EXCLUSIVE: 30+ Years of Insider Knowledge Revealed (Charting the Banana Zone)

0:28Meet Magic Eden, the home of Web3. If you've used any of their protocols, you can claim some. So check out Magic Eden today and watch them become a super dap in the home of Web3 in real time. Go to realvision.com forward slash magic for more information. Hi, everyone. I'm Ralph Powell, the CEO and co-founder of Real Vision. Here at Real Vision, we're committed to give you the best knowledge, tools, and network to help you succeed in your financial future. If you're enjoying this podcast, please take a moment to give it a five-star rating. It truly helps us continue to bring top-tier content. Thank you so much.

1:03Join me, Raoul Pal, as I go on a journey of discovery through the macro, crypto, and exponential age landscapes. In The Journeyman, I talk to the smartest people in the world so we can all become smarter together.

1:33Thank you.

1:57Anytime, anywhere. Experience the fast, accessible futures trading you've been waiting for with Plus500. With over 20 years of experience, Plus500 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. Plus500, it's trading with a plus.

2:21Hi, I'm Raoul Pal, and welcome to my show, The Journeyman, where I journey to that nexus of understanding between macro, crypto, and the exponential age of technology. Now, this is a special, it's a flash update for you all because I know that you're all interested in that special yellow fruit, the banana, for the banana zone. The banana zone is that point when crypto prices go exponential. And while we all love this and our hopes and dreams are all in that yellow fruit. I wanted to get everybody on the same page of understanding so you know where we are and why we're here. So I'm going to run through a selection of charts, many of which you'll never seen before, that gives you a much deeper understanding of what's going on and what we might be able to look forward to ahead.

3:11Because the banana zone is a very special type. Now, if you haven't summoned the banana by getting your merch, click on the link below or if you're on real vision just go to the merch store on the left hand side the kind of icon of a t-shirt and get some banana zone merch it's always good fun um anyway also on the real vision platform i'll be putting the chart pack if you're not a real vision subscriber it's very simple just click on the link realvision.com forward slash join pop in your email um and you'll go straight through and you'll be able to read the document and download the document so you can follow along properly.

3:51So I really urge you to go to Real Vision. You get a lot more value out of it. Once you get there, you'll see all the incredible content, the AI tools, the trade ideas by our members, and also the kind of ideas that they put out. There's so much there for you. You don't know what you're missing watching this on YouTube, but those of you who are watching this on the Real I know you guys enjoy it, so that's great. Anyway, let's talk bananas. Real Vision doesn't have views. Real Vision represents the views of many, many experts around the world. We bring you the best experts in the world to do that.

4:27Now, I am talking myself here as Raoul Pal, the CEO and founder of Global Macro Investor. My institutional research service that I've been writing for 20 years, and luckily has been one of the best, no, without question, the best performing research service of all time. out of that i also build um real vision pro macro which i share with andrea steno larson of steno research so many of the ideas get distilled the trade ideas the trade recommendations the analysis so those of you who are not global macro investor subscribers which most of you aren't um or pro macro subscribers you're getting a peek behind the curtain of the kind of work we do there at that junction of macro and crypto.

5:10Okay, firstly, I've said this before to you all, it's all about demographics. Remember that magic formula that I've talked about in the past where GDP growth equals population growth plus productivity growth plus debt growth. Okay, got that? Well, this is the important bit. The labor force participation rate in black here has been falling for a couple of decades. That is because the population is beginning to age, and so less people are in the workforce. Now, you can see in pink, it's the births-deaths rate that is actually driving this. So as population growth has been slowing, the workforce slows over time as people get older.

5:58Okay, so that's pretty clear. An old population, however, because of the magic formula, less people in the workforce means less GDP. So trend rate of GDP has been slowing. So the economy's been slowing over time. This chart is a chart you'll never see anywhere else. And I think it's the single most important chart in all of global macro. So what is it? It's that same labor force participation rate but this time it's against u.s government debt as a percentage of gdp now it's inverted here and what it basically tells you is that as the labor force declines in size or percentage of people involved in the labor force the government takes on more debt to offset the growth this is what it's all about this is the big economic mess we're in it's It's a mess created by demographics that I've talked about before.

