In short
Podcast Notes: Raoul Pal: The Journeyman
Episode Title
Super Bullish: Raoul Pal and Scott Melker Decipher Bitcoin's Surge & Crypto's Economic Takeover
Episode Overview In this episode, Raoul Pal and Scott Melker discuss the significant movements in the cryptocurrency market, focusing on Bitcoin's price surge, the implications of a Bitcoin Spot ETF, and the ongoing changes within the broader economic landscape. They explore macroeconomic factors, potential investment opportunities, the impact of institutional investors, and the future of cryptocurrencies.
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Key Themes & Discussions
- Economic Landscape
- Current Market Sentiment: Discussion of recent volatility in Bitcoin鈥檚 price, reacting to ETF news and treasury yields.
- Impact of Treasury Yields: As treasury yields rise, there is speculation about its effect on crypto and traditional markets. The conversation hints at a potential shift in investor behavior and market dynamics.
- Liquidity Cycles: Raoul emphasizes that the market is forward-looking and anticipates liquidity cycles influencing both crypto and tech stocks.
- Bitcoin and the ETF Debate
- Bitcoin's Resilience: Despite negative market signals, Bitcoin has shown resilience, and there鈥檚 anticipation around the ETF approval increasing institutional investment.
- Institutional Interest: Commentary on how major financial institutions are beginning to embrace cryptocurrency, signaling a shift in the traditional finance landscape.
- Crypto's Idiosyncratic Nature
- Decoupling from Traditional Markets: Discussion on the narrative of Bitcoin and altcoins potentially decoupling from the traditional asset classes, indicating a unique market development.
- Future of Altcoins: An optimistic view on altcoins gaining traction as new capital flows into crypto markets, potentially driven by ETF developments.
- The Role of Technology and AI
- Influence of AI on Economic Growth: The potential of AI and technology in driving productivity and economic growth, contrasted with the reality of an aging population and declining birth rates.
- Impact on Job Market: The conversation suggests a transformative period ahead where AI could replace jobs but also create new opportunities.
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Key Takeaways
- Market Cycles: The cyclical nature of markets suggests that both opportunities and challenges will persist as liquidity and sentiment shift.
- Long-Term Perspective: Investors are encouraged to take a long-term view on cryptocurrency investments, focusing on fundamentals rather than short-term price movements.
- Educational Resources: Raoul advocates for education in the crypto space, highlighting Real Vision's new Crypto Academy aimed at helping investors navigate this volatile environment.
Recommended Actions for Investors
- Dollar-Cost Averaging: Suggested as a strategy to manage risk in volatile markets.
- Stay Informed: Emphasis on keeping up with market trends and potential regulatory changes that could impact investment strategies.
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Future Outlook
- Anticipation of ETF Approvals: The potential approval of Bitcoin Spot ETFs could herald a new era of institutional investment in crypto.
- Emergence of Real World Assets (RWAs): Discussion on the future of tokenization of real-world assets as a major narrative in the next crypto cycle, with expectations for significant developments in the coming years.
Conclusion This episode offers a comprehensive view of the current state of cryptocurrency and its potential future, emphasizing the importance of understanding macroeconomic trends, the impact of technology, and the necessity for ongoing education in the fast-evolving crypto landscape. Raoul Pal and Scott Melker provide a bullish perspective on the opportunities that lie ahead for investors willing to adapt to the changing environment.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Transcript
Automatic transcript. May contain errors.0:00We had the fake ETF news from Cointelegraph. Huh. I mean, humans are ridiculous, but that's what we are. This is not an easy game. Yes, 86 million millennials. Ah, Skynet and the Matrix wrapped into one. Sounds amazing. Fucking shit show. I don't believe that signal is there. Fiesta of raging markets. There was a, I think technically it would be called a shit ton of issuance that happened then. I could stand here and record an intro telling you about all the nuance and insight that I got from my podcast today and introducing the topics, but I'm just going to say this. This is the conversation that you need to listen to if you want to feel bullish and understand what's going on in both legacy markets and the crypto market.
0:45Every single time I sit down and talk to Raul Paul, my mind is absolutely blown, and I feel absolutely optimistic about the future of our space.
1:12let's talk about the market a bit because obviously a week ago we had the fake ETF news from Cointelegraph we had Bitcoin go 28 30 28 the matter of an hour a lot of people thought oh no, that's the top. Now we got to go down. We looked at the chart. We've got the wick. But here we are today recording on the next Monday, and it's 31 ,000 plus while treasury yields are at 5 % on the 10-year. So can we put to bed the correlated asset argument, or is this just a temporary moment in time? So I think of this like an option, right? So the more the treasury yield goes up, the more we're all going, oh, my God, a car crash is happening.
1:55The more the banks go down, the more the option that the Fed have to do something comes back into play. Yield curve control, right? So this is like an option play. Yes, we've got the ETF story going on as well. But it's also, gold did the same thing. It started to suddenly shift from being fearful of rates to bring the rates up, because we know what you have to do. You have to yield curve control or you're going to have to do something to stop this because if not you're going to blow up the banking system so we're still living the upside down where bad news is good news and good news is bad news it's pretty uh absurd to be to be honest to be living through this through this time but what's interesting is that people keep cheering for the rates to rise as you said yields to rise because they think that something will break the fed will pivot liquidity will come into the system and we'll have yet again a fiesta of raging markets.
2:51But when the Fed pivots, usually prices go down. That's when you actually see the stock market correct massively. And we're about to see the yield curve potentially normalize here and uninvert. Yes, but normally, the yield curve, that yield curve, going back to positive sloping, usually has happened because they're cutting rates at the front end. But this is completely different. This is this excess spending idea and who the hell is going to buy all the bonds. And meanwhile, Janet keeps issuing them because rates keep going up. So they issue more. And everyone's like, well, this is a total fucking shit show.
