Dan Morehead: Why 2025 Could Be Crypto's Biggest Year (Yet!)

0:01Consensus Hong Kong 2025 is where the global crypto crypto community converges to shape the next era of Web3. From February 18th through the 20th, Hong Kong becomes the meeting point for leaders across finance, technology, and digital assets. This isn't just a conference. It's where deals are made, partnerships are forged, and new opportunities emerge. Consensus features exclusive networking lounges, expert-led sessions, and invaluable insights from top industry voices. Whether you're expanding your network, building your brand, or closing your next big deal, this is the event that moves markets.

0:37Visit coindesk.com forward slash consensus dash HK to secure your spot and use Real Vision 15 for 15 % off. Don't miss your chance to be part of the industry's defining moment.

1:07for you guys. So click like and subscribe. Appreciate it. Thanks. Hi, I'm Raoul Pal and welcome to my show, The Journeyman, where I take that journey of exploration at the nexus of macro crypto and the exponential age of technology. Now, I'm a macro guy at heart, as you know. I've been in the macro industry for 35 years and I love and have driven the narrative and understanding that macro and crypto are the same thing. Crypto is driven by the business cycle, the everything code cycle that I talked about, the debasement cycle. It's fascinating to see how many macro people end up leaving macro land where the returns used to be great, but have gone down over time to this new world of crypto, this new frontier market where the returns are ridiculously better, but it comes with volatility.

1:59And one by one, we've seen many, many macro hedge fund managers move over to this new world. The original of the macro managers who came across to the new world, even before me, was Dan Moorhead. Dan's a good friend of mine. We were both at Goldman. We both ran hedge funds. He worked for the largest hedge fund firms in the world, then ran his own fund and then pivoted the entire fund into crypto. He's a legend in the space. He's a good friend of mine. And I always love to pick his brains on that nexus of macro and crypto. Enjoy. Join me, Raoul Powell, as I go on a journey of discovery through the macro, crypto and exponential age landscapes.

2:40In The Journeyman, I talk to the smartest people in the world so we can all become smarter together.

2:51Dan Moorhead, how the devil are you? I'm great. It's good to see you again. Yeah, always good to see you, my friend. I hope you had a good break over Christmas and the year. It's good. And, you know, blockchain never stops. So the markets get more interesting every year. You know, you and I have probably known each other 25 years and been doing crypto together for a decade. It feels like 2025 could be one of the big ones. For me, it's all feeling a little bit like 2017 all over again. There's a lot of similarities. And I want to hear all of your thoughts of let's talk about 2025, because I think it's what people want to hear.

3:26You've got some views on it. There's a lot going on. Politics, regulation, macro, everything. So lead on me. You know, sometimes a lot of bad things happen at the same time. And then, you know, sometimes a lot of things are all positive at the same time. And that's what I'm feeling about right now is that, you know, the lack of regulatory clarity was essentially holding the industry back for a while. And we've had some big changes, like the largest ETF of all time happening a year ago. And then, you know, the election should bring, you know, more changes in the U.S. And, you know, the U.S. does lead the world in, you know, kind of regulatory, you know, kind of feelings or the impressions that investors get.

4:12And so I think this year having all that kind of change should be good for our market. So we'll dig into some of that, but let's start with the macro because you and I are macro guys at heart. The macro and I don't know if you knew Scott Besson. I met him back in the day when we were both running hedge funds. Yeah. And I've known Scott for a while as well. So I want to see what your where you think the macro is and how the new administration might fit into that. Hi, Raoul here. Listen, I think we've got until 2030 before the economic singularity arrives. Now, it might not be the exact date, but it's around then.

4:50So we have about six years to figure out how to unfuck our future. I've put together a report to help you called Prepare for 2030. It's going to help you take the first steps in that journey to make sure you're secure past 2030. So just click on the link below and start your journey now. I've had a very out of consensus view of macro for three, four years now, actually. I think the economy is just red hot. And the Fed made a massive mistake keeping rates way too low, way too long. And as you know, kind of unwinding mistakes is a lot harder than kind of doing a little bit at the time. If you think back, March 2022, Fed funds were minus 830 basis points real rates.

