Raoul Pal: How the Wolf of All Streets Survives Brutal Crypto Cycles w/ Scott Melker

0:00Your favorite neighborhood 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. Indeed, I've seen it with Todd Snyder. In Square, also, you can get real-time insights, so don't wait for end-of-day reports. Go to square.com forward slash go forward slash realvision to learn more about how your business can grow with Square.

0:43That's S-Q-U-A-R-E dot com slash G-O slash R-E-A-L-B-I-S-I-O-N.

0:57Hey, everyone. If you like this podcast, go behind the paywall to get privileged access to the smartest minds in finance. Join the Real Vision community and learn how to become a better investor. Visit realvision.com slash RVpod and use the promo code podcast10. That's podcast10 to get 10 % off our essential membership for the first year. Now to the top analysis of today's crypto markets. so i'm really excited about this scott melker is somebody i follow a lot and i like to speak to all different people in the space whether they're hedge fund managers in the space people who've built the protocol business founders cultural people and scott's really at the epicenter of all of this because he like me gets to talk to some of the most amazing people in the world and he's got a great story too and i think it's really important that we understand the whole space.

1:49So I can't wait to speak to Scott. He's a super lovely guy. I've never had him on this side of the camera. He's interviewed me several times, so I can't wait. The world of crypto is an incredibly exciting journey that we're all going on together. We don't know where it's leading to, but we know it's going to be absolutely massive. Join me, Raoul Pal, as I guide you on our adventure to discover just what this new world will look like. Scott Melker, finally I get to turn the tables on you It can't possibly go as well in this direction, I'm sorry Well you're a better interviewer than I am That's why You're a better interviewer than me, so we can disappoint everyone, it's perfect So, listen, I want to start at the beginning because you've got a fantastic story And I just love how people get into this crazy world in the first place And you came through a very bizarre route So let's start at the beginning I want to hear the Scott story.

2:45Sure. Yeah, definitely bizarre. But I think that, as you said, there's a lot of circuitous ways to get here, but we all seem to arrive in the same place one way or another. I really started getting interested in markets when I was 12, 13 years old. I bought Disney stock and Caterpillar stock because I thought tractors and Mickey Mouse were cool. And I had parents who, you know, obviously valued a financial education and sort of pushed saving and those things on me. We were talking about 1988 and 1989 when you had to call somebody and, you know, stock certificates, the good old days. And so I think I just had sort of an interest in markets the whole time.

3:21I went to the University of Pennsylvania in the late 90s, and that was really during the Wall Street boom. Everybody I went to school with, even if they were like an anthropology or an English or an art history major, went to Wall Street, right? Literally everyone. So I actually turned down a job, Solomon Smith Barty, to become a DJ. You know, and there was a lot more to it. You should have done it the other way around like David Sullivan. Yeah, absolutely. That's right. See, he's going to always be a lot richer than me because he had a smart career path. But I had a lot of people who worked for him that I went to school.

3:54But so, you know, there was a lot of other things I tried. I was sort of a scattered entrepreneur. But at the core of it was really my music. But the one thing you have a lot of when you DJ late at night is time during the day. Right. So I always was a trader, often badly. uh you know i blew up at least three times that i like to recount but probably not worth going into that now the last of the last major blow up was around 2012 when i bought a stock it literally went to zero and wrote it all the way and that you know got a little traumatic um but as i was sort of winding down the music career no no no we're not gonna go skip over the music career i want to hear the music career because i love music you know i grew up in dance music i lived in spain I was staring at Ibiza all day.

4:37I'm jealous because that's the one place I never made it to with all the invitations. Ibiza was one of those things where I wanted to go in the 90s and it didn't happen. Then it was the early 2000s and it didn't happen. And by the time I was going to go, everybody told me it was already spoiled and I was too late. Kind of like crypto, actually, when I got in 2016, 17. So I just never made it. But yeah, you know, I started as a literally a DJ at my college parties in dingy houses in West Philadelphia at Penn and evolved into playing stuff in Philadelphia. And then, you know, New York, Philadelphia, Washington.

