Raoul Pal: How I Invest in Crypto | Raoul Pal The Journey Man

0:00It's really important. Zoom out, remove the noise. Try not to look at hourly charts. Try not to look at daily charts. Try and keep your perspective long term and at lower your cortisol levels and allow you to handle the stress. We're currently like a two and a half trillion dollar asset class today. If we follow the trend rate of adoption, which is how these things usually always play out. And considering the entire banking system is building on this, that sovereign wealth funds are buying Bitcoin, that stable coins are going exponential. The U.S. Treasury is funding the short end of the curve via stable coins, that the Clarity Act is going to get passed.

0:35And all of these things tell you the probability that this trend continues and we get to 100 trillion by, let's say, 2034. AI is the last technology humans will ever discover, and it's the greatest technology we will ever discover. That's the point here. This is the underlying infrastructure layer to everything. Join 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.

1:12Hey, everyone. 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, periodically, I try and change the format from doing interviews to trying to give you some alpha of the things that I've learned on the way and the tools that you can apply in your investing journey. So today, I want to do something which I've not really laid out in one place before, which is how I invest in crypto and how I think about investing in crypto, because I think you'll find this useful too in your crypto investing journey.

1:50So where I've got to start with this is how I fucked it up. You see, I fucked it up many, many ways. Crypto is a complicated asset class. It's hugely volatile. It does the unexpected. Even though people think the cycles repeat normally, they don't. They're all different texture, context, and it's really, really, really easy to fuck it up. So let's do the honest approach because I really fucked it up. You see, I got into crypto back in 2013. I wrote the first ever macro strategy piece about Bitcoin back then and bought Bitcoin at$200. You can see that on the chart here is I bought into this peak.

2:35It then slammed down and I was like, oh, I'm an idiot. I had a thesis though. My thesis was it's worth$200 today. I think it could be worth a million dollars. and I'm going to discount myself by 90 % for being a moron, which is always a good thing to do. And therefore, Bitcoin over time, over the next 10 years, is probably worth$100 ,000. Now, that worked out to be pretty correct. We pretty much got there. We've done that. But the journey is the story. So here's the journey. I buy at a brilliant price. I suddenly, it doubles or triples on me. It then collapses. And I'm like, OK, this is a long-term bet.

3:14I'll do nothing. And it did nothing for a while and then exploded in the back end of 2013. And it got up to whatever it got up to, I think it actually got to 2 ,000 if I had the open high low close chart. But you can see the move that I had. I had a huge run up. And then suddenly it collapsed 84%. Again, I was in it for the long run. I just said, listen, I'm going to treat this like a call option. I don't really care. And I just kind of kept it on my screen, observed it from time to time, didn't really know what drove Bitcoin, except it was going to get adopted over time and let the bet play out.

3:51So I did the right thing. I let the bet play out. And then what happened is it kept exploding. And it was like, oh, my God, look at this now. Suddenly, I'm looking at my screens and Bitcoin's at like two and a half thousand dollars. I, in fact, sold at two thousand dollars. Why did I sell? Well, it was FUD, fear, uncertainty, and doubt. It was about the forking of Bitcoin. It was about, oh my God, it's a bubble. Now, I'd already gone through one of these bubbles, but for some reason, your mind starts fucking with you. You start hearing the FUD. You're like, I've made a 10X. I'm a hero. Stan Drucker Miller couldn't have nailed this trade better than me.

4:28I'm amazing. So I sold at 2000. Thought I've made a 10X. I've done a great job. Problem was, is that's where I sold it. It went up another 10x in the back end of 2017. And I tried to pretend I didn't feel like a moron, but I did, because I could have made 10 times more money than where I'd sold. But that was okay too, because after that, it collapsed again. But when it collapsed again, it fell another 80-odd percent. But then it started rallying. And I bought back in, stupidly, in COVID. Stupidly. The market was down 50 % in a day. I bought back in at about between, I layered in between 6 ,500 and 10 ,000 in Bitcoin.

