Pomp Puts Raoul in the Hot Seat

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0:32All right, guys. Bang, bang. I've got Ruel here. I thought a great place to start is the Bitcoin ETF. We get the approvals. Everyone's all excited. And the price goes down. That's not supposed to happen. Why is the price going down? And what is your reaction to the first two or three days of trading of the Bitcoin ETF? Look, always the most ridiculous thing happens in crypto. I mean, even the run-up was the best, right? That total goat rodeo of that tweet that was hacked. You know, it's brilliant. And it going down is befitting. Basically, it's the overhang from GBTC. So there's a lot of activity.

1:07a lot of repositioning. Net flows have been offset, really, by GBTC as people are unwinding the arbitrage and stuff like that. So I don't think you need to read much into it. It probably has to digest. Don't forget, you brought forward a lot of demand. Net-net, what have we brought forward? $2 billion,$3 billion of demand. OK, so that takes time for the market to digest. And then you've got to think through who the RAAs are, who these people are. And if you put them in your head, these are not New York dealing rooms who are getting on the phone and say, buy this now. They're people who are wearing slacks, who read Barron's on the weekend, read about the ETF, aren't sure, go on the golf course, see their best client.

1:50He asks them a question. The whole process is slow. They've got to go and have steak dinners and all of that stuff. So the whole process of bringing people in is going to take a while longer. But it's there now. I just think of the CTF as a trade deal between the world and crypto land. And so now capital can flow in much easier than it used to. I kind of think of this as a mental model as like China entering the WTO when everybody could invest in China. That's what this is. Now, these aren't permanent residents in crypto land. This is more hot money flows, tourism flows, hot money flows. Direct investment, foreign direct investment, that's VC flows.

2:36And then we've got a bunch of residents there, people who have wallets and all of that. So I do think of it as an economy. And this just allows trade. Now, the capital that's going into these ETFs, there's two ways to look at it. Hey, these are the people who they've heard about Bitcoin. They don't really want to go set up a Coinbase account and go buy it. Now, their financial advisor is saying, yeah, let's allocate a little bit to it. But the first second that we get a 25%, 50 % drawdown, they're out of there. They're like, I knew I shouldn't have bought that, and they're gone. The other argument is that a lot of ETF capital is very sticky, and it's kind of like a set it, forget it.

3:12And once that money goes in, it's likely to sit there. Which one do you think is kind of a more accurate representation of how this capital will behave as we get the volatility of Bitcoin? So if you think about the biggest buyers of this stuff is actually the millennial cohort. What the millennials do really well is they invest in their 401ks every month. And they can put this in their 401ks. So that's sticky. That's why ARK didn't get all the redemptions when it went down 75%. It's because it's millennials who own it, and they put it in their 401k, and they're in it for the long ride. So I think it's the boomer crowd who'll be more concerned about the volatility.

3:55But I think that's a very good thing. There can be a lot of people putting it as a long-term asset, buy and hold. And that should give it the stability that you need, that you don't just get massive washouts from people panicking the moment it goes down. And I think most ETF providers have made it pretty clear that it's a volatile asset, and it's a buy and hold asset. So in the Christian religion, there's kind of like before Jesus, after Jesus, right, in terms of measuring time. my thought process is that we're going to have a before ETF, after ETF kind of epochs of Bitcoin, and specifically talking about the volatility.

4:32We had massive asymmetry and lots of volatility, 80 % drawdowns, et cetera, leading up to this. But if we get, as you said, stability, that also is a pro and a con, right? If there's less volatility on the downside, I think people say, oh, that's great. But then should we also expect less volatility to the upside as well? I think as assets mature, they become less volatile. So I think we need to expect that. And particularly from passive flows of 401k investors putting it in every two weeks, every month, that'll keep a bid that didn't exist before. So I think, yes, we'll probably see lower volatility, but we'll also be feeding capital into crypto land.

