The Crypto Revolution: What’s Next for Bitcoin and the Global Financial System? ft. Michaël van de Poppe

32:52What is your vision on that strategy? Is there at some point, is it enough or can you just keep on adding to your balance sheet and having that Bitcoin mentality? From a philosophical level, is it right for one entity to control all the Bitcoin? Okay, that's something, if you're true to what Bitcoin is about, there should be a limit where you say, well, I don't need to do that. But let's assume that he doesn't blow up because of the leverage, because the cost of borrowing is zero for him. And he's got enough assets to cover stuff. Yes, some assets might have to get sold, whatever. I worry more about the leverage it creates in the system because microstrategy is trading at a huge premium.

33:43That premium is somebody else's arbitrage. And so whether they're buying Bitcoin selling microstrategies or buying the options from the convertible note and that are very cheap and selling more, somewhere within that system is an enormous amount of leverage happening. Yep. And I don't worry so much about micro strategies. I worry about the unwind of the other side of the trade. Because people focus on the micro strategies because it's flashy. But this is what happened with Grayscale. Grayscale was trading a huge premium. People didn't realize it was creating gigantic leverage. And everything was one trade.

34:26And there was one big customer, three hours capital. And when they were forced out of the trade, it took everybody down, including genesis who were the arm of grayscale right so they didn't see it coming either nobody knew there was one customer and that's that's very typical of a leverage blowout so we're creating fragilities in a system the other issue that i've got is there's the two times levered micro strategies etfs everybody's trading those that's causing probably a large part of the premium plus a bunch of Europeans who can't buy Bitcoin in their pension plan. So there's a bunch of premium being driven by this stuff.

35:13But what happens when the market turns and the two times levered guys sell? Yeah. Comes twice as fast in an illiquid market to the downside. Before you know it, MicroStrategies is trading at a discount to NAV. that blows up all of the people who've been in the arbitrage trades you know there's all sorts that can happen that people don't think about and i've been i've been in financial markets 34 years and i've seen this repeat and repeat and repeat and repeat well we've seen it with uh what was it back in germany in 2011 the uh automobile company yeah voxswagen yeah yeah it happened the exact way around.

35:59Long-term capital management, exactly the same. That was so big that the Fed had to cut rates because it was such a mess. Really? Yeah, it happens endlessly. Well, if you discuss this topic and you said at the beginning that do you want one entity to have all the Bitcoin? We've got a whole new group of investors from the US coming in, which is bundled under the name of BlackRock, Fidelity, or the big ones. which is getting access through the ETF. That is the first interesting one, having all the institutional investors getting access to Bitcoin and Ethereum. Finally, Ethereum gets some inflow too.

36:41You could question whether that is good or bad. And then secondly, you've got a hedge fund background. And actually, we were at the Deribit podcast earlier discussing options trading. How is it going to change the markets going forward? as in a lot of asset managers are going to use options to hedge their positions. Does it change the dynamics of Bitcoin or would it be making it more boring?

37:11This concentration within the ETFs is interesting because I think the finance system thinks that they have wrestled control of this decentralized beast. and they're probably thinking you know we've done a pretty good job boys we almost that was a close one we almost had a parallel financial system but we've got control of it how i see it is it's actually a trojan horse because once you go into that world you end up going further into that world and then before you know you're trading smoking chicken fish or whatever the fuck you're doing in the space you know it's like that's that's the path everybody takes right because you go out the returns, you go out the risk curve.

37:52So I think it's a Trojan horse.

37:57Again, I don't really like the concentration, but I also like giving people access in the ways that they want access and things like pension plans and stuff like that. The use of options, I don't know. Now we've had obviously Deribit's huge, so there's a huge market in options already, but this will dwarf that. It's good because it takes some of the risk out of Deribit being the only option exchange, which is very healthy. But it's going to be a battle between who uses the options, whether it's the option overwriters who dampen the volatility. So that would be institutions who are long the Bitcoin ETF and then sell calls against it.

38:43But that's very typical to create a yield out of Bitcoin because they want to yield because they've got pensioners to pay. And yield is very important to them. The flip side is what is the power of retail and their ability to punt options? And so far, it seems the balance of power these days is in the retail hands. So in which case, we can create a lot of short squeezes, gamma squeezes, all sorts of stuff. now it probably dampens the volatility on the downside i've got a working hypothesis that we all think we're going to be given the gift of all gifts again which is bitcoin falls 75 and we get to buy it down 75 or alts down 95 and it's become so obvious that we're just like well at top of the cycle i sell out i buy it back and i become hilariously rich my fear is that doesn't happen this time.