5:23And I thought I'd been a genius, but I hadn't. You see, I just should have held it. But it was the trading around it, the buying, trying to sell into strength and then buy back into weakness. The problem is, is over time, the chart just keeps going up because it's a network adoption asset. And I was doing the wrong thing by trying to time it. So even though I bought it at a great point. If I was a newbie in 2020, it was the best time to buy. But I wasn't a newbie. I'd sold it at 2 ,000 and bought it back maybe averaging at 8 ,000 or 9 ,000. So it was a really suboptimal thing that I thought I was doing right.

6:05And when I did the math, I stuck in 200 grand when I first did it. That was a decent bet. I mean, really was a decent bet back in 2012. It would have been worth 100 million if I hadn't done anything. And that's the power of compounding and also proof that I am a total idiot. I totally fucked it up because I did this. Even though I came back in more size and everything else, that original bet and all the other things, it would have been just better to buy and hold it. So those are the lessons I've learned. I'm going to walk you through some of this and how I can help you with that journey. But firstly, to invest in anything, you need a framework of understanding.

6:47The framework that I've used and brought to everybody is the everything code. The everything code is that idea that because of debt and demographics, we're debasing currency to replace the aging population. And that debasing of currency is the trend that matters the most. So we can see from this chart that you guys should be familiar with by now that we are, by using the total liquidity measure, that's all global liquidity, we're growing at an 8 % annualized rate. Right now, we're growing at about 10%. But average over time with the down cycles as well, you grow at about 8%. So that's 8 % loss of the power of the denominator, your purchasing power.

7:34That keeps going down. On top, you'll average maybe another 3 % inflation. Inflation is separate to debasement. Debasement is when the value of your currency or your savings goes down versus long-term assets. CPI is when it goes down versus the cost of goods and services. They're both different things. So you have to add them together. You'll get to an 11 % hurdle rate of which if your returns aren't beating that 11%, you're actually getting poorer every year. And this is the one thing that's making the rich richer, the poor poorer, is poor people weren't able to invest as easily. Now, crypto changed a lot of that because it's more fractionizable.

8:19It's also globally accessible. But that's where we are now. And this is all driven by the megaforce of demographics. These charts, I think, are the most important charts in macro, and most people don't understand them. So this is the labor force participation rate and the births-deaths rate going forwards, or the birth rate going forwards. What it tells you is demographics is destiny. It's baked in the cake. We tried to change this via immigration. It didn't work. So what we've got is a slowing of the population growth. In many countries in the world, we've got negative population growth. And we can see the size of the labor force shrinks because of it.

9:02Makes sense, right? Because older populations, less people in the workforce. And it follows it beautifully. But more importantly, that slowing of the labor force participation rate, if we go back to the magic formula, GDP growth equals population growth plus productivity growth plus debt growth, what we've got is the population side of the equation slowing. And so debt growth is increasing to offset it to maintain GDP growth. And this chart is the most important chart of macro, and it's the one least shared of all of the charts I've ever made, but it's the single most important one. Debt is a function of demographics, and that is the key trend.

9:43As the labor force participation rate keeps falling, debt has to keep going up until something changes. If something changes in the future, is the AI and the robots adding to the human labor force? And that changes the entire dynamic. But that's a story for another day and the story of the economic singularity. So now we've got this debt. How do they manage the debt? Well, they use liquidity, debasement. This is the narrow measure, Fed net liquidity. We've actually moved to a broader total liquidity in the US, which uses the banking system now, because the Fed, Scott Besson, others have all said they really don't want the central bank to be running the liquidity.

10:29They want it coming from the Treasury via issuance of bills, and then also the banking system. That's the changes in the ESLR, Basel III, and the other parts of the component parts that allow liquidity to increase across the system and have the money multiplied that the banking system does because it needs to offset the government debt. So that's the game. Demographics leads to increasing debts, which leads to increasing debasement. It's a really simple mechanism. That's the framework. The other part of the framework is that interest payments are becoming a larger and larger part of the US economy.

