How Safe is Crypto Right Now? ft. Anthony Scaramucci

0:28Make large crypto trades with Kraken OTC. customers through Payward Interactive Inc. For more information, go to realvision.com backslash Kraken OTC. Hey everyone. Look, sorry, this is the cheesy interruption that you get on YouTube channels, but they're really important. I'd really appreciate it if you just hit the subscribe button. You see, it makes a difference to know how I'm doing, seeing the growth in subscribers, if we're getting the right content. Obviously, comments help as well. But hitting the subscribe button allows me also to book the best guests. It really does make a difference.

0:58So if you do enjoy this content, and I know you do because you keep coming back to watch it, just please hit the subscribe button. Sorry again for the cheese, but it is important. I appreciate it so much. Take care. So you should be thinking of these sell-offs as a gift. These, I call them macro spasms. They don't usually last very long. Rates are going to come down. Liquidity is going to come in.

1:27So welcome to Speak Up. I'm Anthony Scaramucci. Thanks for joining us. Our guest is Raul Pal, who is probably our best guest. I don't know. I mean, if I look at our ratings, Raul, it's off the hook with you. Best looking guest. You're incredibly good looking. You're the Indian British James Bond. You live on a tropical island. You got crypto right 10 years earlier than the rest of us, which is why everybody loves you. Okay. So we're going to talk all things, macro, crypto, web three, but let me just see if I have my crash helmet somewhere. Oh, I don't have my crash helmet. So I'm not too worried about the crash.

2:08If I had been a lot more worried about the crash, I'd have a crash helmet on talking to you, But should I be worried? No. Tell me to the individual investor while I close this door because my kids are screaming outside. And tell me whether or not I should be worried about what the hell is going on. Yeah. When you invest in the crypto asset class, you expect volatility. If I go back over all the years I've invested, most years you get two, three, or even four 30 % drawdowns. This one in Bitcoin has been 27%. it's kind of within the range of normality. And what you need to ask yourself is the main drivers of crypto are the business cycle, i.e.

2:51where are we with the economy? Well, we're starting to pick up slowly. Inflation is coming down. Rates are going to come down. Liquidity is going to come in. And so therefore, that's usually a very good time for crypto. So the tailwind is behind you. And the other thing, are people adopting the technology? Are things being built on it? And that's ongoing too. So when you see a news event like the last few days, you know, driven by macro factors, you tend to think they're likely to be short term. Now, if the business cycle was getting old, and the economy was starting to feel a bit more fragile, then yes, you might be worried about it.

3:30But this is early in the cycle. And generally, you have to expect the volatility. And how I've always dealt with it is a Jedi mind trick, which is you look forward to it. When it happens, you can buy more and you get to compound your returns much better than anybody else who just does nothing or tries to trade around it. So you should be thinking of these sell-offs as a gift is, oh, wow, if I can find a bit more cash, I can put it into the market. And you tend to do really well over the cycle by doing that strategy. I have this whole theory. I'm going to test it on you. And I don't want to bore people with the yen carry trade because it took me 10 years to understand the yen carry trade, which is probably why I'm not on the Forbes 400 list like some of our friends.

4:15I don't know what the hell he meant. But basically, you can borrow at very low interest rates in Japan, and then you can use that money to fuel your other assets. That's when rates go up in Japan, your borrowing costs go up, you're forced to start selling assets, and then it could create a cascade of assets or lots of margin calls. And that's something that we've seen on top of bad economic data. Is that a general premise? Yeah, so even more so, it's generally not the change of interest rates. Maybe really cares if your rate goes from 10 basis points to 25 basis points or whatever, right? What it actually was, was the move in the yen.

4:52Because you have to pay back, you're borrowing yen. When the yen starts moving a lot, then that starts concerning you. The yen went up a lot. So suddenly, the amount of yen you've borrowed has gone up in dollar terms. So what happens is everybody reduces risk. And that was the real thing, is the Bank of Japan started intervening in the currency market because their currency was too weak. And they started selling dollars and buying their own currency. That's what everybody borrowing yen went, oh, my God. Now, suddenly, yes, I'm getting a cheap pickup and borrow, but bloody dollar yen is moving 2 % a day every single day, and I'm losing a lot of money.