3:30And the Japanese did yield curve control within that. So I don't believe that signal is there. I think that the more the curve goes closer to zero, because the long end's going up in terms of yield, the more it's a sign that they're going to have to do something. My point I've been making for a long time, I think last time we spoke, I said this, is the recession got priced in last year. Crypto assets don't go down 80%. The NASDAQ went down 35%. The long end of growth technology like ARK was down 78%. That was the recession, right? So what we've got is markets that are forward-looking because they understand the liquidity cycles.
4:10now so that's why they're going up and have been going up you know i managed to participate in most of this in both crypto and in technology stocks because i knew that liquidity was coming back slowly so even though the fed are doing quantitative tightening and the treasury issuing because of this drawdown in this reverse repo all of this stuff basically means they've not been tightening liquidity for ages now no it's like one hand is punching it's uh both hands are punching the face from different sides and doing the exact opposite. It's really an incredible thing to see. And to your point, seeing the yield curve normalized because they're both going up, but one is just going up faster is not the same as it's been in the past.
4:55But man, seeing the Treasury go from, you know, to issuing enough Treasuries that we've gone from 31 trillion debt to 33 trillion debt in a matter of months. Is there anything they can do to stop that trade? Yes. I wrote this whole piece on this, which is called The Everything Code, which was the idea is that because there's so much debt that needs to get refinanced every three to five years, we get this four-year cycle. The reason being is everybody reset interest rates at zero in 2009. And we've been following this four-year cycle ever since. The whole economy's following it. It happens to be the halving cycle as well.
5:33It's all the same thing. And so what I discovered and i think i was the only person to do this was i found out that the fed balance sheet basically is a three and a half year lag of the interest payments that are due from the previous cycle now if you think about the previous cycle well what was that the pandemic there was a i think technically it would be called a ton of issuance that happened then slightly and so that needs to get monetized right and we're seeing this is early stage but we've got like 12 trillion of this stuff to roll. Plus the new issuance, there's no way. It can't happen. So either the economy goes down the toilet.
6:13My view is the reason the Fed is so slow is because they want inflation to undershoot to give them the cover to refinance the debt. If not, they'll do what the Japanese are doing, which is yield curve control, which is buying all bonds at a fixed price. So let's say they say 5 % will buy any bonds you want to sell us. That is still more cowbell, more stimulus that comes into the system. There is no way of managing an economy that grows this slowly with this much debt. If you had a faster growing economy, it'll be fine. But let's say, on average, to make the maths easy, let's say the economy grows at one and a half.
6:54The trend rate of economic growth is about 1.7%. The US government is about 120 % of GDP in debt. And interest rates, if they're above 1.5%, means all the economic activity just goes to pay the interest on the US government debt. Problem is, is the private sector, they're over 100 % of GDP in debt, so who pays for that? So what's happening is the Fed are monetizing all of the government debt four years later, or three and a half years later. And the private sector does its own thing. But there's just not enough GDP growth. And that's the problem. That's what we're seeing in the market. That's what's going on here.
7:40So stimulus is the only way. Yeah, so we're going to turn Japanese. We did ages ago, but everyone forget. Everyone goes, yeah, but we're Americans. We're amazing. Or, you know, the Brits, not the Brits, all of Europe turned Japanese a while ago. Yeah. You know, their economy went nowhere. The stock markets went nowhere. But everyone says, who's going to buy all these bonds? It's the Fed. Yeah. And they'll also change the rules to force the banks, which they did once with Basel III and all of that. They changed it to the banks bought the bonds. When there's too much there, they'll force the pension system, which Europeans did and the Brits did.
8:15They forced the pension system to hold more bonds than equities to say, we've got this aging population. You need to be more risk adverse. We'll change the pension risk rules. What it means is you're buying the bonds now. So yeah, just that worked out really well for the banks that collapsed a few months ago. Yeah, exactly. And what's going on here that people don't realize is this, you know, governments are a function of the money that we put into the government, taxes and other stuff. So we don't have enough taxes because the economy is too slow to pay the interest and the debt, blah, blah, blah, blah, blah.
8:51So what you do is debase the currency and mutualize the debt across it, the losses across everybody. And the only people, yeah, to socialize the losses. And the only people who managed to offset it, the ones who can buy scarce assets. And the scarce assets, so if you divide the S &P 500 by the Fed balance sheet, it's pretty much been flat since 2008. Gold, flat, real estate, flat. There's only two assets that have actually outperformed the balance sheet which are crypto and technology right because they're both in exponential growth phases so it's actually not that complicated a world we just make it complicated on twitter but you talked about the fact that the price action that we saw the drawdown of 70 80 percent of all these assets was the recession but that's not the recession for your average person right so that's the recession for the stock market correct but that's not the recession for your average person who's paying $100 for some Takis and Tostitos.
9:52Yeah, and I would argue that people are feeling the real pain. They first felt the pain from inflation. They loaded up on credit card debt. They did whatever they could to hope that went away. As we know, even though inflation may be quashed, the price has never come down. So you've lost that purchasing power. And I think people are feeling it more intensely this quarter and probably next quarter. um you know i don't i think the unemployment numbers will continue to rise um you know i don't know a single business that hasn't laid off people i don't know people who are not finding their revenues have gone down unless you happen to be open ai or somebody you know most people are struggling i mean elon made it very clear on his call about tesla it's like nobody's got any money yeah and interestingly we've seen tech stocks do incredibly well through this period But most of that, if you actually dig into their earnings calls and what they've done is because they've fired people and tightened and spent less or not like Tesla, but Netflix, for example, and they raise their prices.
