The ART of TAKING PROFITS with Raoul Pal

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0:45Learn more and join the community now by going to realvision.com slash polkadot. Join me, Raoul Pell, as I go on a journey of discovery through the macro, crypto and exponential age landscapes. In The Journeyman, I talk to the smartest people in the world so we can all become smarter together.

1:09Hi, Raoul Pal here. Welcome to my show, The Journeyman. Well, this is actually a short little thing I wanted to put together for you about the question I get asked probably the most from everybody, and I can understand why, which is, when do I sell my crypto? And there's a lot to that, so I wanted to address it. Now, obviously, if you're here on my YouTube channel, Raul Pal, The Journeyman, you're watching this, please subscribe to the channel. You'll get these kind of updates, plus my long-form interviews, plus my analysis. It really helps the numbers. So if you find this kind of content useful, make sure you subscribe to the channel.

1:45Okay, let's talk about the psychology of when to take profits, the cycles that we know are there. And let's just think it through together because it's going to vary for everybody. And that's a key thing. So as we know, crypto is very cyclical based on this everything code thesis that I've built, which is there's a debt refi cycle that happens every four years because everybody reset their interest rates in 2008 to zero and then made all the government debts in around four years, three to five years. And it's created this endless cycle, which happens to be the same as the Bitcoin halving cycle and the US presidential cycle.

2:19So we're faced with these cycles. And out of three years, crypto is the best performing asset in the world. In year one, crypto spring, year two, crypto summer, year three, crypto fall, and macro spring, summer fall. And then year four is the worst. And the worst is what scars people. And people want to know how to deal with this. So how I think about it first is you've got to establish what are your goals here? What is your time horizon for your investments? So if you're saying, my big macro thesis is this space goes from, let's say,$2.5 trillion today to, let's say,$10 to$15 trillion at the end of this cycle, depending how big this cycle is, to$100 trillion by, let's say, 2032.

3:08So we've got the largest wealth-generating macro trend of all time, and it's still in front of us. Yes, the early days were super high returns, but it's still super high returns. So we don't want to fuck this up, right? We want to capture that. So a lot of people start thinking, well, should I trade out in macro crypto fall, try and sell that peak and then buy in the bottom? And then I don't have to go through the horror of the 75 % drawdowns. Let's think about this. Firstly, I'm going to give you what I did and the lessons I learned. And then we'll talk about how we can deal with this cycle going forwards so I can help you navigate your needs.

3:53And we've all got different needs here. So the first time I bought Bitcoin was at$200 in 2013. I had a five to 10 year view that this was going to be worth a million bucks. And it was$200. And I discounted myself by 90 % for being a moron, thinking that it could go to a million dollars. So I said, listen, it's worth$100 ,000. This is$200. This is the best opportunity I've ever seen. So I treated it like a call option at the time. So I didn't put a huge amount of money in, but a decent size. And I said, right, I'm just going to forget about it. It kind of went up like a rocket ship straight after that.

4:30And I was up 5X or something very quickly. And I was like, oh, my God, I'm clearly George Soros. I'm the best trader ever. And then it fell 85%. And I just didn't worry about it because it was a call option. At the time, I thought, well, I could go to zero. So I'll just see. Let me play this out. That's a macro time horizon, long-term time horizon. I thought if I just hold it long enough, we should generate huge returns. By 2017, crypto is taking off again, and it's at $2 ,000. And I was now up 10x, and the Bitcoin forking wars happened. And I mid-curved it. Mid-curving it, if you remember, is when you're overthinking a very simple trend, which is, you can be the moron on the left or the Jedi master on the right, but in the middle is where you do all of the overthinking.

5:21The moron on the left is it goes from$2.5 trillion to$10 to$15 trillion to 100 trillion. Just do that. Everything in the middle is regulation. What happens if somebody replaces the tokens that I've got? It's what about forking? It's all of these things. They're all noise. So I succumbed to the noise. I'm like, I don't know what this means. Do I switch into one Bitcoin cash or whatever? It's stupid. And so anyway, I took profits and I was 10x. I thought I was great. And then it went up another 10x in the next nine months. 2017 was staggering. I'm like, oh, wow. Okay. But I wasn't worried because I've made 10x.

6:04So I try not to have regrets about positions. And then it fell and it fell 85 % as usual. And 2018, there was all the tether fund at the time. There was a whole bunch of misery around the 2018-19 bear market. So 18 was that terrible year. Then it bases in 19, starts rising. I start watching it and then start digging in, doing the homework of do I want to get back in in meaningful size? And then I'm watching the chart pattern, looking for an entry, and it does this massive kind of wedge pattern, gets to the top, tries to break out, drops into the middle on the COVID massive sell-off. And I'm like, this is the opportunity because I know this chart pattern, the likelihood it's going higher.