6:53This chart is incredibly important. Now, look at the little divergence recently where government debt has been growing, but the labor force participation rate hasn't. That's the recent influx in immigration in the United States over the last two years, where some 6 million people or so have immigrated into the US, and that has kept the labor force participation rate higher, offsetting the retirees. but that's unlikely to continue, particularly with the new government. So what we'll see is the labor force participation rate decline and government debts keep growing. Okay, so we've got all of these massive debts.

7:26I've talked to you about the everything code. The everything code is the servicing of these debts by using liquidity. So liquidity is the debasement of currency. So to service these debts, they print more money to service them. It's as simple as that. That is the game we're in. That is the everything code game. Meet Magic Eden, the home of Web3. They are getting into the token trading space in addition to NFTs to become a super dApp where you can do everything cross-chain all in one place. They're solving UX issues by building products across every chain ecosystem, swaps, borrowing, and lending, NFT, perps, and more.

8:02All seamlessly cross-chain. Instead of hopping between countless sites and handling multiple wallets, just use Magic Eden. Plus, the ME token is coming out this quarter from the ME Foundation. If you've used any of their protocols, you can claim some. So check out Magic Eden today and watch them become a super dap in the home of Web3 in real time. Go to realvision.com forward slash magic for more information. Let's talk about liquidity because I think you've heard me talk about this before. It is super important. Liquidity keeps growing. That's the debasement of currency. It's growing at 8 % a year.

8:38That means the value of scarce assets, S &P 500, real estate, gold, should grow at about 8 % a year just because the currency has been devalued. Now, there's another maybe 3 % inflation rate to add to this. So 11 % is your hurdle for your future self not to be getting any poorer. And most assets just don't do it. but you can see how important it is by this chart that you should have seen before which is the chart of the nasdaq versus our global macro investor total liquidity this is the total liquidity around the world that's government that's government liquidity central bank liquidity and private sector m2 and other measures so it's the total amount of money printed by the system and what happens is the nasdaq is 97.5 percent correlated to it that's incredible the other extra bit that's not correlated, you're seeing now is the secular growth in technology.

9:33Because technology is a secular trend because tomorrow is more digital than today. And obviously, Bitcoin, massively driven by total liquidity. This time, it's about 87.5 % correlated. Reason being, there's a faster adoption curve, exponential growth that happens in Bitcoin or all cryptocurrencies. is. So that's what lowers the correlation is, in fact, the outperformance. But anyway, liquidity drives everything. Now, since 2008, everything has become cyclical because in 2008, every central bank around the world reset interest rates to zero, like a debt jubilee. You don't have to pay your interest so the world could kind of recover from the debt blow up of 2008.

10:17And for about 10 years, we had zero interest rates. And what the governments did is they reset all of their debts to between three and five years. That cycle has created a perfectly cyclical business cycle. The ISM, the Institute of Supply Managers Survey, what we've got here is in black is the current cycle, which is it's currently at its lows, but the forward-looking is actually just the previous cycle moved forwards and inverted because it keeps repeating the same cycle. So that same cycle is repeatable and understandable and forecastable. Sure, the wiggles may change, the direction will be right.

10:56And it's driven by this. This is the distribution of debt in the United States. If you look at the first two boxes, well that's what 72 % of the entire debt structure is one to five years which is what I talked about before this is what's causing the cyclicality that you see in the economy and these four-year cycles so because they're using liquidity to manage the debt the rollover years which is tends to be this yellow and the kind of weird peachy color, the summer and fall, those are when the peak debt rollover happens. So they add lots of liquidity. So if you look at that, you can see the liquidity piling into the system as they start rolling those debts over and they need to print more money because they have to issue new debt to pay the interest on the old debt.

