have you ever considered or looked at buying coinbase adding and adding it to your portfolio yeah no i've got it as part of a basket already so i completely agree with that thesis you always want to own the gatekeepers um where where people have to pay a toll to access so the exchanges are always a good bet um so it makes total sense to me and it's a you know coinbase is not expensive i know there's quite a few bears out there who don't like it think it's going to go bust blah blah blah you know the mark cohodes of this world um yeah we know i think it's a decent piece where do you go binance i mean would you buy binance now would you buy the bnb token it's not one for me i don't you know there's too much opaqueness around it um it's just not one for me i think i like coinbase the people there i know the coinbase people very well they're super high quality they've built a great business got a great institutional business you know even the blackrock etf surprise surprise who's the custodian coinbase you know there it's a high quality operation um so i think if anybody survives this it's them and if anybody flourishes on the other side of this it's them because almost everybody else all the small exchanges are being forced out of the us well they don't want to deal with the regulation hey everyone we're going to take a quick pause and hear a word from our partners we'll be right back

13:42exactly that they don't have enough money to deal with the regulation so they they're not really a part of it also if you think about coinbase's approach it's been slow and steady always always they haven't gone off to fast profits they've always gone off to making making sure that they could be as close to what they thought was the law as possible uh binance took the other approach they went fast they broke things and i think they said look we'll deal with the implications later whatever the implications are i kind of get the feeling that that's what happened and now what you're getting is you're getting Binance being challenged in places like France, the UK, Netherlands, they're closed down.

14:13Netherlands, they're out of Canada, they're out of Australia. And you've got Coinbase actually going into Canada. You've got Coinbase applying for all these licenses now. So to me, it's like, it's almost like right now, Binance, too many headwinds for me. I thought the token was fully priced. I dumped all my Binance. I bought Coinbase. I did it publicly on my show. And I kind of did a very public switch saying, I think that Coinbase is the one that I want to be backing going forward. Binance was cool. But when the time to break things happened, I was in Binance. But now I think the time is to do things slow and steady with the law.

14:45And I think for me, that's very much a Coinbase thing. Yeah. Also, I think the world is going to polarize that the Western world, the predominant player will be Coinbase. Yeah. And in Asia, Latin America, the predominant one will be Binance and maybe Africa, as well. So it kind of, I think the world's going to split because, you know, Coinbase is the largest entity in the West to do this. And Binance is the largest entity in the East. It kind of makes sense. Let's talk about a little bit about the ETF. As you mentioned correctly, that BlackRock partnered up with Coinbase as their partner exchange, also their partner custodian.

15:28BlackRock 575 approvals, one denial SEC 30 30 31 32 33 denials of a Bitcoin spot ETF obviously zero approvals I get the feeling that BlackRock were very very calculated I don't think that BlackRock would have applied for an ETF that they would have that they thought that they could possibly lose I also get the feeling that Larry Fink in the picking order is a little bit higher than Gary Gensler you know I just feel like you know you know there are there are ranks they've got to be ranks I just feel that that Gary Gensler is uh maybe a Larry Fink porn at best um how do you see it I mean do you do you feel the same way do you think it was a strategic move by BlackRock I think it was a strategic move by Gensler I think he as I said is under political pressure and he needs to throw a bone to Congress and everybody else to say I'm not just being objectionable.

16:25You know, I am going to allow innovation, but only Bitcoin and only with a massive financial institution. So he's throwing Wall Street a bone, which is this point you're raising about where Larry Fink is in the pecking order. He's throwing Wall Street a bone and he's politically trying to cover his ass. So yes, I think there's been a secret nod, which is, Larry, if you want to do this, we'd support it. And I'm guessing that a few others have been given the nod and it's very difficult then not to allow the other bitcoin etfs um so net net it's a positive thing yeah i mean so we've got five etfs we've got blackrock fidelity invesco wisdom tree and valkyrie what we saw is that blackrock is a new filing valkyrie is a new filing but the rest were just resubmissions of old filings which kind of means you know these old filings usually the SEC who says to them, please withdraw your application so we don't have to deny it.

17:22Now they like refile it because they don't want, you know, they don't want to be left behind. Question, there has been all this hype on Twitter about what the GLD ETF did to the gold price and how, you know, when GLD launched, that was the beginning of an insane run. And a lot of people are saying that because BlackRock have such great distribution and such great incentive structures for people, for their base to sell their products, that this is going to do the same thing or could possibly do the same thing for crypto? Now, why I'm asking this is because it's very easy for us to get caught up in this crypto bros, crypto Twitter narrative, you know, like, you know, this, we're going to get an ETF, we're going to get all this institutional money.

18:08Do you really think that this ETF is, opens up the the i don't know the big the big flow into bitcoin or is this just another one of these you know crypto twitter just blows a narrative completely out of proportion um i'm just pulling up the chart dxy i think the reason gold did so well yes it did the reason gold did so well back in uh when that etf was launched was the dollar was collapsing okay gold is kind inverse of the dollar. So yes, therefore the market will obviously invest in a product like that. So it's really a matter of price. Institutions, RAAs, investment advisors won't buy it if the price is not good.