10:56They're not getting new customers. They're just charging their existing customers more. And they're mainly monopolies or pretty close to it. So they have an ability to weather the storm because they've all got cash. None of them have got debts. They've got tons of cash. that cash is now earning 5 % interest, which helps. They could raise prices because they're monopolies and they cut costs. So yeah, no wonder they're doing okay. Yeah, treasuries are like stimulus for rich people. Yeah, yeah, exactly right. Yeah, poor people can't invest in treasuries because they need their cash, but a rich person can now park their money in a short-term treasury and get 5%, keep rolling it over, use it as cash when they need it.
11:39They don't care about anything. it doesn't affect them like you said and then they can buy hard assets at the bottom yeah and that's how how the whole system is is that sustainable you seem to believe that at least for now it is well find me another way that that's going to be resolved right because the other side of the equation that most people don't get is people there's a lot of like oh just let it all burn okay you've got 76 million baby boomers about to retire and all the government are baby boomers are you just going to destroy that's the largest part of u.s wealth so if you destroy that you're destroying your parents money if you're younger which is then your money and that means you don't get any inheritance yeah yeah it's like they're not going to do that and they know the answer to stop that imploding is never let the value of collateral go down in a indebted economy which is real estate, equities, all of that stuff.
12:36So what you do over time is you debase the currency. So optically, that stuff rises. So they're just not going to allow that to happen because the outcome is even worse. So the problem is, is it still, it continues to make the rich richer and the poor poorer. The only way out of this equation, because we've had the zero interest rate, that was a debt jubilee, right? Nobody has to pay the interest in the debt. Great. I mean, imagine if you do that to credit card holders now are paying what 30 % interest or whatever stupid numbers make them up yeah I mean it's crazy so that's what all the governments did they say well we don't have to pay debts anymore we don't have to pay interest on the debts we'll pay the debt well we won't we'll just keep rolling it we'll never actually pay it the only way of stopping this is economic growth needs to come back that's really hard with an aging population because old people don't spend money right and how does that happen if those people aren't working and and people's income isn't going up, and tech is naturally deflationary and is bringing the prices of things down, and AI is replacing some jobs.
13:40Although you and I both agree that AI will probably bring more jobs, I think. Yeah, so in the end, how I've thought about this is GDP growth is measured by population growth, productivity, and debt growth. We've finished the debt growth game. The population growth, well, nobody's having kids anymore, because everything's so fucked. So there's no children. So you have to get productivity. But this AI thing does two things. One, it's like infinite new people, infinite new workers, infinite knowledge workers, and then the robots come, that's infinite physical workers. So that's like infinite population.
14:16Okay, that's a really interesting concept. And that obviously leads to productivity. Why hasn't Elon Musk talked about that when he says that the greatest risk to humanity is this deceleration of population and people not having kids and the population decreasing? Because the point you just made, which I never thought about, sort of disavows that entire idea. It does, but it doesn't. And Elon's right. The reason being is if we are going to replace economic growth by using infinitely scalable economic units, AI and robots, they'll become smart enough to displace us. We're economically incentivized to have a crash course, a crash collision with AI.
14:58Ah, Skynet and the Matrix wrapped into one. Sounds amazing. It's all there. But we are incentivized to do that because we've broken the global economy. And the only way is having more AI and more robots, which in the end is accelerating AGI and the other issues that we face. What do you think the timeline for that is? I think it's really good for a while. I'm only asking because I'm moving to the Caymans to enjoy my last days yeah come over to little caiman because the robots are never coming there trust me um i think it's i think it's we've probably got 15 20 years of a complete boom before we have the holy moment of are we in control anymore well it's longer than i thought maybe i can work with 15 to 20 years, I think.
15:51Yeah. I'm hoping. I mean, it could, you know, at the speed that this stuff's happening, it could happen next week. Yeah. I mean, the velocity is really absurd. I want to pivot a bit to crypto outside of the macro because there's this endless debate, obviously, of whether it's correlated or whether it's not correlated and escalator on the way up, but rides the elevator with everything else on the way down. It hasn't been correlated for quite a long time now. Even when it was sideways, everything else was going up and down all around it. So you could say that it was not correlated at that point.
16:25If you look at historical correlation, it's exceptionally low. But are we seeing a real moment of detachment here as Bitcoin rises? And now even in this last move, altcoins rising alongside it, which to me indicates there's actually new money this time. It's not the washing machine of altcoins selling into Bitcoin, selling back into altcoins. Maybe it will be by next week. I have no idea. But do you think that we're really having a moment here where this could become the idiosyncratic asset class that we've believed it is from the beginning? I think it is already, by the way, but yeah. As you know, if you zoom out and put it on a log chart, it is, right?
17:03It does trend perfectly. It's just that the cycles within that trend, when you don't put them on a log chart, look horrific. And most people don't have the stomach for it. You and I have been around this long enough to realize the pain is part of the, the risk is part of the reward. You have to go through that to have an asset that goes up 20x each cycle. So I think it's been decoupled for a while, as you say. It feels that new capital is coming into the space because it's moving out of the risk curve. So we saw Bitcoin going up first part of what I call crypto spring. So all year it was Bitcoin.
17:39And that was driven by, I think just alts bleeding and that washing machine. But what we're starting to see is a movement towards the ETF. And that gets front running of capital from other people as well, hedge funds and others. And then eventually, we got the news today that BlackRock has probably started to buy some. Who knows how much that is? But let's call it a couple of hundred million bucks. Either way. So the way to think about the ETF, I think it's really useful. Here's the crypto economy. And it has been starved of new capital recently. And the ETF is a trade deal between the TradFi economy and this new economy.
18:18So we've just started a trade deal. Doesn't mean we're going to get the trade, but it's looking like we'll start to get foreign direct investment into the crypto economy. What happens then is how I think about this, my mental model is, okay, so the money goes into Bitcoin first, but everybody who's been in this market has been front running it by owning Bitcoin. So then the next thing they'll go is, well, they're going to do the ETH ETF next. Of course, an index of the top 50 altcoins, right? Yeah. It'll go to the ETH ETF, that will run. And then meanwhile, we've got other stories of things that are getting traction, Solana, Chainlink, others that are starting to rise as the capital's coming into the space and people are placing risk bets in things that they think might work in the cycle?