5:42Fed funds were still zero, and inflation was 8.3%. That's just a massive, massive kind of inflation impulse. And then, of course, the Fed bought$9 trillion of debt and basically dared everybody in America to buy a house. And they did. A record number of people bought houses. Every house in the entire country is up 40 % from when they started. And so those are massive inflationary impulses, and they really take a long time to work through. And so I think the Fed really has no room to cut. And I did notice the first time a newspaper article about maybe starting to tighten. And that was my prediction back in December of 2021.

6:27Fed funds were zero, and the 10-year note was 1.3. And I said both were going to five and staying there for a long time. And that's still my view. I think Fed funds should be five or higher, right? And I think rates probably are going, long rates are probably going up. The 10-year note is only 100 basis points over inflation. That's not really paying you to take that kind of risk. So the big picture on macro is I think the Fed has to keep tightening or staying tight or tightening. The issue is with that is because they have to refile the debt, you end up increasing the debt burden all the time.

7:03Yeah. How do they deal with that? Because, you know, they don't really want to do QE because everyone knows what the game is, which is money printing. How do they deal with the excess supply that comes from just having higher rates without a lot of the debt increase is just the servicing of the debt itself? Yeah. You, my friend, if you knew the answer, you'd be smarter than me. I have no idea how they get out of this. It's really tough. The U.S. now spends more on interest than they do on defense, which is a wild place to be. The deficit is 6 % of GDP in literally the best of times. Like, there's, you know, full employment.

7:39Everything's great. Like, if you have a 6 % deficit when everything's as good as it possibly gets, you know, what's going to happen when, you know, some kind of rainy day shock happens? So I actually literally don't know, and that's why I'm so bullish blockchain, because it ain't going to be good for paper money is basically the answer. However, I don't know which way the government's going to try and get out of this, but the U.S. went essentially to an adjustable rate mortgage a while ago and financed all the debt at very, very short intervals. It's all coming due, as you say. It has to be rolled over.

8:14Rates, you know, used to be 1.3 for a 10-year. They should have done a lot of debt issuance at that level. It's 4.3 now, and it could be 5.3 or 6.3 in the next few years. So I really am worried, you know, as an American citizen, like, how is our government going to get out of this? Because they have an enormous amount of debt. They're piling on 6 % of GDP every year. You know, that's a huge new amount of debt. Rates are heading high. They're much higher than they used to be, heading higher. and most countries when faced with that you know inflate their way out of it you know it's a u.s hasn't historically done that there's only 13 countries on earth that have not defaulted on their debt or had inflation above 20 percent the u.s is one of them uh so the u.s hasn't done it but like they could my view is that they do it more slowly using debasement so that's the liquidity the printing of money in lots of hidden ways.

9:13There's lots of ways throughout the system. And from my measurement, the global central banks and governments combined are increasing the global supply of money or debasing the currency by about 8 % a year. So it's like it's a tax you don't see. Most people don't understand it. The price of scarce assets keeps rising because you're lowering the denominator. You know this from emerging market days. Most people don't really understand this mechanism but that's what that's what happens so you know your wages don't go as far and the assets keep going up to make housing unaffordable and eight percent a year but the flip side of that is without doing that you end up with a huge crisis which is even worse so i kind of it's a rock and a hard place right no i i agree with you and and um we have seen this movie before in the EM markets that we were in all those years.

10:05And have you ever wanted to trade Bitcoin, but haven't dared try with plus 500 futures? You can trade crypto without the hassle of opening a wallet with just a few clicks. You can register and start practicing with their free and unlimited demo. See a trading opportunity. You'll be able to trade it in just two clicks. Feel ready. You can move to real money with as little as$100 once your account is approved. And the great thing is that in addition to crypto plus 500 gives you access to a wide range of instruments. S &P 500, NASDAQ, gas, and much more. Explore equity indices, energy, metals, forex, and beyond.

10:40With a simple and intuitive platform, you could trade anytime, anywhere. Experience the fast, accessible futures trading you've been waiting for with Plus 500. With over 20 years of experience, Plus 500 is your gateway to the markets. Visit us.plus500.com to learn more. Trading in futures involves the risk of loss and is not suitable for everyone. Not all applicants will qualify. Plus 500. It's trading with a plus. Inflating your way out by printing more money is really the common way people get out of this. And so I think it's going to happen. And that's why I think you're right that when you talk about the value of scarce assets when price in paper money terms keeps going up, right?