6:49And so I got in there. and I massively sized up versus my original bet. Maybe it's six, seven times bigger than the first time I went in. And I've added since. Okay, so how did I do? I felt great because I bought it low, sold it into a big rally in one cycle, then bought it. I'd ridden one cycle all the way up and down, rode the other one up, sold out, then re-bought into maximum pain, the down 50 % day. And then the breakout of 10 ,000 above that, I thought, yeah, I've done pretty well with this. I then went back and looked at why was it if I just kept my original bet, which was much smaller?

7:28I would have made five times as much money by not doing anything. That kind of upset me a little bit because I thought, yeah, I was a macro guy. I traded it well. No. The issue being is this asset is in a logarithmic uptrend based on a network adoption model, Metcalfe's Law. And so all of the highs are higher and all of the lows are higher. And when you put it on a normal scaling, it keeps looking like a bubble and then this. And when you look back on the chart, these little blips versus this because it's this gigantic trend. So what you start to realize is the drawdowns are a feature and a benefit if you think about them right.

8:13So this time around, oh, I then calculated, okay, what happens if I just added my original size? Again, it wasn't the biggest bet in the world, but it was good enough. Every time we had one of these massive drawdowns, so crypto winter. And let's assume again that Raoul's a total moron. He misses the low by 30 % because to market timing, this stuff is hard as hell. Hey, everyone. We're going to take a quick pause and hear a word from our partners. We'll be right back. Hi, you. Hey listen, if you're enjoying this, come and see me on the YouTube channel, Raoul Pal, The Journeyman. Sign up there, get everything I ever do.

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9:50If I'd have just done that in the two cycles, 2013 and 2018, I would have done 25 times better. because you're compounding. And that really struck me. I'm like, okay, now I understand. So this cycle, the 2022 downside, I didn't do anything except buy when I thought we were close to the bottom. And I started buying in June and I got the ETH low in June. And then I bought more and I bought some Solana in June, actually, which was too early. And then I bought again in October, November, and it worked out beautifully. And that was based around my liquidity cycle and where we are in this whole macro crypto summer stuff.

10:38And we were just finishing winter. And then I found I'd gone to my all-time highs in P &L way before the market had even got close to all-time highs. Now, it helped that I managed to nail Solana. But even then, by compounding and adding to trades into those, you do really well. So for those of you who don't need the money now, then I would take that cycle, the down cycle with utter joy and add. Expect to see an 80 % drawdown. Maybe it's less this time. Maybe it's more. Solana was down 97 % this time. ETH was last time down 97%. And embrace it because every time you buy those lows, you're going to 10, 20, 50X, depending what you're buying.

11:25Just some major coins, right? So it is a huge wealth generated. If you imagine Solana last year was a 10x in crypto spring. We haven't got to summer or fall yet. We're just transitioning to summer now. So if you've got a long-term time horizon, you will definitely make more money by following that route. Buy the sell-off. Embrace it. Have cash ready for it. Right now, we're probably in the last opportunity to put cash into the market. um so if you've got cash or you're waiting now is the last chance because after this we hit the banana zone and everything goes a bit crazy um and then it becomes unbuyable and your entry levels you know if we do have a bear market then you're below water we should you should not be from these levels so or not by much anyway these are good final levels to jam in as much as you can okay so if you're the long-term person wait for for 2026 and go yeah i can't believe i can get more and compound more wealth get some cash ready for that and be ready when everybody's panicking you be the person to stand up and say huh i've got money because don't forget nobody has money when you bloody need to it was hard to for me to find money because cash flows have gone down because the economy is slow, all the other things that you have to deal with.

12:46But anyway, okay, that's one route. The other route, a bunch of you say, well, I want to take everything off the table. I don't want to deal with the stress of the down markets. That's fine too, right? We all need to understand our own psychology and our behavior patterns. I can't help with timing the top. I know that it should be by my work sometime in summer to winter of 2025. But when? Well, my liquidity stuff says, well, liquidity should peak in July of 2025. Is that going to be definitely right? I don't know, but directionally, it's going to be roughly right because it'll look like most other cycles.

13:35Generally, the cycles have peaked at the end of the year. But could that change? Remember, the last cycle was a weird one because we had this huge run up. We had a peak. We had a huge sell-off. Then we had another peak. Didn't make much progress. And then it collapsed after that at the end of the year. The 2013 cycle was different. It was a super pump in the end. And 2017 was an accelerated pump. So of the three cycles we've had, the 2021 top was actually a bit of an outlier. But we don't know what the tops are going to look like, is my point. So how are you going to time that? Let's imagine you get out roughly right, within 10%, 20 % of the high or whatever.

14:21Okay, and let's say you've turned$100 into$1 ,000, and now you're waiting for the bear market. I will guarantee you will not put the same amount back in because you'll be terrified of losing it. And what you'll end up doing is sizing the position much smaller than you would have done. And you play with a negative psychology of, I don't know when to add, when to add. And before you know it, you've actually screwed the whole thing up. When if you'd have kept it and added, it would have been better. So that's one thing I think most people don't realize is it could be easy to take profits. And like I did in 2017, you don't have regrets, even if it goes up more.