11:07In fact, they're larger than defense spending now. And we've got a wall of interest payments to climb. Now, how you've managed these interest payments is you issue more debt to pay for them. It's like getting a credit card to pay the interest on your credit card. That's really what they're doing. And to manage that process, to have the money to do it, they just print money via total liquidity. So this is the US total liquidity chart versus this. And we can see we've got this liquidity gap to come all the way into the end of 2027. Now, does the cycle end in 2027? Does it keep going? I've got other thoughts on that.

11:40My view is we probably have an extended cycle or even no cycle at all because of the debt dynamics and also the CapEx dynamics. But again, that's a story for another day. This is really how to invest in crypto. So when you look at total liquidity, what you can see is Bitcoin is highly correlated. Now, Bitcoin is a very volatile asset. It's more volatile than total liquidity. So it runs hot versus total liquidity, runs cold versus total liquidity. It moves around. But over time, you have a correlation of about 87%. It's a highly correlated asset. In fact, the NASDAQ is 97 % correlated. So they're very driven by debasement.

12:19But Bitcoin's driven by network adoption as well, which is why it moves around a lot. It's a younger asset class. It's more volatile. It has more emotion. It's driven by different things. But over time, they follow the same trend. And Bitcoin massively outperforms that debasement, again, over time. In recent times, it's fallen behind it. In other times, it goes above it. It's nothing to worry about how the world works. The other part of this is the business cycle. The business cycle, I use the ISM survey here, that's the part that drives the economy. And what we find is when the business cycle picks up, Bitcoin picks up.

13:00Why? It's because Bitcoin and all of crypto is driven by investment and activity. And activity picks up and investment picks up when people have more money. When the business cycle is strong, everybody has more money, and things get recycled into assets, which is why the S &P, the NASDAQ, everything correlates to the ISM, and Bitcoin does too. We've had a lackluster crypto market in the last couple of years. And one of the reasons I've talked about endlessly is the fact that the ISM was not yet rising. And we, in fact, had the lowest period of the ISM below 50 in history. And that was driven by a number of factors, some of it with slow liquidity and just the structure of the economy.

13:45But anyway, it doesn't matter. At this point, we've now got the ISM going up and projected to go up. Usually when the ISM peaks, Bitcoin peaks around the same period, sometimes earlier, sometimes later. There's no pure science here. You have to use a number of different indicators. And again, today, I'm not going to talk about all of the indicators we use, but just to give you a rough idea, business cycle and liquidity are two of the very key things of understanding how Bitcoin works and how crypto overall works. Now, I say crypto overall because Because we can see here that the ETH Bitcoin cross, the year on year part of it, is basically driven by the ISM2.

14:23If you think of ETH, it's very different to Bitcoin. ETH is a technology. There is demand for block space goes up when economic activity goes up. Demand for Bitcoin goes up when savings go up. But over the business cycle, you tend to find that ETH outperforms Bitcoin once the business cycle is stronger. Because ETH is really a coordination layer, while Bitcoin is a store of value layer. And at this point in the cycle, it's like small caps outperform mega caps. It's this structure you can see everywhere. Junk bonds outperform treasuries. It always happens when the business cycle is on the rise.

15:04People go further out the risk curve. So that's how to understand alts, where we are. We've seen alts stabilize in recent times against Bitcoin. generally. And that's being driven by this factor as the business cycle is picking up. And so it should continue to play out. But then there's some rules of the game too. The rules that we need to understand. One is this is a logarithmic asset. Using regular charts makes it look too noisy, too messy, too volatile. But when you see the trend rate of adoption over time, you can see it's beautiful. It's a thing of beauty. It's the same kind of log adoption that NASDAQ has had, Google's had, Facebook's had.

15:48In fact, all of the tech stocks have followed this path, Amazon. They're all log adoption models driven by Metcalfe's law. So once you realize that, it takes the drama out of the price charts. And I think that's very important, having that long-term view, because I think, and I'll show you over time, where this is all going. Curious about online trading but haven't taken the first step? You're not alone and Plus 500 Futures is a great place to start. The futures markets are moving fast and with Plus 500, you can explore popular assets like oil, gold, the S &P 500, Bitcoin and more. From crypto to commodities, there's always something happening.