11:20Gold's at a record high. You know, stocks are at record high. Real estate's record high. Bitcoin's record high. Maybe they're not moving. is the price of paper money that's going down, right? And Pantera once did a graph that probably old Twitter feed would have of the price of all those things, price of the US dollar, price in bushels of corn, a share of the S &P 500, gold, an ounce of gold. And it's pretty much the same graph. It's the price of paper money that's crashing rather than the price of all these things going up relative to each other. What I've been doing at Global Macro Investor is dividing all assets via global liquidity, which is an index we build.

12:00And what you find is the S &P 500 has pretty much gone nowhere. There's a bit of growth driven by the tech stocks. Gold has gone nowhere. Real estate has gone nowhere. None of this has gone anywhere except NASDAQ and crypto, obviously, because they're both technologies that are being adopted and crypto is the big outperformer. So I found that, yeah, a hurdle rate for assets is 8 % a year for debasement plus, let's say, 3 % inflation is 11 % just as a hurdle rate, which people haven't got their heads around yet. Yeah. And that really is the story for fixed quantity things like Bitcoin or other cryptos is that if the governments around the world are currently debasing at 8 % a year, they're probably gonna have to speed up.

12:43Why be in something you know is being debased, right? Why not be in something that has at least kept up with inflation, like a bunch of those things you just mentioned like gold and S &P. Or, hey, why not get into something? Our Bitcoin fund's 11 years old. It has a 90 % compound annual growth rate, right? It almost doubles every year. That's pretty good compared to minus eight, right? Like plus 90 versus minus eight. And again, investors shouldn't put 100 % of net worth into crypto. But for the majority of institutions... You know I've been there for a while. 100 % That was probably not a good idea Probably put a little pressure On the spouse and everything But if you're Somebody who doesn't have any exposure yet You really should have some To essentially hedge the risk That governments do Continue to debase their currencies If you think about currency debasement It used to be pretty straightforward When I was a kid, silver colored money was silver right like dimes and quarters were made out of silver and now they're made out of some cheap alloy right and even pennies right pennies used to be made out of copper it's a five-year criminal sentence if you melt a penny in the united states because the intrinsic value of a old school real penny is more than one cent right and so the government has to criminalize accessing intrinsic value there and my favorite one is a pound sterling right is of course used to be worth a pound of sterling silver.

14:18It costs 184 pieces of paper pound sterling to buy a pound of sterling silver. So governments are really good at debasing currencies. Unfortunately, I think they're speeding up, like all the stuff that you're talking about with deficits and, you know, paying more in interest than defense, speeding up. And so, you know, again, that's why everyone's going to crypto. You know, a couple hundred million people are using crypto now. Four billion people have a smartphone and that's all you need to operate crypto. So it seems like a billion people will be using crypto in the next, say, three, four years.

14:51Yeah. I mean, I've got my measure to get to a billion. I think it could be, yeah, two or three years, probably. It's reasonably fast. The other one of the macro before we move on from that is when you look at the the rolling debasement it like 2017 the u.s were actually tightening the balance sheet raising rates and um and m2 was falling so all liquidity was shrinking in the u.s at the time they used the general account uh because after the election and the debt ceiling the big one in 2017 was the chinese and it feels like we're about to replay that exact rule book again because the dollar's been too strong for them they're pretty fucked they're going through a debt deflation they've got the aging population slow growth we've seen the entire rule book before right oh yeah yeah no i agree and you know china's always the unique interesting different thing out there and at some point we'll probably get around to talking about what i think is going to be an arms race to acquire bitcoin once the u.s has a bitcoin strategic reserve and china being the most interesting one because they have their entire history savings in an asset the U.S.

16:07Treasury Secretary can cancel. I mean, that's pretty wild, right? Like they have$2 trillion in something that if things became more adversarial, you know, the United States could cancel. So they're going to have to take a hard look at Bitcoin as a strategic savings vehicle over US Treasury notes. So that as well could put pressure on rates in the United States as foreign nations decide they need to save in something other than US Treasuries. So let's talk about that, about the Bitcoin strategic reserve. What format do you think it's going to be? Because we saw some noise on the tape today that it might not just be Bitcoin, it might be other US crypto assets, you know, XRP or whatever it may be, Solana.