5:32And what happens is a risk manager comes along at a bank or a hedge fund and goes, you need to close your positions or reduce your risk. And that's really what the last four days were all about, was the risk manager tapping somebody on the shoulder saying, listen, you're losing money on this side, you need to start reducing risk. And that's why everything gets hit, from crypto to NASDAQ to mining stocks to oil to anything, any risk at all. But these tend to be very short-lived, because once the market resettles, they get used to the change, people have been washed out of positions, it then kind of settles back to normalcy.

6:11And these, I call them macro spasms. They don't usually last very long. Could it last a week? Could it last two or three? That's possible. 2016 saw very similar. The dollar had been very high. The world economy was super slow. World trade had slowed down because the dollar was so strong. And the Japanese came in and intervened in their currency. All the markets blew up. Exactly the same mechanism. But what happened after that was the central bank started simulating, particularly the Chinese, because they've been waiting for this moment to do so. the Europeans last time around and the UK last time around.

6:47This time, I think it's going to be the Chinese who are going to stimulate. And why they get to stimulate is they couldn't do much cutting of interest rates or stimulating of monetary policy because their currency was too weak and they didn't want to lose control of it. But now the dollar has weakened, they're able to do more. So I think really, it's probably a net positive. Just give it a few weeks, and it's probably very positive. Okay. So I'm going to test this out on you. 15 corrections in the last five years of at least 10%, 15 corrections. Okay. The 1 ,000-year flood, that being defined by the global financial crisis or the stock market crash, 87, the David Askin blow up, you and I are old enough to remember that in 94, the 1998 Russian ruble crisis that blew up long-term capital management in 98.

7:42It feels like the thousand-year flood happens on Wall Street every five or six years. And we chop. We chop our way higher. Is that the case? I mean, talk to an individual investor. Should you say, oh, well, this time is different. We're going down 50%. We're going into a global depression. Or are we just chopping and chopping higher? So firstly, it depends when these events happen. If the economy is rolling over after you've had a strong period, inflation has been rising, the Fed are raising rates. If it happens then, it can risk turning into something bigger. When you're the opposite, which is the business cycle is just turning up now, the Fed are cutting rates, the probability of this being a bigger event is significantly lower.

8:33So from that probability, less so. The other thing is something happened in 2008 that has stopped a lot of this. In 2008, the central banks discovered the money printer. And the money printer, and you and I have talked about it on this show before, essentially is debasing the currency by printing more currency. Now, it's dressed up in a nice term called liquidity these days. It used to be quantitative of easing, but they find different ways of doing it. When they print more currency, it makes the value of that, the purchasing power of that currency go down versus scarce assets. So it makes assets go up.

9:08So now every time, every four years, in fact, that we've come close to something that could be nastier, they've started printing money. And it's not just the US, it's everybody, all the main central banks. And that has kept a bottom under markets, even in 2022 was a bit trickier because we had inflation. So it was hard to print money. But eventually, when it got to it, when the S &P was down about 30%, they kind of went enough's enough. And they started printing money again. So I don't think there is a lot to fear. In fact, I would be so outrageous to claim the probability of a down 50 % market is now miles smaller than it was when you and I grew up, when it was a common occurrence that we would see it.

9:53We won't see this again because of the money printer. It doesn't mean it's a risk-free world, obviously, because when they print money, they're debasing your savings by 8 % a year to start with. But if you think of that 8 % cost of that debasement, that's like the central bank's buying a put option on the whole system, and it's costing you 8 % premium a year. Put it that way, it's not the worst thing in the world, but it's never great. The Fed behind the curve? Yeah. Yeah, they are. So if you look at true inflation - So somebody, you know, are they 150 basis points behind or are they? Yeah, I think, you know, where they should be now, if we look at Truflation, which is an on-chain, so on a blockchain recorded about a million or so prices.

10:42Okay, so let me interrupt you. That's truflation.com. And I recommend that all the time to people because it's almost like a blockchain aggregator, decentralized aggregator of pricing data. Go ahead. I'm sorry. I just want to make sure the viewers know where to find it. It's a trusted source of truth. Now, it's not exactly the same measure as Fed inflation, but it's currently at about 1.5%. Now, inflation itself is driven by a lot of lagging factors, and housing is the big lagging factor, and wages, both of which are coming down. So we should see inflation. Have you ever wanted to trade Bitcoin but haven't dared try?