18:57It's not like, oh my God, we can now buy Bitcoin. But if the price is going up like it is now, yes, it will bring much more capital into the space. So all of these guys are sheep. Pretty much everybody in the financial markets are sheep. They're all momentum traders. So if we've got momentum, if the dollar is weakening a bit, and if the BlackRock ETF then comes out, yeah, that's going to attract a lot of capital. If it was three months ago and they launched it, it would have attracted nothing. Because, you know, you've seen that with GBTC. The discount is a function of the lack of flows coming into that.

19:35And it's just been widening and widening and widening because there's no flow coming into it. So, I mean, other than, I mean, the GBTC has got 2 % management fees per year. Also, you can buy the shares on the open market. you can't redeem the shares for the actual Bitcoin. Do you think that an ETF is really that different in the eyes of an institution? Or do you think that an institution said, look, if I wanted exposure to Bitcoin, I could have bought GBTC. I probably couldn't have bought Bitcoin, because we haven't approved custodians in our process flows and stuff like that. But I have approved, you have got GBTC, which is approved.

20:17Do you think they see the two as equal or do you think that an ETF would like open up a whole new bunch of capital coming in? Well, as long as the ETF doesn't trade like a closed end fund, you're OK, because it's the discounts and premiums to NAV that's the real problem for people. And also an ETF for most people is more like an equity while GBTC is more like a fund. OK, so they just want to see whatever it is on their screen. trade it as a normal stock people are lazy i mean people just generally are lazy and people will generally follow momentum so if you make it easy and momentum's rising it's going to work without question and blackrock have the aladdin system which is you know their kind of major system for all of the products and everything else that is used by a lot of rias a lot of capital allocators So once you've got the product on that, okay, that's pretty useful for people as well.

21:16So we will see, it's just the access that I can do it via BlackRock. It's kind of, it means it's sanctioned by the state and everything's okay. I mean, that takes a lot of uncertainty out of Bitcoin, right? Do you think that, I mean, if you could have picked your fighter, if you could have picked your best soldier to do the task, and we were to ask you like a year ago, who do you think, which entity would you like to win the first Bitcoin ETF? Do you agree with me that we couldn't have picked a better winner than BlackRock? From a distribution point of view, from an access to funds point of view, from a credibility point of view, I just can't imagine a better scenario.

21:57I mean, surely it's better than getting... Yeah, if you take your emotions out of what you want the space to be and you want the new up and coming people, you know, bit wise, because I like Hunter and stuff like that, But you're right. If I want the space to attract capital and get larger global recognition, BlackRock is exactly the right person to do it. What's the counter? What's the counter argument? What's the part that we say, take your emotions out? Where did the emotions come in? Well, the emotions come in that BlackRock is at the epicenter of the global financial system. It's like Goldman Sachs launching an ETF on Bitcoin.

22:35And people want to wrestle this away from the existing incumbents. And I think rightly so. I mean, the whole reason for this space is to create a parallel financial system. And what they're trying to do is bring in just as a regular asset into the system. And I can understand why, you know, at an emotional level, I don't really like BlackRock doing this. But for a bags level and for an adoption level of the space overall, yes, it helps. but i don't understand the narrative of changing the system this is not changing the system but why i mean if you want the way i see it is if blackrock want to bring in their money and buy bitcoin and store bitcoin centrally because that's what they do with with all their stuff great if i want to own bitcoin and store the keys myself also great i see a lot of people on twitter with the same you know the same opinion as you like we don't want blackrock here we don't want blackrock to buy our bags i don't i don't really care who buys my bags in fact the more money i didn't say that i said emotionally i would love to see it differently yeah but i think it's exactly the right answer is blackrock so i'm with you yeah i don't really want everything to be custodied at a centralized level in a global financial institution but i'm willing to accept that for the extra adoption because the space will figure it out over time more people self-custody stuff more people will do other things build on top of the network so no i'm i think it's i think it's great news yeah i must say the more i think about it the more i'm happy that it's blackrock i want blackrock to be the first i think it brings the most credibility into our space and you can say well there is a a bitcoin etf what do you think about an ectf do you think how far away do you think we are from an eth an eth etf right now miles away um although i do think there's probably a lot of institutional interest in eth and i've talked about this before because of the yielding properties of it and because the narrative is not so much about here's a new global money we're going to fight the system it's like here's a technology you can use it So that's much easier for most investment committees at institutional level to agree with and to have an asset, a long duration asset that has a 5 % yield.

24:57People like that. But I don't think that the U.S. is even close to allowing ETH yet. And, you know, knowing how these people work is even if they did, they wouldn't give you the yield. So BlackRock would take the yield from you and you just get the price appreciation. becomes a very attractive product for them to do something like that because they get kind of implied 5%. It's what they do with stock borrow in other ETFs. Having said that, I remember the last time that I asked you whether if you had$10 ,000, if you had put into Bitcoin, if you'd put into ETH, at the time you said to me, you were backing ETH.