16:53um what's your thought on all of this is the u.s going to be openly buying crypto is it going to be stuff that they've they've seized and ongoing seizure from criminal stuff what do you think the u.s does own one percent of all the world's bitcoins already um and um we actually participated in the first u.s marshal service auction in 2014 or whenever that was uh which is really cool to see the U.S. Marshal Service star on the Bitcoin page, you know. So I, you know, this is just my own professional hunches, but I think what will happen is the U.S. will do a strategic reserve, but just Bitcoin. The analog would be old school gold, Fort Knox.

17:35We have an enormous amount of gold stored as a currency reserve. We don't have palladium or silver or anything else, right? Like, So it's easy to get one very well-known thing that has 60-something percent market share through. So if I were a betting man, I would say it's just a Bitcoin strategic reserve, not kind of blockchain generally. And there's actually three different ways the president could or the United States could acquire new Bitcoins. The first one is the president could decide to direct the U.S. Marshals Service to stop selling the Bitcoins that the U.S. has seized from criminals.

18:14That is about$14 billion of crypto. And for comparison, we have$650 billion of old-school gold. So it's a pretty small amount relative to other things. There is an old thing called the Exchange Stabilization Fund, which allows the president, by executive order, to stabilize currencies. And no one's tested whether Bitcoin is a currency or not a currency in that definition, but it probably is. So the president could do some of that. And then Congress, I think, would have to pass any legislation to buy it like a significant amount, like we really wanted it to do. You know, sometimes people talk about buying a million bitcoins or whatever.

18:58That would take Congress. But there's been a huge swing in Congress, too. So it's not unthinkable. You know, obviously, prior to this election, that would have been unthinkable. But from what tallies I've seen, the majority of the people in the House, 270 or so, support crypto. And in the Senate, it's probably a lot less, maybe 20 or 25. So it's definitely something that could happen. But the point being, there's three different ways that Bitcoin could end up staying on or getting bought by the U.S. government. And I think at least one or two of those will happen, and maybe all three. And then that begs the question of who next?

19:34We know the Middle East is doing it, whether it's via their family offices, but maybe not directly in the sovereign wealth funds. It makes total sense for them because they want to be part of this entire thing. So what do you think, Middle East, next major player? Yeah, yeah, I think you're spot on. Like, I think it's very sensible that the U.S. save in something other than just gold. You know, gold's been great for 5 ,000 years, but, you know, it's passed its sell-by date. digital gold's a great thing. So I think, you know, the U.S. will do it. And then once the U.S. does it, you're right. There are all kinds of both strategic alliances and competitive dynamics out there.

20:11And that's the thing I think people forget is it does seem likely that places like the Gulf that want to stay aligned with the United States will replicate a strategic reserve that seems to make sense. But equally, I think the countries that view themselves as adversarial to the United States would want to hedge, you know, China being an obvious one, but there's a lot of countries out there, you know, they're certainly not fully aligned with the United States, and would want to say, at least have some of their savings or FX reserves in a currency that's independent of, you know, whatever the U.S.

20:50Treasury Secretary wants to do. So I think you're going to see it from both sides, the U.S. and people that want to be align with it. And then people that are worried about US hegemony in the financial system. Yeah, I mean, it was one of the most, I think you wrote about this as well. I'm sure we spoke about it. One of the biggest mistakes I think the US made was the seizing of the Russian private assets and then the seizing of the reserves, essentially making them worthless. Because that sends a signal to everybody that US money is not good. Well, it certainly sends a signal that you don't have all of your savings in something that somebody could seize.

21:29And so, you know, I think on the margin, that's going to, you know, encourage countries to think about saving in a stateless currency, right? Like that's what Bitcoin is, is a separation of money and state, right? So it's a currency, does everything other currencies do, but it's not controlled by any one nation. So if we're looking at the US regulatory side, what are you expecting to change? You know, Because I'm starting to think, you know, how far do we move towards back towards some variation of ICOs, for example, because it is a great vehicle for capital formation, needs tightening up. You know, things like the U.S.

22:08users can't use perps and other margin products while everybody else can. Where do you see the regulatory landscape shifting over the next year or so? Yeah, I actually don't spend a ton of time on the regulatory side since we can't really influence it ourselves. The main theme, though, is regulatory clarity, and that's been, I think, what's lacking, is that because of the lack of clarity, some things like trading of tokens went offshore to places like the Bahamas, and we've had some negative consequences from that. So I think any clarity that the agencies in the United States could provide will be helpful.