19:08I think that you think bigger than I do. So maybe these things don't surprise you. But never, maybe in my bingo card for any time in the future, would I have had every presidential candidate who's not 400 years old taking a position on Bitcoin? I understand that Biden and Trump probably won't talk about it much. And Larry Fink going on national TV and calling crypto So a flight to quality. In a million years, I don't know that I would have had Larry Fink saying that, especially when the market is down. Although I guess we should, when the market is down is the perfect time for him to say it, but still.
19:47It's really interesting. You know, he won't say these things. He's not like Paul Tudor Jones or a hedge fund manager can pretty much say what he wants. He controls one of the largest financial institutions on earth. A flight to quality tells you that you need one. Yeah, that's right. He's telling you how screwed you are by calling anything a flight to quality. Yeah. And so, you know, I think it's the banking issue is the problem. Because, you know, everybody saw Bitcoin really started taking off when the banks were struggling. I saw this firsthand in Europe back in 2012 and 2013 with Cyprus. Bitcoin exploded because people understood you couldn't keep your money in the bank.
20:30And that's when I first got into the whole space. And here it's happening in the US again. And people are like, oh, I get it now. But yes, it's a really big statement for Larry Fink to say that. Yeah, you and I can say it all day, it makes no difference. But him? Yeah, that's a deal. That's a big deal. And the presidential candidates, and we're seeing a potentially pro-crypto speaker of the house if the republicans can actually get their shit together to put anyone in i mean we're this is main stage man we're not the little name on the flyer anymore we're up at the top of the coachella right it is and the reason being is the democrats which is a very boomer driven current cohort of leaders there are looking after their own, which is the disenfranchised boomers on the coasts.
21:24Okay, fine. But there's 86 million millennials who just don't have the same economic interest as those retirees. So I think that this other cohort of politicians is thinking, huh, well, there's a bunch of voters we can get behind a single issue. which I don't care if it's yet another slimy politician with another agenda or at least it's getting the right agenda yeah I don't expect anything out of politicians at least they can say the word I like them to say right or talk about the thing that I want them to and speaking of politics and certainly not political parties or who we would vote for or anything like that which I would rather stab myself in the face with this pen than talk about but do you think that the election itself will play a major role in the market cycles next year.
22:11I mean, we have some historical precedent, obviously, for what happens to markets in election years, knowing that incumbents don't usually win if you're in the middle of a recession or a depression and everybody's angry. Markets almost always go up in the presidential cycle last year. Very simply, more cowbell. They want to give out money to everybody who can vote. so they they you know have you noticed how many of these coincide with recessions um you know almost all of these people come in the four-year cycle is all the kind of same bloody thing I was gonna say so it's the same fed four-year cycle we just talked about and the Bitcoin having and the presidential election cycle effectively effectively aligned essentially yeah essentially is it's all the same bloody thing and the stimulus always comes at this point so 2024 should be a lot of stimulus then the new government comes in they produce stimulus and those seem to be the two big stimulus years we're coming through the stimulus stop shrinking year which was this year which is the the spring the macro spring or crypto spring and then we go into the summer yeah i mean i hadn't actually thought about that but yeah yeah i mean literally like the having if it plays out in the same way it has in the past it's called six months after the having, you're two months before the election.
23:29And you're two months before the election, and it might just be Biden and Trump, so you may not hear about it. But if any other candidate is there, they're going to be talking about Bitcoin all the time. Yeah, it's all the bloody same thing, which either makes it now, at some point, it will stop happening. But if it doesn't, it makes it the easiest environment we've ever been given. I mean, if it ain't broke, I'll try to fix it. I keep saying people, you know, I always have the having argument. And I say, if I'm wrong next time, I'll readjust, but I'm just going to keep doing the same thing until I'm proven wrong.
24:01Yeah. And if you've got now the understanding of why the macro does the same thing and the political cycle, it's like, well, unless something dramatic changes here, rinse and repeat seems to be the same idea. What could that dramatic event be? What could be a big enough event to really break this cycle and send us into a black swan depression or global meltdown? You can't because you're going to print. So China... Couldn't hyperinflation be the answer there, though, if you print so much that you actually hyperinflate? Well, fine, as long as we own the right assets, we'll be fine. There's actually another risk, which is the opposite side of this, which is, let's say we're in 2026 and rates are starting to rise and the Fed go, you know what, we're not going to do this again.
24:51We didn't need to do it last time. We screwed up, you know, blah, blah, blah, blah, blah. We're just going to pin yields at 3 % or whatever the number is at the time. And so they just print money through the inflationary cycle. That's another side of the equation that I can't square away is, are we going to go through another full rate cycle again or not after they've done this? Depends how this one ends. But that's another kind of distribution people aren't thinking about is maybe they just don't raise rates again. Yeah, it's a really interesting idea. It just depends on if people always look back favorably on an X and they forget all the bad things about it and only remember the good times.
25:33Seems like the Fed does that every time. They should have learned their liquidity injection lessons in past cycles. You would have thought after 2008, anyone who lived through that, but it only took about 12, 13 years for seemingly them to forget all the bad things and remember all the good things and don't forget the bank the bank of england's been doing this since the 1700s uh 1600s and the you know the i think it was the bank of uh the bank of holland bank of amsterdam whatever they're called at the time have been doing it even longer that i think the world's oldest central bank they've never managed to get rid of the business cycle and people assume that you know the fed can we can't we can't whether our system of money creates it or whether it was our agricultural cycles before or weather cycles.