5:12And then what kind of music were you playing when you started? That really depended on the phase. At the beginning, I was a hip hop DJ just outright. And these were the vinyl days. You have to remember. So you really had to choose. It was like every song you wanted to play at a gig cost you 10 bucks. Right. It wasn't it wasn't like now. You had to carry it and you had to be really selective. So you couldn't just, not like the computer days, we could have every song in the world accessible to you at all times. But then I got really, really into electronic music, particularly trance, progressive house, and then sort of evolved towards deep house.

5:42So in those early days, I was kind of all over the place. But the biggest gigs I did were in that vein. Actually, I went to Twilo in New York City and I saw Paul Van Dyke and it blew my mind. It was like this religious experience. And I walked into the DJ booth. I was just like a senior in college. Somehow I wasn't a girl or anything. And he allowed me in. I don't know why. And I convinced him that I was going to book him to come to Philadelphia. I don't know what I was on. And we started this party in Philly called Air Trance at a club called Shampoo. And we got him. And then we booked like all this world-class talent.

6:14They came and played with us terrible trance DJs. And we basically found a way to open for and play these huge parties. And so that was kind of the beginning of it all. And I went through these major waves of music. but eventually found a way you know i booked a tour in 2006 in japan with the michael jackson of japan his name is toshi kabota so i did a 30 city tour in japan of stadiums i've been to more cities probably in japan now than i've been in the united states and that led to really getting a lot of things where i was playing you know opening acts for enrique iglesias and i mean pretty crazy crazy situations those were the days you could actually make money djing as well it got it got much harder i i think i i was right before the real glory days and then it got a lot harder you know back then i remember dj am booked this million dollar year residency in vegas and it was mind-blowing to everybody that you could show up once a week and get a million bucks which is 20 ish grand a night round right well now i think the change pokers get like 1.2 million a day in Vegas every time they show up, right?

7:19So I think that that money did evolve to some degree, but yeah, you could make a living. But I kept dumping all of my profits into the market and losing it, so it was kind of irrelevant. I didn't get in whatever job I was doing, it didn't really matter. But then I had kids, you know? And really, I like to joke sort of, if you've ever seen the movie Dazed and Confused, you know, Matthew McConaughey's character, he says, you know, the best part about high school girls is I get older, they stay the same age. Well, that's how I felt about DJing. I just kept getting older, but the crowd was still perpetually 21.

7:50And at a point you're like, I'm 34, 35. These kids are trying to like buy me drinks, you know, Jägermeister shots or something. I don't know. And it's just embarrassing, you know? And so like, I just kind of transitioned out, but that was the perfect timing for me. I said I was going to trade more. That's how I was going to make a living because I hate fun and want to torture myself. But I found crypto, you know, and it was late 2016 going into 2017 where you could throw darts and make money. And frankly, I just got very lucky with my timing. But I came in as a trader. I just wanted to make money.

8:21And then I got orange billed. Before we go to crypto, my favorite moment of the dance music thing is a friend of mine was a house DJ called ATFC and producer. And I ended up in the DJ booth at Pasha for Bob Sinclair, headlining Pasha on a Friday night. And that was an extraordinary moment in time there was a lot of energy around that scene then i feel like bob sinclair like quietly was the one who transitioned edm or whatever all the genres of edm from being sort of underground still to being just wildly mainstream yeah exactly and then david gasser and everybody else kind of came after that but i feel like she doesn't get the credit now that you mention it for having done that because world hold on those two songs i mean were just massive anthems and even in new york city you know that was when i remember it the clubs transitioning to really playing house music and club music from being all basically hip-hop clubs in new york city besides underground spots so that must have been a just mind-blowing experience it was it was anyway that's enough indulgence over music because i love it so why the hell crypto so you've been trading trading poorly but you seem to be addicted to it why were you addicted to trading or addicted being wrong word but why why was it interesting to you and then might be the right word and and how crypto in that journey well you know i i always i i said found markets generally fascinating uh the sort of human psychology the problem is that i understood it but was a victim of it and it took quite a long time to step out of the matrix so to speak and be able to see it for what it was without participating i think and that's why all of my errors in the past were always the classics that you teach anyone about you know fomoing in buying the top selling the bottom panicking just uh being a human basically um but i always really was just interested in the the framework of it you know like why markets move the way they did what gave companies value what gave assets value how this sort of shared human belief and things contributing to making them real and valuable when i found crypto by complete luck djs were super into crypto and people don't realize that 2015 16 17 somebody offered to pay me bitcoin for 500 in bitcoin for a dj gig in 2011 and i said no because i wanted money um this has got into they first heard about bitcoin at a club at ibiza hey see it's it really is but so all these djs were kind of speculating gamblers and i had a friend and he said you got to buy this thing bitcoin i was like i've heard of that one you know and then you send it to bittrex because remember back then there was only bitcoin trading pairs.