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17:07The other rules of engagement are what I call the don't fuck this up rules. This is a volatile asset class. It's complicated. It's new. It has a bit of the Wild West about it. There's hacking. There's stuff that happens. First thing, don't use leverage. Leverage makes you look like a hero in a bull market, but suddenly you have a 50 % drawdown on something happens, like what happened in October 2025, and you lose your stake at the casino. You lose your coins. Never lose control of your coins, of your tokens. This is like rule number one. Don't lose control. Don't FOMO. I know your friend is going to call you up and say, listen, you need to look at Fartcoin or whatever it may be.

17:51And this is the best investment ever. And he's made 10x his money. And there's another 10x to make. And you start moving away from your core allocation into stupid shit. FOMOing too late doesn't work. This is a very crowd-driven asset class. The other thing is your FOMO friends or your XFeed will get you to buy stuff that is disproven yet as an asset class. And those are earlier stage tokens, more speculative things. Whether they're mean coins or earlier stage protocols or something that's not quite working yet, that's okay to have some of it. Have a small bag, the 10 % degen bag I mentioned. That's where you can experiment and learn and try more speculative things.

18:36But please hold three to five assets as your main holdings. And I'll come on to how I think about those three to five assets. You may differ on that, but you better have the proof of why you have it. Not a hunch, not what your friend said, not because the chart looks good. You need to have proof of network adoption. Self-custody. You want to make sure that you're using a device like a ledger or you have a multi-sig wallet so people can't access your crypto in a hack. Have good wallet hygiene. Do not connect your wallets to third-party sites. Use transition wallets to move things around. Keep everything away from the internet.

19:18You don't want people to take your tokens. You don't want to leave them sloppy, leaving around. I don't really like DeFi protocols for the same reason because they can be hacked. Never lose control of your tokens. Do that one thing and that saves you a lot. I've had friends of mine who've lost a ledger for seven years come back and they've got millions of dollars in it because they couldn't do anything. In fact, remember, in a brokerage house, the best performing clients they've got are dead ones because people don't do anything, which is because the long-term trend, the log regression is in your favor.

19:54And that's why you want to hold over a longer-term time horizon. This is not about three-week trades, two-month trades. It's not about even the cycle. I'll talk about that in a bit. It's the network adoption model, Metcalfe's Law. Let it play out. Let it compound. It's really important. Zoom out. Remove the noise. Try not to look at hourly charts. Try not to look at even daily charts. Try and keep your perspective long-term, and it'll lower your cortisol levels and allow you to handle the stress. Remember, you're going to get 35 % pullbacks two or three times a year, and you're going to get 50 % pullbacks in Bitcoin maybe once every two or three years.

20:34And there'll be definitely a bear market too. And then your smaller tokens will go down 80%. It's normal. As long as those tokens are showing network adoption over time, they should recover. They outperform in a bull market, underperform in the down cycle. but your main token holdings should be something that is provable to you that you know will have a long-term store of value. Not all of them. I mean, there's very few options actually when you look at it. And I'll come on to that in a sec. And the other thing, and I'll prove this to you, is buy the fucking dip when you can. If you don't do that simple thing, you do not compound.

21:12The dips are the things, the big sell-offs, the 50 % sell-off you should be waiting for. You should have money saved for, because this is where you make the big bucks. And I'm going to prove that to you in a second. But again, here's the chart of the market cap of crypto. Again, the network adoption model is playing out. We're currently like a$2.5 trillion asset class today. If we follow the trend rate of adoption, which is how these things usually always play out, and considering the entire banking system is building on this, that sovereign wealth funds are buying Bitcoin, that stablecoins are going exponential, that the US Treasury is funding the short end of the curve via stablecoins, that the Clarity Act is going to get passed.