39:41We don't withdraw massive amounts of liquidity from the system. And that 401k buyers of Bitcoin balance up the selling effects. Yes, we might get the blow up of the microstrategies trade, whatever it is, there's going to be messy. But the ability to use options, put options i think we'll balance out some of this so my biggest fear is not the down 75 we're all used to that it's the down 40 and we miss it i mean this is so interesting as in first of all you've got a bunch of people that came into crypto in the previous cycle and they are like yes so October 2025, I'm going to sell during that period.

40:30That group is relatively large, expecting the peak to be at that exact moment, already talking about it currently. So it's going to be either way earlier or substantially later. It's not going to be the exact same scenario as everybody expects it to be. Ask most people who were in last cycle, and that was their first cycle. They have tremendous PTSD. because they looked back on the 2017 cycle and 2017 the market peaked in market or tax season it then corrected so it peaked at 2000 it then kind of corrected and then it went up it went up 10x in four months you had to try the correction in between as well and And so last time, I also thought, okay, we saw the tax season correction, then the rally back up.

41:26It was a big correction, down 50. Then it shot up, and it's like, okay, it's going to be 2017 again. And it wasn't because the central banks were starting to withdraw liquidity, and the business cycle had been brought forward by the massive liquidity was starting to come away, and that was the end of that. So this time, when you go on X and you see people, they are so PTSD by that, that I think that many will sell taxis in March and then get trapped out. And then they'll expect an early peak and maybe it does peak. From my liquidity work, it still suggests that it peaks at the end of the year, towards the end of the year.

42:07But it depends what happens to liquidity. but if that is the case, I just think the risks are here, and then the risk is 2026, is the people who then sold out, maybe they screwed it up, and maybe they got out like I did in 2017, way too early, you then try and buy it back, and you end up buying back at much higher prices, which is what happened to me, I ended up buying back in COVID, in that crash, and I got in at six and a half thousand, but I'd sold out at two thousand, and I'd done a job, I sold out to strength, and bought into weakness. Difference was, in a secular exponential uptrend, the difference between that peak and that trough was like this.

42:50I mean, it's super hard to time the markets well. And I think that the previous cycles have shown that the complexity of the markets are going up significantly. I mean, there are more variables that we need to take into account when we trade into crypto or in any asset class at this point. And especially if you look from the macro perspective, I think crypto is having a lot of good factors right now. Trump is getting into the White House. At least his promises are very productive for crypto. In the short term, China is increasing liquidity by a magnitude we've not seen for years. so would it be like you often phrase banana zone i think plan b is saying super cycle they're all like some sort of potential cycles that we could have but is the the macroeconomic framework going to push bitcoin and crypto further ahead this time than in the previous cycles we we can't tell because liquidity is actually the dominant factor.

43:58So right now, we look at the business cycle using the ISM survey. It's below 50, which means the manufacturing is still contracting. So, okay, we're nowhere near tightening financial conditions. They did tighten because the dollar went up and rates went up, but the Federal Reserve and the governments need to change that because we need liquidity in the system. So even if it went up every single month for nine months, it's still September next year before you get somewhere near a peak in the business cycle and crypto tends to kind of just that tends to be a rolling top and crypto tends to have a rolling top around that so I think it's longer than people imagine so it's later in the year because people are so scarred by last time around again and if I look at it on a probabilistic basis there was when we took off so aggressively in 2023, I'm like, okay, look, there is a chance that we front load the cycle.

45:00But then we had a eight month correction. And that kind of put it back on track. And so therefore, I think we've got two odds now is, does this look like a more normal cycle? What that means? I don't even know anymore. But let's say, let's say 250 ,000 Bitcoin? Or do we get something like 2017 and 2013, which is something a bit wilder? And I think the probability has gone up for me of that. But I don't make predictions on this stuff because it's pointless and you just get trolled on the internet for making predictions. But probabilistically speaking, from what I know today and what I know about liquidity, and the regulations and everything else, the probability is that we're going to get a more violent upside cycle with lots of volatility in the middle.

45:56Like liquidity has been falling for two months now, three months, it's fallen quite sharply. And that's whether you use Global M2 or whether you use our Global Liquidity Index, total liquidity that we produce at Global Macro Investor, it matched really well on Bitcoin. Now, these correlations don't last forever in a perfect form, but it's been perfect. And it would suggest that the market peaks sometime December, end of the year, early Jan, and sharply corrects, which is exactly what happened last time Trump came in. When Trump got voted in, the dollar screamed higher, rates went higher. He actually came in, rates went lower, the dollar went lower.