11:08You couldn't trade against, there was no stable coins and there was no access to USD. And literally everything I remember, everything had S at the end. It was all pluralized. You had to buy ripples and ethereums and litecoins, right? Because nobody even knew how to pronounce any of it. It was just ridiculous. But I was buying, you know, ripple at a penny, two cents, something like that. I remember buying TRX at 20 sats when Binance became a thing. Like I said, it was just lucky timing. So I think I got very hooked. And to be, if we're being really honest about it, I think I backed into the importance of the asset class and really started digging when everything went down.

11:44Right? Because then I had to convince myself that I was here for a reason. Hey, everyone, we're going to take a quick pause and hear a word from our partners. We'll be right back.

11:57Yeah, talk me through that first cycle, because, you know, everybody's got to go through the hero to zero moment you've gone through it a few times but the crypto one is quite astounding yeah i mean you know i view a portfolio and maybe life as a kind of like i view a chart you know i i love the visualization of charts i've loved technical analysis since i was first introduced to it my grandfather was a stock broker actually used to drop charts on the uh on the kitchen table every morning it's it's crazy but you know i view both my my life and my portfolio as a series of higher highs and higher lows.

12:32So I was, you know, as long as I'm making a higher low in the next cycle, I've been somewhat successful with no expectation that I'm going to always be at that all time high. And so having sort of been through the cycles, been through, you know, the early 2000 cycle, certainly the great recession, I knew what it was like to try to at least secure profits, but certainly what it was like to be, you know, exuberant and then lose everything. So I did manage at the end of 2017, early 2018 to lock in meaningful profits enough that I didn't have horrible regret, enough that I still have a family, you know, enough that I was able to stick around, you know.

13:12And so I think that the key to being passionate about crypto is surviving long enough to actually realize why it matters, you know, and I think I managed that. But I had no intention of being an influencer or whatever they call us or having a large Twitter account or a newsletter or podcast. I literally was on Twitter as a musician. I alienated everybody that followed me. I cut my following in half from 40 ,000 to 20 ,000. And I just started sharing these charts. And for whatever reason, it resonated. But my initial sort of Twitter popularity in those markets was my trades. It was me posting charts.

13:45It was not really talking about Bitcoin. I had no podcast. I had none of that. And so I just became extremely passionate about it. And through that crash and then sort of becoming more cognizant of monetary policy and really going down the rabbit hole of the Fed and central banks, you start to realize how important the asset class is. And that's when I really became obsessed and just started talking about it all the time. I had a Twitter account and I said, it's not enough. I need to write a newsletter. This, you know, 180 characters or whatever it is, isn't enough for me. It's all free. You know, and then the guys at Blockworks, you probably know them.

14:21Jason Yanowitz calls me, like a cold calls me one day and says, hey, man, you got a pretty good presence. You should start a podcast. I said, what the hell is a podcast? But I'll do that. You know, and I started horribly these planned interviews. And so that's what I really, the journey for me is like a slow tumble down the rabbit hole, I think. And I think it's that way. some people are galaxy brain and just get it from the very beginning you know they see bitcoin they say maybe they were a gold bug before and they really understand it i was not like that at all i i was one of those who needed it sort of hammered home repeatedly and i really did take sort of the traditional you know i i feel like i came in through the back door because of trading like my first love in crypto was not bitcoin it was doge right because you may remember those massive doge cycles where it was just like free money you know you buy between 20 and 30 sats and it goes up to 180 and you sell and you wait two months and you do the whole thing again and it was a lovable meme and so you know i have sort of even though i don't want people to trade these things and lose their money i do have a sort of like affection for nfts or or you're a dj that heart is yeah but i do think that you know i think you can make the argument that there's been more people introduced to bitcoin through the back door through all of these assets than those who just got it right away and believed that they were, you know, buying a store of value or digital gold.