5:13And crypto land's not just the state of Bitcoin, it's a whole bunch of other places that are going to see capital flows. So the Wild West will still exist, but the big daddy becomes less volatile, which, yes, it's a shame because we can't make as much money out of each cycle. But if our underlying philosophy is we want the adoption of this technology to be broad and deep, it has to go that way. So it's kind of good from that philosophical angle of trying to change the world, bad from the ridiculousness of the cycles and how profitable they can be if you get them right. So we're sitting around$40 ,000,$42 ,000 today.

5:53It was at$15 ,000,$16 ,000, kind of at the bottom of the bear market. What is your expectation in this bull market? Will we see$100 ,000,$150 ,000, $200 ,000? Maybe one of the things I've taken away is people are still looking at these cycles as It's like, yeah, it's going to$1 million. It's going to$500. These crazy price predictions. And I actually maybe somehow I'm getting more realistic and saying, I don't know if we see$200 ,000 in the bull market. Where are you? I don't know is the answer, but the same reason. Also, everybody's got PTSD because of last time. That second run up after the big correction, the second run up, everybody thought it was going to extend further.

6:31And it didn't. And so everyone's got PTSD. So how I'm thinking about it, I'm giving a 60 % probability this is a relatively normal cycle, in which case it would get to 150 ,000, let's say. I'm giving a 20 % chance that it's actually a front-loaded cycle because of the ETF and other stuff that maybe it gets to that 150 faster and then fades, which will be kind of pain for a lot of people who expect it to go into 2025, right? And then the other 20 % chance, I think, is that this ends up being a bubble cycle. And so it looks more like 2011, 12, 13 than it does the previous one. And in which case, if you remember that cycle, it had an interim top correction, everyone thought it was over, and then it just exploded again.

7:21I think there's a decent chance of that. But we need to see the contextualization of how the ETF flows impact, what's happening with monetary policy, what's going on in the economy, how the election is going to play into this. So that's how I'm thinking of it. That upside crazy bubble target, using that kind of everything code structure that you and I've talked about in the past, we get price targets of half a million plus. So even if I discount me for being a moron by 50%, you still get 250 grand. So that's kind of the spread to me, 150, 250. But obviously, who the hell knows? And as you know, the worst thing for any of us is everybody wants price targets.

8:06And then a year and a half's time, they hate you for it because you weren't exactly right. It's ridiculous. Well, I think it's also just like, hey, does this replicate past cycles? And I think that's what everyone is thinking, right? But also, maybe that is a signal that that's not going to happen, one. But two, also, the holder base has changed again, right? So kind of pre-2020, there was the very hardcore believers. Then in 2020, we started to get a little bit more of the finance crowd. Now, I mean, this is RIAs. This is as finance as it gets. And so I wonder, as the price goes up, do they actually sell?

8:40Are they rebalancing on the way up? And so it kind of takes a little bit of the edge off on the upside. I think that's possible. but also think about the crowd that got financialized in 2020. Again, mainly the millennial crowd, right? There's 110 million Coinbase accounts. And when I checked six months ago, only 9 million were active. So speaking to the guys at Coinbase, they're like, yeah, in normal activity, it'll get to 35, 40 million, and the top will grow as well. So there's a lot of money still to come in of people who participated last time around. have that interest, still have PTSD, will come back in.

9:21So maybe that offsets it. I don't know. I also have a feeling the applications layer of blockchain is going to bring in a lot more use case. So I'm thinking of this cycle as maybe the everything, everywhere, all at one cycle, when people have different unlocks for NFTs or inscriptions or different unlocks for smart contracts and some of the other things. And they can use it for everything from whether it's ticketing to real world assets. So it just depends how far that applications layer goes. If the applications layer doesn't make much progress this cycle, then you're dead right. You know, we'll see rebalancing.

9:59Don't forget, they're also going to be issuing options on the ETF. And that changes the structure of markets as well. Hey, everyone. We're going to take a quick pause and hear a word from our partners. We'll be right back. Your favourite neighbourhood spot grows with Square. Indeed, my favorite neighborhood spot has quickly become Todd Snyder in Williamsburg. Todd Snyder is one of my favorite menswear shops and has supplied me with all the clothes I have needed this quite hot summer. Every business has different goals, but Square is the business platform that supports them all. From opening a new location, selling something new, or just expanding their reach.