11:50Sometimes they use a central bank balance sheet. Other times they just create liquidity and it's done on a globalized basis. Right now, China's the big liquidity driver. And then you get those blue years, which are the winter years when they start withdrawing liquidity because they don't need to service the debts because there's no debts around those periods of time. So that's why we get this cycle. And this cycle creates the Bitcoin cycle. It actually corresponds with the presidential election cycle and also the Bitcoin halving cycle. They're all those summer months. the summer months tend to be pretty strong you can see the previous examples 2012 16 20 all good months all good seasons or years and then fall tends to be very strong the fall in 2021 uh was still strong but it had a stunted cycle because the liquidity was starting to get withdrawn because they put so much in but if you look at 2017 and 13 they were gigantic so the fun is yet to come When you look at it in year-on-year terms, you can see the cyclicality and how related Bitcoin is to global liquidity and how the seasons dictate that.

13:00So what we're looking forward to is the big rises in price ahead. 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. So 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. What happens normally is around the Bitcoin halving or around the early part of crypto summer.

13:41Now, we're not talking about summer as in actual seasons. We're talking the four seasons, which correspond to each year. the early part of the year usually is something called the boring zone so it starts strong and then sideways corrects after the halving for a extended period of time and then eventually begins to break out the breakout usually ushers in the banana zone so we've had the boring period it was about eight months long it was a nice orderly correction so what lies ahead the banana zone the fabled favorite yellow fruit of all of us the one where our hopes and dreams are all in it let's talk bananas so when we look at um halvings from the halving you can see what happens until the end of that year so we had 2020 at the top was very strong um we had another strong year in 2016 and 2024 were a bit below par right now.

14:44But don't worry about that because you'll see it in context of everything else. We should still see extremely strong price rises. The US election, well, that's a key time for this because after the election, we get the banana zone. There's often liquidity being injected into the system. And there's also a shared sense of optimism that drives prices higher. We are just starting that now. At the time of recording, the election was two days ago, and already crypto prices have started their explosion into the banana zone. Bollinger Bands are a measure of volatility or lack of volatility because Bitcoin was ultra low volatility recently.

15:24And that's really interesting because every time you get there, when you get these kind of low volatilities, you tend to get large price rises. And we've been following that kind of price action. So you tend to get two, three, 400 % rises over the course of six to 12 months. So that I think is another interesting signal. So suppressed volatility usually leads to hypervolatility. Also, Solana exhibiting extremely low volatility. That box in the right, it shows you that every time we've got to these levels, we've seen everything from a 25 % rise to a 520 % rise in two to three months. This is bananas.

16:08Now, looking forwards, the business cycle is starting to pick up. So current ISM today is very lackluster. It's almost recessionary conditions, which is why many of you think we're in a recession right now. The forward-looking indicators are exploding higher, meaning we're all going to have some more money soon because the economy is going to be working better, our businesses will run better, our earnings will go up, and we'll feel a bit better about ourselves. That's what lies ahead and is the essence of what matters in the banana zone. And you see the Financial Conditions Index, which is our lead on all of this, it's comprised of oil prices, the dollar and rates, is also suggesting that ISM leads.

16:51And it's a pretty good indicator that it leads ISM by nine months. So we kind of know the business cycle is going to be going up at least for nine months and probably a lot longer. Now, here's where the magic happens. Altcoins, as a percentage of total market cap, so it's like the inverse of Bitcoin dominance, actually is driven by the business side. And that's because people take more risks and invest more money when they've got their earnings going up, when people think they've got a bit more money. And that is what drives altcoins. It's the same as small caps in equities. They're all driven by the same basic phenomena, which is the business cycle creates more activity, which creates more investment, which drives prices higher.

17:35So we've barely started. As I showed you before, ISM starts going up, altcoins, go bananas. Now, when we measure altcoin season by using this 30-day outperformance underperformance of Bitcoin, we're nowhere. there. We're still at 39%. That's mid-cycle range. We've got a long way to go. And that's when things get very excited. It tends to be the last 12 months of the four-year season, that four-year period. Those last 12 months are where all the returns come and they lie ahead. Also, total liquidity is breaking out. We see these wedge patterns every time around the same time in the cycle. And then what happens is as soon as it breaks out, Bitcoin breaks out too.