15:40So I think it really took me a long time to be quite honest. But once you get it, man, there's no turning back. Have you ever met anyone who was like, I was wrong about that Bitcoin thing I'm giving up? Unless they just lost their money, right? But I think people - Yeah, there's a bunch of people who give up. No, there's a lot of people who give up, but they generally all come back. Yeah. Because they don't understand the cycles and how difficult it is to deal with a cycle so they're like no no i think i made a mistake and then they all come back i've seen that they'll be back when bitcoin 75 000 that's when they'll buy right before we go to 45 on the way to 100 right and that's the part of it that i kind of was so obsessed with i think from the beginning and what made trading so interesting is exactly what you describe i don't think they necessarily either they didn't really have the conviction in the first place which i think is probably the case but i mean you can look at 2022 i think there's a lot of people who just got washed out by all these bankruptcies and failures that they just can't stomach having conviction when they don't have skin in the game.

16:41How is it for you, the 2020-21 cycle where suddenly you start accumulating a big presence online, a lot of people listening to you, and then afterwards the world blows up and everyone's like, Scott, you're a wanker, Raoul, you're a wanker. We've seen that whole cycle. So talk me through the kind of up and down of that because i think it's it's just interesting for people to understand what it's like psychologically miserable it is and i'm not going to pretend that it never affected me and that it didn't matter because i think people love you till you know they only love you as much as the last trade that you posted online or the last idea that you shared or the last thread that you wrote and two years of positive history can be erased by one market crash i mean there was times where I literally feel like crypto Twitter thought that it was my fault that the bear market came, you know, and I'm sure you felt the same way.

17:32Like you get so many attacks, you can't say anything. All of a sudden it's you posted this at the top and this at the top, but they forget what you were doing all the way up, you know? And so it was very hard for me. I never, I wouldn't say, I wouldn't be dramatic and say I felt like quitting or any of those things, but there were definitely dark periods there where I was far less compelled to go online and share tweets and share ideas. To be honest, you know, you kind of joked earlier, I'm a degen at heart. I am, but it's been years since I've shared any of that publicly on Twitter. I'm not going to share a chart for Pepe, you know, like even if I, I don't, by the way, I think it's great, but even if I thought it was like a world changing tech and I would just never share it.

18:14Right. So it's sort of pigeonholes. I sort of joke that Twitter becomes really, really miserable after you get a hundred thousand followers like there's just this break where the even if it's the same percentage of negativity it just becomes exceptionally loud you know you see it in the comments it's very you can't hide from it anymore um and so you you sort of see that everybody becomes like a zen philosopher when they get a hundred thousand they just start sharing like uh famous quotes and inspirational ideas about sleep and uh you know drinking off water because it becomes too difficult to tweet about other things without getting so much pushback.

18:50So you end up just being a Bitcoin or an ETH maxi and talking about those things. And so I think that people forget that you once had 10 ,000 followers or 5 ,000 followers or 20 ,000 followers. And then just one day, all of a sudden, you had an impact that you didn't realize you had. And you have to change your behavior with time. So I think that it's a blessing, honestly. I love what I do. I love that I have an audience. I think it's amazing that people follow me and go along this journey. I just think that my focus became conversations like this rather than posting charts of altcoins. You know, and that's sort of how I became this host that I'd ever intended to doing all these interviews and hosting roundtables because it may be controversial content, but, you know, I can ask the question, let the other person say the thing.