14:59The hard thing is actually putting the same amount back in again. It's a real psychological problem. So think that one through. I don't like that way of doing things. I think everybody's trying to be too cute. Here's my suggested path for most people. And maybe something I will do this time myself is we don't know what the cycle peak is going to look like. We don't quite know when it's going to be. We do know it would be crazy early if it finished this year. Usually the back part of the year after the US election, there's usually a screaming pump into the end of the year. So my advice is use that in terms of time and not price and take maybe a third off the table for lifestyle chips.

15:47Okay, now you can buy a car or your house if you're lucky or whatever it is, or some extra savings, right? Take some money out of crypto land, put it into a fit world where you live, secure your lifestyle, the things that matter to you. Right, now you've taken all of the pressure off. You've done it by time and not price, which is towards the end of the year, I'm going to take a third off. I don't really care what the price is because it will be up a lot. So I'm just going to take it off. And then now I've de-risked my life so I can now run 2025 more intelligently. so 2025 you can then run with the rest of the money that you've got the two-thirds remaining and you can say okay i'm going to take some off by about the summer if i wanted to take more off maybe you don't maybe just run the rest because you've now de-risked your lifestyle that's my favorite approach.

16:43But what I would have a tendency to do is if we do get a mega pump, the 2013-17, then take another third off when that happens. If it doesn't and it gets stunted, it doesn't matter. You've taken a third off, you've protected your lifestyle, and then you can then buy some cash with that. If you keep that cash, you can buy the dip or you use it to, as I said, for your lifestyle chips. But this way, you're now ready for whether it stops early. You don't care because you've taken your money off the table, but you're still in the game. That being in the game is the secular trend. That's the most important thing to me.

17:20But if it really goes wild, you take a bit more off and you can put it into the lifestyle chips bank. And then you've still got a position. Because if you don't have a position in a secular market, I think you end up making suboptimal choices. So that's how, now you might not say a third, maybe it's 50 % for you. It doesn't matter. What I'm trying to give you is an idea of not trying to nail the top, trying to think in terms of time zones and then how much lifestyle chips de-risks your life.

17:55Because I think it's too important a trend to fuck this up. So that's the best advice I can give. I will probably do the third off strategy this time around because I've got some lifestyle stuff I want to do. I did not last time. And I was bloody happy with not doing anything but buying the dip. I will absolutely buy the dip in 2026 because this trend is going to keep going. Remember, two and a half trillion, 10 to 15 trillion, 15 is the pump. The 10 trillion should be normal to 100 trillion. That's the game we're playing here. Let the cyclicality be your friend. Understand that there are seasons that you can use to your advantage.

18:39We are transitioning right now, and I'm talking to you, this is Sunday the 12th of May, I'm recording this. We are just transitioning where we're about to hit crypto summer. And that usually happens June, July of the season cycle. and then it goes bananas. Of course, there will be corrections and there will be sharp corrections. 30, 40 % can happen, but it usually goes up into the banana zone from here. That's when you've got to be careful not to lose your mind and fuck this up doing other things you shouldn't be doing, like putting all your portfolio into mean coins because they're getting up the most because you want to maximize profit.

19:14Think of this as a longer term game. You'll make plenty of money if you stay with a secular trend in the big tokens and have a small amount to play in the other stuff. The other thing that I have been doing is I've been taking some of my main bet of Solana and putting it into NFTs, which is another thesis. And this is Xcopy and Beeple, two artists. I've bought some others, but the two artists were, I think, that a huge amount of that$100 trillion of wealth will end up being stored in high-end art that stays within crypto land. And I'll talk about that thesis another time. So I've been taking some profits into assets, long-term assets.

19:53But really, for me, I'll take a third off and then run the rest. I don't want to mess around with it too much. Every time I've seen anybody, the reason Jeff Bezos is the richest man in the world essentially is because he never sold his stock. He didn't trade his stock. He just held on. Bill Gates, all of these people. You hold on to a secular trend, it compounds over time. And if you can buy more, buy more. But listen, that's the general idea for you. I hope that helps. Try not to time it in terms of exact price. Do it in terms of time. I like the end of the year because it's usually the end of this year because it's usually kind of pump-tastic and you'll feel pretty decent about taking some money off.

20:35It'll feel like significant money. You won't feel like it's too early, but it'll be enough that can make the lifestyle difference. And that gives you the psychology to succeed. For those of you who really want to compound wealth, again, don't do anything and buy the sell-off. Use it to your advantage. Get cash aside. Squirrel it away. Save it. Do anything you can so you can jam money in. Anyway, good luck out there. The banana zone is coming. It will take care of a lot of sins. Meantime, don't fuck this up. Now, for those of you watching this again, if you do like content like this, I'm experimenting to do more of this short form.

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21:51Anyway, I'll see you next time. Take care. We hope you enjoyed this episode. At Real Vision, we arm you with the expert knowledge, time efficient tools and a powerful network to help you succeed on your financial journey. Get a taste of financial freedom with our free offer at realvision.com forward slash free.

22:15Thank you.