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11:10RAOUL PAL, explain that more because I don't think a lot of people understand maybe the blessing and the curse of this ETF approval. ED HARRISON Yeah. So what you've done, and it was always going to happen, is Bitcoin's now become financialized when it wasn't really. It still had purity to it. Now, it doesn't mean it's impure because of this, but you've allowed a financialization layer. And what that's going to mean is that they are going to offer leveraged products on it. Now, options are kind of defined risk products. But what you end up with is in a very high volatility product, we get a lot of volatility sellers.

11:52And it dampens the market because they're always hedging. And that hedging structure can really change the nature of market. Sometimes it creates acceleration points because everybody's short and suddenly the price goes through and everyone has to buy everything back. Other times, just by the ongoing selling of yield, selling of premium for yield, it slows down the whole market itself. So I do think that's a bigger deal than people expect. But the casino for options on ETFs is going to be quite amusing for a while as well. because if you think about how much the Robin Hood crowd use options on tech stocks, are they going to go wild on this stuff?

12:38And they've not been able to. For Americans, it was really hard. Deribit was not accessible to Americans. They're now going to start using options. I don't know when that launches, but it'll happen at some point. And that brings in all the market-making firms and the investment banks and all of these other financial players. One of the other aspects that obviously drives price of not only Bitcoin, but most assets around the world is liquidity and interest rates. And maybe a shocking thing, if I had said to you in the beginning of 2020, hey, they're going to cut interest rates and asset prices are going to rise, you'd say, OK, that makes sense.

13:11But then if I told you at the end of 2021, they're going to raise the interest rates to, you know, five and a half percent, and the stock market's still going to go to an all-time high. Bitcoin's going to go up, you know, hundreds of percent off the bottom. I think a lot of people would be like, that doesn't make any sense. How can interest rates be higher, but also asset prices are still continuing to grow? What's happening there? So this is the difficulty people have with different time horizons. So interest rates are set by the Federal Reserve. The Federal Reserve operates in core inflation land, which is driven by core inflation unemployment, which is driven by stuff like owner equivalent rents and stuff.

13:51All of this stuff is lagged. So the Fed operate in that, but lags. Stuff like crypto and tech stocks are trading on liquidity and future liquidity, so financial conditions. They eased a long time ago. So people looking at the Fed saying, well, when the Fed raise or when the Fed cut, that's not relevant. What's actually relevant is what the financial conditions are doing, which have been loosening massively, and liquidity has been rising. Whether you use Fed net liquidity or broader measures or M2, they're all rising on a global basis. And the global basis is another key thing most people miss because they kind of look at the US only.

14:30But if we look at this cycle, who's got the biggest economic problems right now is China. So they probably have the biggest bazooka to fire to try and get their economy going. Then it's probably the Europeans, then the US. It feels that way. But we've seen liquidity. I managed to catch the bottom in crypto and tech last year because of liquidity had bottomed. And the moment it bottomed, ETH bottomed first, and then the whole space bottomed, including tech, in October. And it's just been following that liquidity cycle ever since. And using my forward-looking projections based around this everything code thesis, it should continue all the way into 2025.

15:13And crypto should continue to price that. What is the everything code? The Everything Code is a thesis that I put together after 30 years of work where it came randomly. We all know the world's broken. There's all the debt and the demographics and stuff you and I have talked about many times. I started looking at the ISM, the business cycle, so the Institute of Supply Manager Survey. It was like fucking clockwork every four years. That stopped me in my tracks. This didn't exist beforehand. And then I realized that what had happened in 2008 was a debt jubilee, where every central bank said, we'll cut rates to zero, so you don't need to pay the interest.