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12:18Much lower. Now, if I look at something called inflation break-evens, that's Wall Street's guess of where inflation will be in one year's time. If I look at it now on my Bloomberg screen, it's at 0.63%. So they're pricing in a massive undershoot of inflation. So it's telling us that rates should come down significantly. Right now, they're probably 100, 150 basis points too tight. And I think they should come down to probably around 2%, which is also very convenient because this year, the US Treasury has to roll$10 trillion of debts. And it's very expensive to roll it at 5.5%. It's a lot easier to do at 2%.

13:02So I think it's a blessing. And the Fed will want to get rates as far down as possible for the next 12 months when they have to roll all this debt. It's like nobody wants to refire their mortgage at 5.5%. They want to refire it at 2%. It's exactly the same mechanism for the government because it costs you a lot okay well i mean listen the reason i'm shaking my head is that uh we're both in this game a long time and uh you know when somebody tells me this time is different you and i both know run for the woods it's never really different um and i am going to say something to you that i didn't think before i want to test it on you i feel like we have a looming debt crisis but i also feel like we're going to figure out a way to stay in a roughly permanent looming debt crisis.

13:56I feel like I'm 60 and I'm going to be 70. And hopefully you'll still accept my invitation to come on my show. Of course, the show will have billions of viewers by then. And I'll be saying to you, hey, we're in a looming debt crisis, but the debt crisis actually hasn't happened. Am I right about that? Or are we going to be sitting here five years from now in a big crisis? So we're exchanging a debt crisis for a slow debt crisis. The slow debt crisis is the printing of money. So it's the 8 % a year. So over 10 years, that compounds at 100%. Yeah, your money is going to be almost worthless. I mean, it's going down.

14:35I mean, it's terrible to see, right? I mean, somebody showed me a chart. It said, this is the average house priced in Bitcoin. and the dollar was going up, but the price in Bitcoin was going down because the Bitcoin price is going up faster than the inflation. Yeah. If you think of most asset prices versus this debasement, the S &P is doing about 8 % a year since 2012, which basically just keeps your head above water. The NASDAQ's done about 17%, but Bitcoin's been doing 150%. And when you look at NASDAQ versus Bitcoin, the NASDAQ is down 99.97%. So it does do very good for your purchasing power.

15:20But this debasement is a real issue, because most things just don't keep up with the debasement. So you're right. We're not going to have a massive debt blow up. What we're going to have is this ongoing bleeding of all of our purchasing power. Okay. I mean, all of this stuff is inside your bandwidth, inside my bandwidth. We've got a lot of crypto enthusiasts on the call. Some of them have diamond hands, actually. And so let's just talk about the ETFs for a second. So last two days, net inflows to the ETFs, the 11 ETFs, more money went into the ETFs than left ETFs. So what do you think is happening?

16:02You think the world is getting educated to accept this volatility in crypto? Do you think people are just, there's just an overwhelming amount of demand now? You and I were just so effing early that now there's, you know, we were underestimating the amount of demand that's going to come in from traditional finance people. Or what do you think is happening? Hey, everyone. Listen, if you want to unfuck your future, let me help you. Follow this channel, subscribe, click the notifications, and you'll get everything as soon as it comes out. See you there. So the volumes in ETFs are driven by two, net inflows, or people known as arbitrages who are arbitraging the futures market.

16:44So we don't know what that flow was. So they would sell the futures, which traded a premium, and then buy the ETF. We don't know what that flow was, but let's assume it's net inflows because Binance saw record inflows yesterday as well. So what we're seeing is people, I think, because of the education that you've been doing, I've been doing, Michael Saylor's been doing, everybody's been doing, people are starting to understand the game. And even Larry Fink has been explaining the game. The game is the erosion of your purchasing power, not via traditional CPI inflation, but via this more pernicious debasement idea.