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27:25Okay, so barring that black swan, we can continue with the Jubilee and we get these cycles. But it seems like in that cycle, your average person or someone in the bottom 90%, or we could even call it 99 is going to just suffer more through each cycle. So if you don't have the money to buy any hard assets, what is your strategy? What can you do to survive further cycles? We've seen the survival technique. One was borrow more money, right? Which actually the purchasing power of that of that debt, the cost of that debt actually goes down. And the other thing that everybody did was remove the cost of going to work by doing it from home.
28:10So we got cost efficiencies. The other one was everybody did two or three jobs. RAOUL PALAMARAJAMPANI Yeah, which is horrific. RAOUL PALAMARAJAMPANI Job numbers are great. But then you dig in and it's second jobs, government jobs. It's not people getting high paying fresh new first jobs. RAOUL PALAMARAJAMPANI And you know, I've been talking about this for a long time, even that Bitcoin life raft video that got viewed millions of times was, listen, you have been given one gift is you can buy a fractionalized asset that you can be a billionaire or you can make$200 a week and you can put 10 % of your money in it because it's fractionalized.
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28:46And it's the first truly global asset that's the same for the person in Brazil as for India as for Philadelphia. It's one asset. So that's really, really empowering for people. So there is a chance. and also i've talked a lot about this before is this is the first time the little guy gets a chance to front run the institutions amazing you know and it's yes it's not easy right it's not easy plenty got wrecked on the route you know everybody told them just to hold don't use leverage and people don't listen they lose their fucking minds in the middle of these things in the bull market but if they could just hold maybe dollar cost average don't use leverage and put it on your ledger device, your probability of success is extremely high.
29:35And then you get to front run what is now the dumb money, which is the institutions. And don't mentally plan your retirement next year based on the portfolio number at the top of the bull market or that yacht you're going to buy if it just goes up 10 times more because it has to when we're at$69 ,000 Bitcoin. We've all been there, right? Yeah, I've got the architect's plans in my drawer for the massive extension I had for my house. We designed an entire house that we didn't build. That was more because rates and stuff went up so much than the epic losses. But yeah, I did that. I literally have architect plans in a drawer.
30:10I seriously hope my wife does not listen to this because she'll be so angry that I reminded her or anyone else of that. But yes, it's the same. So the answer then, obviously, is buy some Bitcoin, right? Because we believe that you could do well. Where do altcoins at this point fall into your mental model? Is it still, which we've shared in the past, is this sort of Bitcoin, which we can call digital gold, store value? Is everything else still a VC tech investment in your mind? Do you think that in this cycle, it could be a bit different where some actually break out of the kind of the same cycle where everything gets wrecked together, everything goes up together, Bitcoin sort of dictates the market?
30:52What you want to do is look at things versus Bitcoin and see where things are. Now, ETH has always been very interesting to me because the whole down cycle, it didn't do the down 90 % versus Bitcoin. Many of the existing alts do because we know it's a massive ecosystem. Also, ETH, everything changed for me when A, it got deflationary in large activity, because actually the biggest activity is in a bull market. So it becomes scarcer in a bull market. that's like, okay, nobody really thought that one through. The other thing is it now has a yield. And if you think of institutions, they like things with yields.
31:29So they don't like gold because it's another yield, ETH does. So ETH has been actually my bigger bet. But I've recently been switching into Solana as my bet. Can't be bad about that. I don't know when you started recently but i started i started buying solana in uh last year uh june through till december um to average and um i just had the feeling and i looked at the chart and i saw the solana ecosystem and you throw all the worst news possible and it's the worst sam coin and you know just the i was just gonna say the best argument for solana is it isn't dead that's right and then i saw people like tolly you know who's anatoly he's just classy he's just so good and i'm like okay this is really interesting i've met him previously and saw the kinds of people he was involved with and they were like the heads of all of these amazing businesses i'm like i obviously can't talk about it publicly but like okay this is amazing um and then i learned about i don't know have you gone down this fire dancer rabbit hole yet i haven't really i mean only very superficially i i have not gone really public on it uh but i'll write some stuff out of it because i've been writing about it for the real vision pro macro people and and for global macro investor but i hadn't even heard about it but i went to mainnet and there's colleen from breven howard who's a good friend and an amazing person she was on stage and she was like and you know fire dancer that's obviously a big bet that we've got that's that we think is really important i'm like i don't even know what you're talking about colleen but she knows a lot of stuff i don't know so i'm like okay fine and then anatoly comes up and he's speaking and he starts talking about fire dancer and oh yeah you know if we think it can do 600 000 to 1.2 million tps and that i'm like what and i was thinking at the time maybe it's some sort of layer two blah blah blah compromise so i went back home I was looking at the charts, which I have been for a long time of Solana versus ETH and Solana versus Bitcoin.
33:38I'm like, this looks like a fucking rocket ship. What is going on here? And so I started looking in and watching the interviews with the jump trading team who built Firedance and realized it was a separate validator for Solana. That increases the security of the entire chain itself. and that yes these speeds were right because it was being built by people who were trying to build light speed for high frequency trading and uh you know tolly's going yeah this is the real deal this is what we should have done in the first place um and i'm like okay this is huge i mean that solves the trilemma like we've never heard of a coin where you can get better security with faster speed right no and the speed here i mean just think of the the quantum this is so we've got Solana at supposedly 65 ,000 TPS.
34:30We've got a layer two like Polygon at about the same, but less secure than a layer one. Okay, fine. This is a layer one of Solana that does 20x. So they're saying it's fast enough to run the entire securities industry. Twitter only runs at 24 ,000 TPS. So you can run all the social media. you can run high frequency trading, you can do anything. So all I think is use case. Use cases explode. And it just becomes very interesting. So that's why I'm very bullish in all of that. I haven't gone down the fire to answer rabbit hole. I wonder when they started working on it. I've done quite a few podcasts and conversations with Tully.