19:39and maybe would have gotten me in trouble otherwise. But really, I think that that's how we convert more people. But isn't that a shame because you're not giving over your brain power, your analytical abilities, right or wrong. You're not sharing with people anymore. And everybody suffers from that. And again, because nobody expects everybody to be right, but the collective thought process of a lot of smart people on Twitter is an astonishing thing when it's happening. it's it's incredible uh study again in in human psychology i mean i do still run a newsletter and when i see a great idea that i like on a chart i you know have like seven disclaimers before i share what line i think is cool uh and you know i kind of approach it that way and i say you know but it really people people's ability to blame strangers for their own bad decisions will never cease to amaze me you know and the other thing is is you can be right and they can lose money right and you're even you're saying this is not financial advice i didn't even buy this i'm just analyzing it and still you know they obviously fomo into something just because they see a cash tag on twitter they don't use a stop loss like you would have they don't know where you're taking profit you're not reporting to them at home at four o 'clock in the morning and so i think you know you just don't you cease to want to feel that responsibility for people's financial decisions even though you know they're not your fault and you just change your behavior so i think it's for better or for worse you just have to become sort of a different kind of uh personality as it evolves i still like trading that stuff sometimes you know quietly in the background that's what i was going to ask is what do you actually do yourself i mean i interesting i i don't trade i spent my you know i was a hedge fund that as i trade i don't trade i really not trade much very occasionally i'll do something but generally speaking i just buy and hold it same old stuff i'll stomach the volatility because i'm kind of used to it now um do you do that i mean i do buy the nft but i barely ever sell them either how about you i've never sold an nft in my life right i didn't buy that many of them but i've certainly never sold one i'm still holding you know 90 of the lower cap things that kind of went to zero that were small bets from the last market because who knows um and because that's the approach that i took with them in the first place right if i if if my approach which is 50X or zero and zero comes, well, I should have been positioned and sized according to the odds of that happening.

22:10If they're options, then what's so good about these things, the shrapnel that's left the wrong bets, they're free options because they never expire. One day, one of them is going to go. And plenty of them did go, right? And I took profit on those in the last market. So it's a massive net gain. But as to my behavior, first of all, my time is better spent creating content. In my mind, I enjoy it more. Being a trader is very hard. It's not something that I ever intended to do 24-7. You know, it's like people are like, I'm going to quit my job to become a trader. And you've now traded your 9-to-5 desk job for a 24-7, 365 desk job with no benefits.

22:53It's just a really hard way to live. And I think you learn that 99 % of the time, certainly in this market, sitting on your hands is the best strategy. So there might be some cycle that comes through that's just really apparent that things are good, right? Bitcoin's gone up 100 % sideways and altcoins are going left and right. Okay, I'm going to have a little fun for a couple weeks there. And then I'm a trader. But I'm not trading full time. I'm not trying to trade through the chop and volatility to make a paycheck. And I'm impressed with those who can because there are people who are actually exceptional at that and can look at a five-minute chart and figure it out.

23:32But I'm much more like you. And to be honest, it becomes an element of practice what you preach, right? I mean, if I'm going to keep telling people dollar cost average is important, zoom out, low time preference, that should be my approach as well. but even when I was honestly at like peak degeneracy, I still had at least 50 % of my portfolio just sitting in Bitcoin and ETH. You know, I always believed the bull, and usually for me, it's 70, you know, 70 % investment, 15 % cash, 15 % to a light on fire was always sort of the approach I was taught when I was younger. And I carried that over to crypto.

24:06But like I said, if it's full alt season, you know, I'm going to ratchet up, take some of that investment money out and have a good time. But it's very rare that I buy anything that I'm even thinking about selling in the next six months to year. Hey, everyone, we're going to take another quick break and hear a word from our partners. We'll be right back to the Real Vision Crypto Daily Briefing.

24:31So the other big thing that happened at the tail end of the last, the peak of the cycle was the split of the Bitcoin maxis versus everybody else. How did you deal with that? Because you, like me, you were having conversations with everybody. You're inquisitive and curious. And before you knew it, everybody split into this weird world. Well, we'll talk about that in a second, but I will tell you that what I find most entertaining is now the Bitcoin Maxis all hate each other because there's different various levels of Bitcoin Maxi. Ordinals, I don't have any opinion on Ordinals. I just love watching that community cannibalize itself over them.