17:19And I think people are understanding and have been educated that this is a volatile asset class. And as I started at the beginning of the show, if we do get sell-offs, people are starting to realize, that's what I buy. That same strategy worked incredibly well in the NASDAQ over the years as well. You've got a big secular trend. Any wobbles, generally a buying opportunity. Solana. What do you think? Solana is cheap, fast, and there's a lot of innovation coming. And we're seeing lots of nice, easy applications for people to use. So what drives a blockchain use? Well, nice applications, easy use, and cheapness.

18:00So it's really, really blowing out all the metrics versus other chains right now, hence why its price outperforms both Bitcoin and Ethereum. So it's been definitely the big breakout of this cycle. And I think it continues because it's getting a lot of traction. It's just a very easy to use chain that's very fast. And a lot of the applications are just very user friendly. This show is sponsored by BetterHelp. In these crazy times we live in, the last thing on your mind is you and taking care of yourself. We all deal with it. Work, kids, obligations, bills. How about 11 days in the White House? You name it, everything takes priority except you.

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19:20Never skip therapy day with BetterHelp. Visit betterhelp.com slash wealthion to get a 10 % discount on your first month. That's betterhelp, H-E-L-P.com slash wealthion. I have a relationship or I did have a relationship with Sam Bankman-Fried. And my producer probably doesn't like me talking about him because he's in jail. You and I are not in jail, but he was a brilliant guy. Okay. Flawed human being, and obviously sad to see what happened to him. But I had dinner with him in September of 2022. And he told me that Solana is the fastest. And Solana is going to be the winner. And I said, well, you've made investments in others.

20:08You've made investments in Miston Labs. And I think you're on the board of one of these. And so, no, they're good. And they will have a role. but solana uh is great i said well this network stops a lot he said yeah it stops a lot because a lot of users and the people the programmers know they want to use solana because it's moving fast and it's very secure and so he'll fix meaning anatoly the creator of solana will fix the work stoppages do you believe that well they've stopped so yes okay but do you believe that he who is fastest wins and therefore solana solana flip ethereum let me say it that way because solana flip ethereum you know i don't know i don't think so i think solana grows massively and closes the gap massively with ethereum different chains are used for different things ethereum is securer is probably the chosen one for the finance industry to build on top of whether it's layer twos or whatever, because it's very secure, very well battle tested, and very respective, and still innovative.

21:18Solana seems like it's more for retail application and fast moving applications, even maybe crypto exchanges can build on the new Firedancer part of it, because it's super fast. So I think, you know, to extract away for people watching this, I don't really understand this. It's really simple. Bitcoin, Ethereum, Solana, they're all just decentralized businesses selling block space on their blockchain. And different block spaces have different attributes, and they're used for different cases. So Bitcoin is the single most secure. So right now, its main use case is just Bitcoin itself. And it's perfect in that way.

21:57Ethereum, DeFi has really been the big thing. And obviously, NFTs are very big, but that's also gone to Solana. So valuable transactions, if banks are going to transfer hundreds of gazillions of dollars between each other, Ethereum is likely the chain of choice. Solana, for lots of rapid transactions, it's the right choice. We will see other things, whether it's SUI, which is the Mistin Labs one, or Avalanche or others for gaming, or for other applications like converting the old web to social media into web three or music they will all find different blockchains that better suit their purpose okay all right so this is uh the time where i get very happy and i don't know viewers and listeners get happy but i think i talked to you once i was like in uh hawaii and you were getting right you were giving price targets and i i don't know i must have drank like 40 mai ties after your price targets you know what i mean so i mean let's go here so where is Because I always get hung out to dry every time I do this.

23:01No, no, I don't. And then some bloke on the internet. You know, I'm sitting here in my vacation home, and I'm expecting price targets from you, so I can – it'll give me an excuse to do something dangerous and dastardly. So go ahead. But then I just get hounded online for saying, Ralph Nell says this. Solana is at the end of this cycle, meaning, you know, we get closer to another Bitcoin halving. Solana is where? It's probably north of 1 ,000. I think the range for me is worst case is 800, mid case is like 1 ,200, uppercase in a blow-off top would be 2 ,500. So don't cut off that 2 ,500 bit at the end and says, Ralph Powell says 2 ,500.