35:15And many months ago, I asked him, you know, can we do the one chain to rule them all thing? Or do we need to live in a multi chain world with interoperability and he very quickly said nope solana can do it all because i have no doubt we can live in a one chain world we can do all of it i'm not saying that i believe that necessarily because i don't think ethereum is going anywhere and bitcoin's still a chain right um and maybe there'll be some other winners i think in different niches but his confidence that that was possible by what he saw coming is pretty uh we'll give you pause yeah i think you know it's a very, very big deal.
35:54Chris Berniske phrased it well, the guys that placeholder VC, they were saying, if you think of ETH as the Android economy, so it's a big open source network that you can do lots of different things with. And Solana is more like Apple. It's like a single operating system, but a very good one. And your Android phone can speak to your Apple phone. So it all works in the end. Yeah, and some of the massive criticism for Solana, obviously, was that it was a VC token, and it was the familiar names, and of course, the Sam coin. I think a lot of that has been washed out. I don't think that that is really true at this point, even of who's holding the supply.
36:33I could be wrong, but it feels like there was a reckoning in the last year. RAOUL PAL Yeah. And look, I could be wrong, too. It may not be the great bet. I may be a complete moron. And I'm more than happy to be the moron. To me, I'm looking at risk rewards here. And I'm just thinking, could this be the ETH of this cycle? That's not taking away from ETH. It's not taking away from Bitcoin. What we're trying to do is if we're in this ugly economic world, you want to trying to make as many chips as possible when you can. That's the game. Now, you could be the Bitcoin maximalist who says, I don't want to keep all the chips.
37:11I just want the chips that I want. And that's okay, too. There's no problem with those different worlds. What do you think is going to happen with the NFT market? Or let me rephrase that with the previous collections that exist from the last NFT market. I'm not talking about tokenization of real world assets. We can talk about that. PFP, 10 ,000 collections. Do you think that they'll ride this wave as well? Or do you think that some of that is just gone? I mean, we know that some altcoins are gone. Some NFT projects are gone, the bulk, right? But yeah, I mean, look, the vast majority of that was beer zero.
37:43I think most people knew that. But out of the ashes rises the phoenix, NFTs are just an asset in the ETH economy. Assets, if you think of the stock market versus real estate. The stock market's led real estate by about 18 months. And so what's been really interesting is the crypto cycle is the same as the economic cycle. So if I look at the cycle of Rolex watches, secondhand watches, and Patek Philippe's, exactly follow the NFT cycle. And they will turn. Why? Because everybody's been puking anything to get some cash because everybody skims right now. So the best way is you sell some of these assets, and then eventually the assets find a base.
38:24We all start making a bit of money again. We all go out and buy the Rolex watch and the NFTs. And before you know it, we're all bidding up crypto punks again, because we're feeling rich and we want to show off. I mean, humans are ridiculous, but that's what we are. But maybe it'll only be the punks and the apes and, I mean, Pudgy Pankhamid seem to have utility, but it'll be the ones that are the Patek Philippe's and the Rolexes of the NFT market. Yeah. And the generative art of the best artists even, but it's a very hard game. This is not an easy game. Yes, if you've got plenty of money buying some NFT projects at Lowe's right now that are super high-end, well-respected.
39:01But the only other thing is utility projects, that's very different. If you're buying it because you get used for it, like we've got the Real Vision Collective, and with that you get a membership to Real Vision, and you get to events. That's a whole different thing. That's a membership card, which is an incredible use case. It's a membership card you pay for once and not every year. So that's fine. But the standard stuff, yeah. and somebody's going to make a fortune out of choosing the right ones much like people bought ETH in in 2018 down 97.5 % or Solana down 97.5 % this time around maybe a month ago we did a crypto town hall twitter spaces and it was a bunch of nft collectors a bunch of the guys who created the projects the people you would think would have been the most bullish everyone on stage was a pfp and they sounded like they were at a funeral like even the guys who had created these collections students had given up it's over it's dead I it was the first time that I looked at this because I never really participated even in the bull market I know that you did right you bought an ape all that I I almost pulled the trigger like 10 times but this was the first time when I said oh it's going up like at the good stuff the good stuff is going to rise if the guys who made the good stuff are afraid it's going to zero this is exactly the moment the crypto market went through in November, October last year.
40:21It's exactly the same, right? You've crushed everybody's hopes and dreams. What's been doubly bad is anybody, luckily, most people don't think of NFTs in dollar terms. They think of them in ETH terms. But many of these things are down 80 % in ETH terms. And ETH was down 70 % in dollar terms. I mean, it's a 99 % washout for many people. but as you say that's when it gets really interesting it gets really interesting when everybody's had their hope go away and they don't believe that anybody can do anything without this space ever again um you know i that's when i start tuning in the right people on twitter um and you know the proper collectors of the space the people who really see it people like um ovi and mando as well who were traders who understand markets i just i just start tuning up the people who have a better filter it was like in the whole collapse of ftx chris baniski again at a placeholder vcs he's a really good follower on twitter was just starting to ramp up about solana and i'm like this is not some rando this is a guy who really knows his shit and he's like well look at the amount of projects happening so that's it's time to listen and focus i think think you're right.
41:39Your radar is right in this. Yeah. Going back to Solana just slightly, you talked about the incredible speed that it will have now and what's possible there. So I think the next inevitable question that I didn't ask is, what's it going to be used for? Right? So I think that we've had these previous cycles where we said, hey, this is fast enough, or we can fill this block space. And we just never saw the traction of anything really grab the mainstream and fill that block space or Ethereum, we did, and see it really skyrocket or be needed. So firstly, I went on Twitter and asked, when is this happening?