22:46And I had served as chairman of Bitstamp for a long time, and it is difficult to manage of business when there's nothing written down. You have no idea what is a security, what's not a security. So as soon as there's more clarity on that, that will help. And then I think the bigger part is to help institutions get engaged in the space. In 2021 and 2022, a lot of very big institutions were doing a ton of work, going to get engaged. Some did some small investments in the space. And then, you know, we had, you know, Terra Luna and FTX and all these bad things happen. And with the lack of regulatory clarity, it kind of scared off a lot of institutions and they put it on ice.

23:25That's my biggest prediction is that once we do have regulatory clarity, bigger institutions will come back to the space over the next two years and really start investing in a real way. I also think the finance sector will go all out for this as well because they know how much efficiency is within this, whether it's in the payments or whether it's tokenizing equities and all other kind of financial assets. for settlement, clearing, everything else. It feels like that is going to be, whether it's this cycle or next cycle, but that's going to be enormous when that happens. No, I agree with you.

24:00And I think the ETF was huge in kind of breaking that log jam, where for years, I'd be out there evangelizing for blockchain. And, you know, you talk in some firm and they would say, oh, well, we can't invest in Bitcoin for compliance reasons. I'm like, well, well, that's interesting. I've run a couple of compliance departments, and I have no idea what you mean. What do you actually mean by that? Like, why can't you do Bitcoin for compliance reasons? And then they just give the circular, well, for compliance reasons, you know? And so now that BlackRock and all these very reputable firms have Bitcoin products out there, that just kills that.

24:35That was kind of the last, you know, inane reason to say no. But it was a reason a lot of big entities said no. But now that you have, you know,

24:46$35 billion float into branded ETFs, you know, like BlackRock and Fidelity and Bitwise and others. So with that, I think it opens it up. And you're right. Wall Street, you know, spends billions, each company on Wall Street spends billions on all these silo databases. And then every day they have to reconcile them to their own databases inside. And then they've got to reconcile the outside clearinghouses and all that stuff. And I think that'll take, you know, the better part of a decade for all that to really actually happen. But it's coming. And Mike Cagney, a figure, is a very good leading example that he had previously been a macro trader with us back in the day and then founded SoFi.

25:23And they're doing mortgages on the blockchain. And I actually started out as a mortgage securities trader. And it's amazing how many people take a bite out of your mortgage payment, right? Like there's all the servicers and the people. You know, it takes 55 days for the check to get from one person or the other person. So putting it on the blockchain is very efficient, and his company figure already has$10 billion of mortgages on the blockchain. And everyone's talking about RWAs. That's real. That's a real-world asset, and there's$10 billion of it already on the blockchain. So those are the things that help big institutions get in the space.

25:59Most of the main alternative managers, like Apollo and BlackRock, they're doing funds now that are on the blockchain. I think those are a bit more proof of concept than hugely important today, but it just opens the direction we're going. Another great example, Ondo is putting treasuries on the blockchain. The U.S., as you said, needs to export$2 trillion of debt every year, right? And what better thing than via Ondo or stablecoins because you're finding new buyers in every little hamlet on Earth, right? Anybody with a smartphone can now be a loan money to the US government, right? Like anybody with a smartphone in the weirdest corner of the earth can buy a treasury on onto or whatever.

26:48So there's that kind of stuff that is actually happening in the real world. Yeah. The other thing that we're looking at at Real Vision and where are the worlds moving is I think we will disrupt asset management itself. the idea of crowdsourced tokenized asset management where people form an opinion about maybe this is a basket to invest in you spin up a token and it creates the ability for people to create their own product there's no real reason we have asset managers in many instances you know any group of smart well-educated people can get together and and try and outperform versus hedge funds or benchmarks or whatever it is oh yeah no i i love that concept that if there's some talented managers wherever they are around the world you can have all kinds of league tables that show their uh risk adjusted returns versus everybody else then money can flow to the better managers you know all that is is possible and it you know it's certainly coming and my favorite example that was the constitution dow you know remember that a couple years ago where in days a group of people that did not know each other didn't trust each other had no reason to be connected decided they were interested in the same thing purchasing the last privately held copy of the u.s constitution they got 40 million dollars together in a few days and they went into christie's or sootheby's i forget which auction house had it and competed with it and the fun bit about that you know it they didn't win ken griffin the ken griffin stole it from them didn't Yeah, yeah.