25:30Your ETH was your preferred soldier for the hold. Now I'm asking the same question this time around. The regulatory environment has changed. Bitcoin is on a tear. If I were to give you the same question answer to you can only you can only back one horse you can't back both horses you're holding periods two years are you backing bitcoin are you backing eth same answer i'm a very long term time horizon guy i don't change stuff around and my thesis is when i look at the monthly chart on a log scale of the bitcoin eth bitcoin cross it's a big wedge pattern i know what drives the ETH Bitcoin cross.

26:09It's driven by the business cycle and where you are in the liquidity cycle. We're at the turning point where we should start to see over the next coming couple of months, ETH starting to massively outperform. I've written about this in several of my Global Macro Investor and Real Vision Pro Macro articles. And so it's just a matter of time to me. Now, Now, how this works, Ran, is pretty straightforward. Let's say BlackRock ETF. Money comes into the space, money gets recycled, it flows into other stuff. These things have a smaller market cap and they're less liquid. So the alts do that. It's the same that happens in emerging market stocks, credit, junk bonds.

26:54It's always the same. So as you move out of US Treasuries into bonds, into emerging market bonds, the least liquid ones rally the most. So that's what I think happens. What do you think the timeframe is for ETH to start outperforming Bitcoin? I mean, right now, arguably, you could say, right now, the best bet for the short term is Bitcoin, right? Certainly for the next two weeks, three weeks, four weeks, a month, two months, it just feels like Bitcoin's got much more momentum. Or am I wrong? Yes, it does. And let me just pull up my chart on this one sec. It's a pity I can't share your screen today because of this new system.

27:31but if you tell me which chart you're looking at i can also call it up well now i'm using the d mark just to have a look at the um eth bitcoin cross and see where we are on the weekly because it'll give us a rough idea of when we get to the bottom yeah it's still got a while to go so i think you're probably right another few months um before we start to see the pattern base out and this revert that's that's my best guess um and again i'm so long term i don't really care because i'm like I know you're not a trader. I know you're not a trader. I know you're not a trader. You're a much more long-term macro investor.

28:07But if you were a trader, would you go into Bitcoin now and then kind of wait for a little bit more of a run and then just watch the charts and then maybe switch into ETH? Or is it just not worth the additional return?

28:25I don't... Yeah, I mean, it's probably... There's been a bit of return. I mean, there's been 20 % difference over the course of this year. So 20 % is a reasonable amount. Does that trend continue ad infinitum? I don't know. Is there another 20 % in it? Probably not. So if you want to move around some tokens for a 10 % gain, go for it. But I just find, you know, once you've just had a gold candle like this week where it's up 20%, it's like the 10 extra it's just a lot of hassle for a limited game just the space itself as well so yeah that's the chart so if you so zoom zoom out again okay and then join let me just let me just yeah it's basically a big wedge pattern so that one you're talking about it's not only that way you're talking about that the switch from the highs in 2017 18.

29:29so it's from there that kind of it's kind of yeah it's somewhere around here it's on my trading view i'm thinking i've got different prices i'm not sure which is the source but it's different but it's that i can't see if you take out put it on a line chart and get rid of those spikes so get rid of the the candle uh get rid of the open high low close or the candles okay so put onto the line chart and yeah how's that okay that is that's your basically a wedge yes so you're waiting for the break of that we're getting okay i'm with you i'm with you i'm with you yeah it's there's not much time left for this to make a decision right no it depends where you draw the bottom because if you were to draw that 2016 low you actually get a slightly lower part of the wedge so you're saying that would be up up from there up from there okay so you're going to this one yeah and then yeah okay i'd have to draw this a little bit more scientifically but but but i think i i think i get the point here um so that's eth i want to ask you that's a compression right yes so regardless of the perfect wedge or not perfect wedge that's a compression of a range, the moves that we've seen are small, right?

30:46That correction in the ETH Bitcoin cross has been small. Generally speaking, if you were to get a measured move from this, I mean, it kind of suggests that ETH does two or three X Bitcoin in the next cycle, which also kind of makes sense. So really, it's about when you hit the kind of crypto summer zone, ETH will outperform, it'll break the wedge, and then we'll see a much larger narrative around it. I must be honest, I'm feeling really uncomfortable buying altcoins now. And specifically like buying the altcoins that I think are the best. And I use Solana as an example. Like, I think Solana, I try and disprove my theory.

31:27I keep saying to myself, if I want a fast layer one with low fees, with high latency, where everything settles on chain, where do I go? Yes. And so I bought Solana into the chaos of last year, both in June and then the FTX, you know, the end of the year. And I think it's the same thing now is like, you know, if it gets another leg lower, it's a gift because of the points that you raise is that the network activity is very good. this is there's a lot of activity going on there's a lot of people doing stuff so that's the idea for me is is like if we get better prices i love it i missed that last dip that we had what a couple of weeks ago that was a shame because that was a gift when it went back down to what 12 and a half 13.

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