42:22And again, Tolly being Tolly's first person to respond. Everyone else is like, what the fuck's Fired Answer? I'm like, anybody know in the Solana community? He's like, yeah, we think it's on testnet end of this year, mainnet by the summer. I'm like, okay, this is happening quick. Okay, so let's go through that case with Solana in what we've just enabled. They cracked the NFT compression, which means that they can mint a million NFTs for a hundred bucks. Okay, now they've got a chain that is like stupid cheap and stupid fast. Those two things, to me, have the financial markets written all over them.
43:03So an NFT is just a contract that lives on chain. Every derivative, everything is a contract, and they can be all unique. But also tickets, all ticketing. When you're issuing tickets like that, it's cheaper than paper tickets. It's cheaper literally than printing the damn things out. And so that enables a lot of use cases we've never done before. And having a chain that is this fast, if that proves to be correct, means that you can use it for exchanges, which you weren't able to do before because blockchains were too slow. If you think about it, what happened, the high-frequency trading business is all about one thing.
43:49They're fighting one thing, the speed of light. So they've got fiber optic cables, and they're trying to get the information down into the exchange and back again, as close to the speed of light as possible, which is why the Flash Boys book by Michael Lewis, all of these people are moving their machines closer to the actual exchange. So they're all around the exchange with this fat fiber optic. Okay, so that's how fast that system is. That's about the fastest use because money is incentivized to pour into the way you can get the most advantage. So money poured into that. So what these jump trading guys are saying is, well, we know what we're trying to do is the speed of light.
44:29So we just need to make a chain that can do that. And if we can do it, then we can do high frequency trading. And if we can do that, then it means that anything in the financial markets can be settled on chain. And that is the big game changer, where we decouple this concentrated risk and decentralize the risk. Preston Pysh Listening to you talk about it, I think that maybe one of the major narratives of the next next cycle is going to strangely be private blockchains versus these insanely speedy and cheap blockchains like JP Morgan Onyx, right? We talk about all financial assets moving on Solana, but we've already seen BlackRock and Barclays settle a tokenized money market, which can be used for collateral on JP Morgan's Onyx platform.
45:18So you got to imagine we might be kind of at war with the big banks once again if this gains traction? I think economic incentives will win. In fact, there's two incentives that I think will come through. And I think you're right. That battle will happen this time around. But then there's the other battle. One is cost. Finance will go for the cheapest place and the fastest place, and it will not be onyx. Maybe they settle some stuff. Fine. There's a multi-chain world, as we know out there. The other thing is interoperability. If Franklin Templeton builds their money market fund on ETH, or whatever they built on, I think it was ETH.
45:58I think it was built on Stellar, at least for their tokenized treasuries. It's about 300 million AUM now. And so how does that move within the ONIX system? The market will solve interoperability. And if not, it becomes a career risk for any bank that makes the wrong change voice. That's stupid. That shouldn't happen. It's like, well, you can't have Apple phones because we've only got Androids and they can't speak to each other. Or, well, you can't use a Dell computer versus some other computer. That's nonsense. So I think they would most likely go to open blockchains in the end for these purposes.
46:33But of course, maybe the insurance industry chooses that it wants to create a consortia, which already has an all insurance contractors settled on their chain. fine but then how do we get all of the wallets take our insurance contract it's just it doesn't make sense in the end they might start that way because they're protectionists but they're going to have to go multi-chain i think that rwa now it's even got a three-letter acronym real world assets so we know that it's going to be a part of the next cycle like nft or d5 okay four words four letters. But I think that's going to be a huge narrative in the next cycle, of course, tokenizing these real world assets.
47:13But now I wonder if this could be the one that we see the first early iterations in this cycle. And then we're talking about this like NFTs in four years, and then we actually see it happen in the next cycle. That's exactly what was in my head when you and I were talking. I'm like, you know what? This is going to be, we'll see the first use cases. Everybody overhypes the cycle. It then fails. The actual hype cycle comes the next time around. Yeah. I mean, I'm willing to wait the time, but it does just sort of echo of these previous cycles. That's what takes this crypto space. Let's say for argument's sake, it gets to 10 trillion this time around.
47:50That's the one that takes it to the 100 trillion, because that's where it's total fungibility with the financial markets. And all of the assets in financial markets, equities are like$200 trillion asset class. Bonds are like$200 trillion. So that is the one where you get the full saturation. Don't forget, within that cycle is the CBDCs as well. That's when we end up with 3 billion people using crypto rails. So that's all coming. So you have JP Morgan Onyx. We have Larry Fink writing in his annual letter earlier, I think it was in March, saying tokenization of everything. Everybody's focused on BlackRock talking about the black bitcoin spot etf but he's also very clearly been talking about tokenization you talked about franklin templeton another one of the largest asset managers in the world they've already tokenized i think it's 300 million aum in uh treasury notes and that markets a billion when you add in maple finance and all of these others do you think that these institutions are taking a small bet that this could be the thing or do you think that they're betting that this will be the thing so i know all of these people i know them personally they all know it's everything okay good but firstly i mean and the people who are building it there are not some evil finance people they really care about yeah and they really care about this space they're in it because they truly believe in it um abigail johnson at fidelity truly believes in it I can't remember the lady who runs Franklin Temple.
49:22Well, Sandy, she doesn't run it, but Sandy's all there. Yeah, she's incredible. Not Sandy. She's the woman who owns the whole thing. Yeah, my brain's not working, but yes, her boss. But yes, another amazing genius. These people truly believe in it. So what they've got the issue with is regulation, is slowing them down. And size of the market is still too small. It needs to be of a certain size before many of these large pools of capital can use it. It's like I've got an asset management business called Exponential Asset Management, and it's a fund of hedge funds. It invests in lots of different hedge funds.
49:56So the hedge fund space in the traditional markets,$4 trillion. That's why traditional markets are really deep. They've got lots of liquidity. You can get shit done. The entire size of the hedge fund industry in crypto is$6 billion. I didn't know the number, but thanks. Yeah. And which is why retail are all of the liquidity. And, you know, in the end, we need these institutions. That will get rid of some of the volatility. Yes, it will lower the returns, but we'll get the return cycle. But we can't have such illiquid markets driven by some random trading firm out of Hong Kong that we don't trust.