25:08So I really do. But yeah, I think it was very hard, but maybe it was always there. I think it just became more of a split, maybe because Ethereum maximalists started to talk about hard money, and that was just a little too much stepping on the Bitcoiners' toes. But I think largely by that point, I had almost everyone muted or blocked after going through those last cycles. And it really is like if a tree falls in the woods, you know, does anyone hear it? If you don't read the comments, it never happened, right? And so I really got very good at making Twitter and the community into a one-way street where I just launched.

25:51My joke was that I throw a grenade and I walk out of the room. And that's how I view Twitter at this point. And so, you know, I think that I somehow managed to at least maintain enough friends on both sides that it wasn't that bad. And to be honest, I think a lot of them just want to come on the show sometimes. So they tread lightly about calling me names, even though that sounds ridiculous. But the most toxic Maxis I've seen say bad things about me on Twitter are certainly knocking on my door when I'm doing a spaces with Michael Saylor saying, can I get on stage? Right. And so I think, you know, you get to a big enough platform if you if you sort of thread that needle, you have a fighting chance.

26:30but I was very much on the, I like each side like you. But my approach was always that they were separate assets and non-competitive, you know, and I continue to say that there's Bitcoin and there's everything else, but that doesn't make everything else bad. It's okay to take, you know, a VC approach to investing in speculative technology. I love that. Right. And so that's how I viewed sort of altcoins at the beginning, if it wasn't just outright trading them for profit. it. And so at least I think I always maintained the Bitcoiner mentality and kept, you know, on the right side of history, perhaps there.

27:07But to be honest, I don't know, man. It's no matter what you do, you're going to end up on the wrong side of some community. So, I mean, what's the answer? Should I, you know, should we have become Bitcoin maxis? And then all the people who love Ethereum would think we deserted them. And if you even mentioned Ethereum, I was just joking about this with David Bailey from the Bitcoin conference, but I did a roundtable recently on my YouTube channel and everybody was sort of bullish on Ethereum. They're all Bitcoiners, you know, but they like us. And I got a DM from a friend who's a toxic mapsy by any definition.

27:43And he told me he was disgusted with me because there was no Bitcoin opinion in the conversation. Right. And I said, listen, like next week I'm having an entire Twitter spaces where a bunch of Bitcoiners are going to attack me. Like I'm literally inviting them and I'm going to be the only one who's not a Bitcoiner. So there's not going to be anyone representing the other side there. And he said, yes, but any bullish talk of Ethereum is an attack on Bitcoin. And my response was, you're really insecure, man. That's literally what I said. I said, listen, Bitcoin doesn't need defending. If it is all the things that we believe it is, if the community is that passionate, then something else being good is not a threat or an attack on your asset.

28:28I just don't understand that mentality at all. Maybe it's because I mentally put them into buckets, like I said, but talking about Amazon stock is not an attack on gold. That's really how I view it. I don't know. And the one thing that I've really enjoyed is the rise of the kind of web three ethos it's like it's very open-minded it's kind of we don't really care what chain it's on there's art there's music there's culture it reminds me and i've talked a lot about this i was i happened to be the ledger event in paris and i'm sitting there with famous artists musicians fashion people finance people technologists all at the same table united and I'm like, this stuff rarely happens.

29:14It feels like there is magic here somewhere. Yeah, and they'll tell you that you were sitting at a round table trying to figure out ways to attack Bitcoin, if you ask the top six magazines, right? That you all got together to plot your next attack. But yeah, I haven't seen anything that's brought these people together. And a lot of people say it's a bubble, it's a speculative bubble, everybody's going to lose their money, but that's fine because those cycles advance the ball, right? The people who are here earlier inevitably going to fail, 99 % of them, right? And people is, I love when people compare crypto to the late 90s, early 2000s tech and internet bubble, as if that's a bad thing.

29:56Yes, there were Pets.com and NetTaxi or whatever, all these companies that went to zero, but there was also Google and Amazon and the biggest companies in the world. And so I view these cycles that we see in crypto, certainly this bear market, as washing out all of the failures. Listen, there were plenty of outright scams, horrible ideas, I'm sure. But most of them are just honest people who tried something. Maybe they were a brilliant technologist, but horrible at managing treasury. I think that's what we saw a lot of times. They thought that they had unlimited money and that everything was cut down 90 % and they failed.