18:25We're breaking out now. China is leading it. China's injected$8 trillion of liquidity so far since I think October, November 2022. Europeans about a trillion, the UK about a trillion. The US has actually been about flat, but we expect them to start injecting money soon via the Treasury General account. Okay. Global M2. It's a measure of private money. It leads by 11 weeks, Bitcoin. Perfect. And Bitcoin, banana zone. We keep going. So that looks great. Now, don't get fixated exactly. It's going to be 100 ,000, but it seems in that kind of range. Basically, a strong end to the year and should get even stronger into next year.

19:07GMI total liquidity, another fantastic correlation, same kind of outcomes uh strong bitcoin into the end of the year um and that's what we're looking for here ignore the corrected price action right now on that chart because it hooks up afterwards so we should just continue over time all right okay are we anywhere near the cycle top i know people fret oh my god but bitcoin's at all-time high surely i'm gonna be buying the top surely ral shilling things at the top and he's trying to find excellent liquidity and all the nonsense that people talk about online. Basically, our cycle liquidity indicator is nowhere near where it's going to go.

19:44Also, look at the acceleration that happens before it peaks out. We haven't done anything yet. This has been super mild. So expect the acceleration ahead. If we look at prior cycles, we're kind of nowhere in the current cycle. Well, sorry, we're nowhere. We've still got the exciting part where prices go vertical, lying ahead. It's the light blue line here that's a little bit hidden. But really what we're doing is we're more closely following, let's say, the 2015-18 cycle, which I think is how it plays out this time, as opposed to the stunted cycle of 2020. But that remains to be seen. Why this matters is crypto in the end is the best performing asset class in all recorded history.

20:33It dwarfs anything else. So Bitcoin does about 142 % annualized returns. This is actually a table from Exponential Age Asset Management, my asset management firm, that invests in crypto hedge funds. So we invest on behalf of high net worth individuals, pension plans, institutions, et cetera. And Bitcoin, Ethereum, Solana, the returns are an order of magnitude different to the next best performing asset technology stocks, the NASDAQ. After that, you get to the S &P 500 of 13%, which barely beats that 11 % hurdle rate and nothing else beats it. The long-term returns of small caps, large caps, REITs, treasuries, nothing.

21:13They all are destroying your future wealth. So really, this is the powerful thing, the crypto supermassive black hole that outperforms everything. The NASDAQ actually is down 97.5 % versus Bitcoin since 2012. No, sorry, 99.97 % versus Bitcoin. So that's how powerful an asset crypto is. This supermassive black hole sucks in everything around it. And it happens because this is all about a technology that is growing. So this is a chart of the number of users of crypto by using wallet addresses versus internet users from 1992, when the internet was at 5 million and we started wallets from 5 million.

21:58Now, internet users is IP addresses. We've all got many IP addresses. Crypto wallets, well, they're wallets. They're not necessarily daily active users, and we've all got several wallets. So it's comparing a similar like for like. But currently, crypto has been growing at twice the speed of the internet. Now, on this chart, we assume the internet actually slowed down in year 8, 9, and 10. So we've assumed the same rate of growth as the internet, not a doubling of growth. If it was a doubling of growth, it's probably growing at 80 % a year, which I think is more likely. But we slowed it down and we get to 1.1 billion wallets or users in inverted commas by the end of 2025.

22:371.1 billion. Okay, that's huge. But it's not as huge as if we extrapolate out to 2030, that fabled day where I think we've got six years to unfuck our future and invest before things change. At that point, crypto starts to become quite saturated in terms of its growth because suddenly you're at 4 billion users and we can only double in growth to 8 billion users. Yes, on-chain activity will grow and that will drive more metrics and still drive prices. But generally, the bulk of the returns happens between now and 2030, which is why I'm so anxious for everybody to make sure that they unfuck their futures doing this.