23:44No, no, no. I actually think it's 1 ,000, so I'm not going to push you to 2 ,500. But if it is 1 ,000, right, it's really – You tell me it's fully diluted market cap right now is$83 billion. You're talking about$400 to$600 billion of market cap for something that is this unbelievable decentralized software that could facilitate large scale trillions of transactions at very low cost for a global society. So I don't know. You tell me what the banks are worth. You know, do you think, I mean, if this thing is going to replace a lot of banking transactions, shouldn't it be worth at least a trillion dollars?

24:29I think all of these big blockchains will be worth multiple trillions of dollars because these are not single applications. They're entire networks of which you can build entire other businesses upon. These are immensely valuable things, but the applications haven't yet been built on it. So, yeah, I think you're dead right. You know, this cycle is not where these things are going. I think this space goes from$2 trillion today to$100 trillion by 2032, 2034. Okay. So the message from Raoul Paul and also Anthony Scaramucci, but you're the big kahuna, I'm just a tiny biker, is relax. Don't get yourself too crazy with the volatility.

25:10All right, let's go to viewer. Hold on. I just want to raise one point about this. Yeah, yeah, please. I want to go back to what I just said. $2 trillion to$100 trillion in, let's say, 10 years. That will be the largest, fastest accumulation of wealth in all of human history. That will be double the 100-year accumulation of wealth of the S &P 500. So for those people in the game - Not to interrupt, but it would make sense because you're taking third parties out of transactions. business because you just have to think about from a human innovation point of view every time we've interacted with each other because we don't trust each other we have a verifiable third party to help us if you remove that think of the cost savings to human society human economy so of course it would create that a level of wealth in a system that does that so therefore as an investor that's the thing to keep in mind how do i stay in this trade for as long as possible and compound what is the largest you know if i go back to anybody and said would you have bought the nasdaq in 1990 everyone would hell yes well here you've got it 1990 not 99 1990 you go hell yes well that's where we are now somewhere in the mid 90s of the nasdaq even though the nasdaq in 2000 corrected by 50 if you bought it in 1990 you're sitting here in 2024 you're a very happy camper very very happy camper.

26:40So, you know, just think about the amount of wealth that generated from the technology boom. This is going to dwarf that. Is that a barber's chair behind you? I just have to ask the question. It's a 1950s barber's chair that was refurbished. And you have it because you don't shave or somebody cuts your hair in that chair? No, I have staff who just come and shave me every morning. No, I just like it. It's just kind of iconic. And I've listened to podcasts there and it has been used for tequila shots at parties as well. Okay. All right. Well, I got to get to one of these parties. This is an absolute must for me.

27:12All right. Let's go to viewer and listener questions. Are all Bitcoin and Ethereum ETFs pretty much the same? And I think they're talking about, Alex from Georgia is talking about the configuration and the pricing and the fees. Generally speaking, yes. Yes. Okay. Generally speaking, some are a bit cheaper. Some have little perks and benefits. But for the average person, they're all about the same. Yeah. And they're highly regulated instruments. And so I think generally, I would say they all have the rough safety seals on them, which I think is why the industry has done so well this year. That regulatory reformation, if you will, has led to people saying it's acceptable for me now to buy these products.

28:00Okay, let's go to the next question. Trump proposed a national Bitcoin stockpile, sort of like a reserve fund for Bitcoin. What is your take on this? And how would it impact the crypto market? This is Lucille from Kentucky. So I actually think it's a bit of a red herring, because the US dollar is the world's reserve currency. The US doesn't need to hold other assets in reserve. Yes, it's got gold, but that was a legacy from leaving the gold standard. other countries have to have reserves to support their own currencies. So they don't need it. Now, would they do it? I think it sounds flashy. For what reason, I don't really know.

28:43But let's assume that they do. Let's say I'm wrong, and they do build something. It's kind of a weird world because yes, obviously, it's good for the crypto market, because there's yet another buyer. But it's also weird because Bitcoin was set up to try and replace the government's control over money. And now you're inserting the government as one of the largest buyers of private money. I don't really like that, actually. But it's probably net positive for the crypto price. Now, maybe it pushes private use of money away from Bitcoin, if that were the case. Because if the government can manipulate it, they could dump it onto the market, they can buy more.