15:58Think of it in those terms, because there was too much debt. So every government around the world resets their debt to three to five-year sector. And that leads to this four-year cycle, which is the same as the presidential cycle. and it's the same as the halving cycle because Bitcoin was born out of that, right? So everything is now perfectly cyclical. And that won't change until we solve the debt problem. And once you understand that, you can then forward look where liquidity is going to go because if we're repeating the same cycle, you just use the old cycle, map it forwards for ISM, and it gives you a forward look on assets.

16:42And if that's the case, then it's a real code. Now, what I found within this was that the use of the balance sheet by all of the central banks was just for one thing, to pay the interest on the debt of the previous cycle. So they are just debasing the currency in the purest, simplest form, which is why we all make so much money out of crypto, because it does the best because it's got technological adoption. and it's a scarce asset. So it does phenomenally well when they debase. So liquidity comes in, that's great. Debasing the currency is super great. And so we've now got coming forwards, if we look forwards, we've now got all the COVID interest payments to make.

17:27You cannot do them at 5.5%. We saw that before, the bond market freaked out. There's no way you can finance it without Now, all the debt payments going exponential. So the Fed has to bring rates down. And it's going to end up on the central bank balance sheet, as it always does, because there's no other way. Because if you think about how the world works, is GDP growth, trend GDP growth in the US is 1.75%. The government's 100 % of GDP in debt. It's actually more, but easy maths. If interest rates are 5%, that's 5 % of GDP that needs to pay the interest. But growth is only growing at 1.75%, so you'd have negative growth.

18:11Oh, but the private sector is another 100-and-something percent of GDP in debt. So they're competing for the same GDP to pay the interest. So something has to give, and what gives is the government side ends up on the balance sheet. So this was all this big thesis I found from the Everything Code that made everything explainable. Why asset prices rise? Why is it becoming predictable? Why have we got these cycles? And what's really going on, which is the debasement. And debasement, to think about, they're doing it about 15 % a year on average. So they could have either raised taxes by 15 % to get the payments, which is politically unacceptable in an age like now.

18:55So instead, they just put the coins and debase the currency. And people don't really notice. They just notice that the rich get richer because they can afford scarce assets and the poor get left behind, which is creating this huge political divide as well. How do you think measuring inflation is done best by the average person? Is it asset prices? Is it CPI? Is it something like a truflation? Is it something else? Like when you try to get at what is the actual inflation rate? What do you look at? So I think there's two inflations. And each person has a different inflation. Your inflation rate is different than mine.

19:31But I think there's two inflations. One is the inflation versus your income, which is what we saw last year. So the cost of goods rises faster than your income. So you have less discretionary spending power. That's what caused the economic slowdown. That was the shit show that happened in 2021, 2022. Asset inflation is different. Your future self is poorer. What an asset is, is a way of tying up your capital in something with an expected return. So in a future date, you're hoping to be wealthier. The issue is there. So with this regular inflation, which I don't think is sticky, I think it falls back again.

20:15Doesn't mean that prices don't come down, the prices come down, but the rate of inflation comes down. This asset inflation is more pernicious. And it's the thing that people don't understand. You know, if you go and speak to your parents and say, you know, how many times your income would it cost to buy a house when they were in their mid 30s? They would say three times, four times. You ask a 35 year old now how many times your income would buy a house. It's like 10, 12, 14, 15 times. Right. So their future selves are poorer because they can't buy that house. I think that is more destructive over the long run.

20:52They're both destructive, but this is bad. Yeah, I completely agree. You also have this new motto, phrase, don't fuck this up. What is that? And what is that really, I think, kind of reinforcing to people as we go into 2024 and 2025? Look, you've been around this for a long time. We've all made the mistakes and everybody makes mistakes. it's very hard dealing with an asset, let's say crypto, that is very volatile. But when it runs, it really runs. And you become overwhelmed by emotion. FOMO, you see your friends bought that 100x dog coin, and you're like, I want some of that. You want to look for 100xs as opposed to just own some Bitcoin.