21:56And all of these things tell you the probability that this trend continues and we get to 100 trillion by, let's say, 2034. So that's eight years' time. We go from 2.5 trillion to 100 trillion. That would be the largest wealth accumulation event in all of human history. It would also be gigantic returns. because within this, there'll be some things that outperform, some things perform in line, and obviously a whole bunch of stuff, most of it won't do well. The thing is to be in the things that matter. And go back to the same point I keep raising, the long-term trend is the game. It's not really about the cycle.

22:35And I know everyone's obsessed by it because nobody likes to take the down markets, but it's really not. It's about compounding. So a quick break in your regular programming. If you're serious about your future, grab my free report called Prepare for 2030. I think you've got five years to make as much money as possible. And this guide will help you navigate what's coming. The link is in the description. Download it now. So let's talk about making compounding easy. And so I've built something that's going to be launched on Real Vision soon, which I think just helps this. So it is the GMI compounding machine.

23:14Now, I'm going to change my screen here, and I'm going to show you the GMI compounding machine. It's pretty simple, but it helps a lot, I think. So what we've got with the GMI compounding machine is I've got two tabs, NASDAQ and Bitcoin. It shows you where it is today. It shows you it is versus the trend. So here is the log trend that we've been using. Now, you might say Bitcoin's a power law. It doesn't matter. You can adjust for that. And I'll show you in a second. We're 38 % below where fair value is, according to Metcalfe's law right now. And what I've said is we're going to buy when we're one standard deviation oversold.

23:55So these bans are one standard deviation overbought, two standard deviations overbought, the trend, and oversold oversold. So I can change this dashboard to say, hey, I'm going to put 100 grand in. And I'm going to buy when we're, I'm going to add compound when we're oversold by one standard deviation, 1.3, whatever number we want. I'm going to choose one for now because that's where I like to do it. I want to buy, and we can see it bought four times, five times, including recently. Okay, I want to take some lifestyle chips off because it matters to me and I don't want the psychology. so I'm going to take lifestyle chips off maybe when we're one and a half standard deviations oversold, overbought.

24:42Now, that's only happened twice. We didn't have it in this cycle. We had it in the past cycles. Okay, fine. So let's change it to one and a half to 1.4 right now. One and a half. Now, I want to add, and I'm going to save money in the meantime, for every time it gets to one standard deviation, I'm going to add 25 % of my initial bet, 25 grand. And I'm going to sell 20 % of my entire Bitcoin stack if it gets up to there. Okay. So this is managing the cycle that some of you want to do. What it means is I will have had to invest 225 grand. So I've had to add to my initial investments. Now I've taken 260 ,000 off, but I often use that money.

25:25You can either put that into lifestyle or use it to buy these dips. So you're selling strength and then using the same money to buy the dip. I've now got 1.9 million in Bitcoin in the market. If I'd just held and not done the buys and sells, I'd have had 1.6 million versus the no sell strategy I just bought every time it sold off. I'd have compounded to 12 times my money at 2.6 million. So I can change these. So maybe I don't want to sell anything. I can do it that way. I can change it by whatever structure I want, how much more to add. I could be more aggressive and add 100 grand, double my bet every time.

26:11Well, it does 105 for some reason. Every time we get oversold, but maybe I say, you know what? I only want a few signals oversold and I'm going to sell only when it's overbought by two standard deviations. Okay, now look at the difference here. So I've now had to invest$415 ,000 because I put some big bets in. I've sold$1.4 million, but I'm still out of pocket$240 ,000 overall. So that's the net cash outlay. That was after 100 ,000 initials. So that's cost me a lot of money. But I've got 3.7 million still left in the market.

26:56So I've made some good money now. If I'd have just held and done nothing, I'd have made 1.6 million. But now, had I not sold, I'd have made 7 million. So you can see the difference. And you can play around what works for you. And it works exactly the same for the NASDAQ. I can do the same thing. I can see where it works. The NASDAQ's always in a beautiful log regression channel. It gives you a lot more entry levels, but maybe I only want to buy when it's one and a half standard deviation. So you can play around with this, but this is how you think about it. Do you just buy every time it sells and just keep running that core position over time and absorbing the buys?