23:18It's a huge thing. and that's what's driving this beautiful log trend bitcoin over time number go up because people use blockchain technology because the world is more digital than today and we've barely started the rise we usually get to two standard deviations overboard will we get that far or not i don't know if it's two standard deviations we're talking 500 000 that sounds a bit too racy to me maybe gets to one standard deviation because each cycle is a little more muted than the past either way expect prices to rise from 150 to 450 000 over the course of this cycle depending how it pans out again no guarantees here but just to give you an order of magnitude filming this today we're at 75 000 okay got it and then finally the banana zone just so you can visualize what this means to you and your returns and how the banana zone how you unfuck yourself with the banana as those nfts say that real vision is produced is this things go vertical this is the time not to lose your minds this is the time not to fomo in all the stupid shit your friends are making money in this is the time to just do nothing you should have already made your allocation maybe a bit of bitcoin a bit of solana um a bit of eef maybe you've gone out a bit the risk curve like i have and sui which is one of the newer chains that's gaining massive adoption or maybe you're playing around a bit in memes.

24:46But remember to not fuck this up. My don't fuck this up thesis is don't use leverage. Don't FOMO into stuff. Have 90 % of your assets in the core top three coins. And then with the 10%, you can speculate more, whether you want to have a meme or whether you want to look at some smaller projects. So that's how I like to think about it. That way, you generally won't fuck it up. It's by over-trading, trying to trade breakouts, using leverage, don't use leverage please because what happens is you get it rolling you lose your coins we have one job here one job in a secular mega trend like this is not to lose control of your coins that means don't fuck around too much in defi don't give your coins to anybody just do nothing use that 10 if you want to feed your inner dj or you want to learn new things and how things work but Don't do it with your full stack.

25:42Anyway, I hope this helps. The banana zone has arrived. We're here to help you at Real Vision navigate this. Our job is to give you the knowledge, tools, and network to really succeed. Now, if you are a crypto person or you're crypto curious, we have Real Vision Crypto, which is an entry-level way of getting the knowledge that you need to succeed in the banana zone. Or if you're leveling up, then Real Vision Pro Crypto is an essential. Jamie Coutts' work on this is really, really something incredible. And we're so honored to have it. But it's not just Jamie's work. There's plenty of others. I pop into Pro Crypto too, and we've got lots of analysis for you to make sure that you are on top of the trends that matter and identify the best opportunities.

26:40The community within ProCrypto is something incredible. The Discord channel, how people help each other share ideas. Also on the Real Vision platform, just go to the trade ideas and see what other people are doing. Learn why they're doing the trades. It's all there to help you. I don't want you to miss this opportunity. So if you're not at Real Vision, come across realvision.com forward slash join, download this doc so you've got something to guide you. Use the Real Vision platform to start learning how to best navigate these times. If you are a Real Vision user, think about RV Crypto, think about Pro Crypto.

27:16Even if you're a Pro Macro subscriber, Jamie's work is different to my work. I do the very macro crypto crossover with Julian Bittle, but Jamie's work. Anyway, not a pitch for products, it's a pitch for knowledge. I just want you all to win. I really, really don't want you to fuck this up. Anyway, take care out there. Meet Magic Eden, the home of Web3. They are getting into the token trading space in addition to NFTs to become a super dap where you can do everything cross-chain all in one place. They're solving UX issues by building products across every chain ecosystem, swaps, borrowing and lending, NFT, perps and more, all seamlessly cross-chain.

27:53Instead of hopping between countless sites and handling multiple wallets, just use Magic Eden. Plus, the ME token is coming out this quarter from the ME Foundation. If you've used any of their protocols, you can claim some. So check out Magic Eden today and watch them become a super dap in the home of Web3 in real time. Go to realvision.com forward slash magic for more information. If you like this episode, I'd love for you to head over to realvision.com forward slash join for a free membership. Start your journey today to unfuck your future. Just one click away. Have you ever wanted to trade Bitcoin but haven't dared try?

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