50:38You know, it's like this has to stop. We need proper capital in the space. putting that capital in the space will have a multiplier effect. So everyone's going to get rich as that capital comes in, but we need it. Does the ETF solve that partially? I mean, I'm assuming you're of the opinion that this is inevitable. I am, the way that obviously Larry Fink is out there, you know, on his roadshow. I can't imagine he's just doing that for fun or for his health. Do you think that that solves some of this? And then I guess as a corollary, what would you consider a successful or failed launch of the Bitcoin spot ETF?
51:12at this point. So look, that's just part of the trade agreements going to come from TradFi to crypto economy. This is one of them. The ETH spot ETF will happen as well. It'll be later and everyone's going to, as soon as the Bitcoin one is done, they'll front run it by going to the ETH one because they know that it's the next one. We will see that. We will see the rise of the the hedge fund industry, the capital coming in, the pension funds coming in. Matt Halstead and Mike from Texas Teachers are kind of showing the way and how that's done. So they're all coming, and it will all happen over time.
51:53The Bitcoin ETF, I don't think of it as a one-off event. I agree. People are thinking of it as like this liquidity injection into the crypto economy, and I'm saying it's a trade agreement. Trade agreements really start working when people starting to get return on their capital in that new economy. And then they pile in. Do you remember when people, when China started opening up and people started putting a little bit of money there? Before you knew it, you'd be in Shanghai and everybody's been posted there, being given like a billion dollars, set up an office for us there, figure out how to make money.
52:28That's what will come. So I'm less concerned about the start, but this pipe is going to be an important pipe to bring kind of RIAs and others into the space as it moves. Sounds like the halving to me, right? You have this event that everybody's excited about, but nothing changes the minute that the halving happens. Although you maybe get people trading on the news, but then six months later, when you've had a proper amount of time to see that reduction in supply actually affect the market, then you get the price rise. and and if you think about the halving it's so beautifully timed last time in this time i can't remember the previous time but last time it's like okay we're going to reduce the supply of bitcoin whilst we're going to jam the maximum amount of money into the system as possible yeah it was like it was right around the covet bottoms you know in spring of 2020 and then six months later microstrategy bought bitcoin which sparked the next bull run but we all know that was probably So here we are again, going into some liquidity, whatever that's going to look like, plus the Bitcoin spot ETF, all around the same time at the halving.
53:41It's like, you couldn't ask for a better picture. If I'm ever sad or feeling down or having my doubts, I'm just calling you, man. Anytime. Just come, we're going to have dinner at Tilly's. Watch the sun go down. The world will be okay. Maybe it'll be a little less hot this time. But yes, I'm 100 % down for that. always inspiring to speak with you really always a pleasure and I love the vision and consistency I'm hoping that nothing happens in this market that shakes our confidence because we somehow survived this one yeah exactly now talking of survival a couple of things I just want to get across is one thing is we've built a whole academy course for people at real for real vision members well for anybody because like you I don't like seeing people get blown up in the space it's a risky enough space there's a lot to learn and it was really important that we put something together that really helped people we've already got the real vision academy which is for traditional market trading right and that's helped thousands of people we've just built the real vision crypto academy and it's actually hosted by ov and mando because they're both traditional market traders who know their stuff but they're also complete nft mean coin dgens and great crypto traders and they get it dude i had you had you guys had me on the the festival with ov and the topic was worst like mistakes i ever made in crypto i think the word was in there somewhere the worst the most shitty shittiest decisions i ever made in crypto and man he and i could really go back and forth for a long time we could have the two of us could have extended that one five hours i didn't even know him before that but but he's awesome yeah so so that's coming out so um We've got enough for your audience there because, look, you need to educate yourself.
55:26You've heard us talk about the opportunities. You know, Scott and I have gone through the School of Hard Knocks. I came from a Trad5 background, so I did have experience in it, but it's still not easy. So gift yourself an education. Go and do it. It's not that expensive. It's like 350 bucks, but it'll change your life. All we want for everybody is to survive. We want you to prosper and not blow up. Is that available now? Is it available? it's realvision.com forward slash wolf of all streets um it's all there so just do that and the other thing is i've also just started a new youtube channel so it's called ral pal the journeyman uh and i've just got some really cool interviews there how do you like it how do you like uh youtubing well we already did it anyway i know well no really it was real vision content that went on to that but this way it's good for me it's just because all the others were lots of different real vision interviews plus me i just wanted to give people what they wanted which was and what i wanted which was i just want to interview whoever the hell i want about whatever the hell i want welcome to my life yeah that's what i do anything else we should know about the real visions building no that's enough for now this we're doing plenty of stuff but look get yourself the education the uh that whole crypto academy is really worthwhile and if you want to have some more fun come over to uh Ralph Hale the journey man and and watch me talk nonsense with a lot of interesting people well man thank you so much once again for your time uh we gotta do this more often we sat down and we said hey man we said hey man there's probably an opportunity for two guys like us a couple other people to build something or do something more regular and then I got ADD and I two months passed and you know how my brain works so we gotta do something I know this conversation is always amazing to me it's always great fun when we get together so anyway so anybody watching this you got ideas what we should be doing together let us know so this is a message man thank you so much uh have a great day all right take care
57:38Thank you.
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Don't miss out on this must-see interview with Raoul Pal and Scott Melker from the Wolf Of All Streets Podcast. They delve into crucial topics such as the economy, Bitcoin, alternative cryptocurrencies (alts), non-fungible tokens (NFTs), the Bitcoin Spot ETF, and the involvement of institutional investors. If you're looking to gain a bullish perspective on the world of cryptocurrency, this is an opportunity you won't want to miss.
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