21:40And if you want to own some ETH, and a few of the big projects, and just buy and hold. But people don't do it. They want to start trading it because they think they can make more money. Also, they custody things wrong. People start thinking, I want the extra 5 % yield by sticking into some project of which they know nothing about the security of. And the don't fuck this up is don't let somebody take your tokens. Don't trade and hold quality assets. If you can do that with 90 % of your portfolio, you will do well. Keep 10 % to be a total filthy degen. Do what the hell you want, because that will go to zero.

22:21We've all got the wallet of shame, right? Every single one of us has a wallet of shame of shrapnel left for the previous cycle. It didn't do anything. So don't fuck it up. It's trying to protect people from themselves. And so we've actually even issued an NFT, which is free. so it's in your wallet and it's a video of me saying don't fuck this up so when people go in their wallets there's me looking at them disapprovingly trying to say look don't fuck this up so if people want to do that you also get the um subscription to the uh the free subscription to the real vision platform but it's free so go to realvision.com forward slash pomp get the do not fuck this up don't fuck this up nft it's free but it's the most valuable nft you'll have because it'll stop you doing the stupid shit that you know you'll do when you lose your mind.

23:09I love it. I'm just trying to help people is really, in the essence, I'm trying to help people because I think we've maybe got two more cycles left at best. And this is a game changer. And as we talked about, most young people can't afford, you know, they've got, they're now starting to have kids. They've got a kid schooling, university. They can't afford a house. If they do, they have to move miles outside, further away. They can afford less of the S &P than their parents could. All of that stuff. So here is the chance to increase your probability of your future self living up to that image you've got, which is people want a comfortable retirement.

23:52They want their kids to go through school. They want a house to live in. They want to be able to pay their medical bills. Well, if you just don't fuck this up, you can do that. it's not a guarantee, but there's a high chance. So the message that you're sharing is shared in a very specific way. We also now are seeing other people can enter the space and share their message, their advertising, their marketing in a very specific way. Most notably BlackRock's new commercial is basically a guy who is standing there, no tie, but the blazer, the jacket, the nice, almost like an elevator music playing in the background.

24:26And it literally, if you don't even listen to what he says, you just know, it's okay, BlackRock's here. We got you. It is now okay to buy this ETF, which is in direct opposition from pretty much every other issuer's ads, which have been all about innovation and disruption and Bitcoin ethos, et cetera. Do we need both? Or will the BlackRock style approach actually suck in a ton of capital that maybe the others couldn't actually reach? So I think it's a matter of demographics. Which demographic are you trying to reach? So if you're VanEck, you're trying to reach young people. Right. Fidelity. Abigail Johnson's made it very clear in Fidelity that she wants to attract young people and give them the products that they need for their financial success.

25:15So that's why those guys tend to skew younger. BlackRock is going for that classic RAA, mutual fund from Ohio kind of product. And that's exactly the right messaging that they need. So I think it's, look, as you know, this product, Bitcoin itself is so disruptive and so broad-based that it needs multi-messaging. It can't just be it's digital gold. It can't just be, this is a new system. It has to be a number of different narratives. And actually, I know there's a big philosophical hand-wringing about an ETF, but is this really what we signed up for? I just think of it as the trade deal. We're bringing capital into the space to finance new projects.

26:02And that allows us to move the whole thing forwards. And when you hear Larry Fink talking about the tokenization of all assets, you know it's moving forwards. And the more capital that comes into the space, the more people can build. So yes, it's suboptimal, but we need that capital from Fiat World and get it into crypto land so we can create this new system we all want. Hey, everyone. We're going to take another quick break and hear a word from our partners, and then we'll be right back. All of us together are living through the death of an old world and the birth of a new one. This is a fourth turning, but this is not the fourth turning of demographics or politics.

26:44This is the birth of the new technological age. This new world has a world of 3D printed rockets, crypto payments in space, discussions on the rights for humanoid robots, machine intelligence that may outperform our own, simulated worlds where autonomous AI agents write code for other autonomous AI agents. It's a world full of opportunity and full of difficulty too. You see, we are living history and it's happening much, much faster than any of us can comprehend. This is Reed's law, Metcalfe's law squared. Humanity has never gone through anything like this. But we have to comprehend and understand what is happening.