46:38But that run up over the Trump getting voted in in 2016 caused a 35 % correction in January of 2017. In the end, it was all noise. But, you know, we're going to get to that. We're going to get to very frothy. You know, some people are worried it's happening now as we speak. Maybe. Doesn't look like it according to my work. It would suggest later. But, you know, who the hell knows. But we'll get one of those to come. Then we'll have the post-US tax season version as well. because in the end, people are going to have a lot of gains. And if they've switched anything around, they're going to have to pay the tax man a lot of money and they have to sell stuff to realize profits.

47:16And that's that kind of sell-in-may-and-go-away idea that generally works. It's tax season. Well, it worked this time again. The summer was like the most boring I've experienced it in, I think, since I started in crypto. And I know it's very hard to make predictions where the markets are going to go to. At least if you look at the crypto markets, Bitcoin has seen a very strong uptrend since, well, the FTX crash in November 2022. But on the other hand, there are a lot of things putting down the crypto markets at this stage, which is we're still in a relatively high interest rate climate. That, yes, you're mentioning PMI and that's contracting for, let's say, six to eight months already.

48:05And it's going down even more. but the Fed is very stagnant on the interest rates and not really looking to cut it a lot in 2025 unless the labor market data is going to keep being terrible. And I think the past few months we've seen a substantial drop in job openings in ADP, all those data points. Would that probably kickstart another strong move in anything related to crypto, as in there is some sort of correlation with each and the yields, right? So that is the global liquidity, right? And that's, or we use FedNet liquidity as another one, either way, or financial conditions, even better. Financial conditions that we use are basically rates the dollar plus oil.

48:56Those are the kind of three variables that really matter for the global economy. Oil has been falling, So that's dampened the issue somewhat. But the dollar screamed higher, as did rates. Now, that has a lag on the economy. So we're talking about having a lag on crypto. We probably see a slower economy in Q1 or Q2 than people are expecting, which plays into the idea that you've got is I think the market is underpricing cuts now by the Fed. And they kind of go through this madness every time this happens. They're like, well, it's one and done. or it's just a little bit. They're never going to do it.

49:35And then eventually they have to because they've got to roll$10 trillion of debt, as does every other country in the world. And financial conditions are far too tight for the Chinese. If the Chinese don't get their economy going, we have no export market. We've got no bar of treasuries. You know, Europe is struggling as well. Germany's in a total mess. So we need to ease financial conditions and they all know it. and they've had to hold on as long as possible because inflation had been higher in the previous cycle and it cost everybody the election. Every government across Europe, pretty much around the world, that was in over COVID got voted out.

50:16Why? Because prices went up so much on people. So they're very nervous about that, but we've now got a new regime. So I think you're right. I think the probability is the economy is weaker than expected, and that gives them the green light that they've been after forever. I mean, is there, I think what is my PTSD is that crypto basically boomed during COVID where the world completely got destroyed and crypto did well. And I kind of get the feeling that we're again seeing the world just being destroyed and crypto starts to do well again. Is it like? no I don't think that this is very similar to the 2016-17 cycle rates went up once in 2016 and then stopped didn't go up again in fact the Fed didn't even put any liquidity in but the Chinese had to because the dollar had been too strong prior so they really had to stimulate and then the Europeans and the UK then had Brexit and they started simulating so the US didn't need to be doing it Same in 2014 and 2015.

51:28I mean, rates didn't move. There was a bit of QE that came out of Europe, obviously, from the banking thing, the draggy everything it takes. But then after that, crypto, the amount of movement in crypto doesn't need a massively large total amount of liquidity. People just over-focus on the Fed, over-focus on balance sheets. just as long as global liquidity keeps rising by 8 % crypto will still do 100 % a year it's kind of so I worry less about it I think again people have an anchoring bias on the last cycle but having seen three of them the last one was the outlier and crypto went up less and finished earlier so therefore that kind of doesn't make sense if if it's just the liquidity cycle I think a lower volatility cycle in terms of the economy actually creates more risk-taking than a higher volatile cycle like COVID.

52:32I think you're saying something very interesting there, which is that previous cycle felt completely different than 2017 for me. I think if you look at the terms or the groups of participants in this cycle, it's a whole new dimension compared to the previous one. And 2021 wasn't really a group of new investors coming into crypto. It was a bunch of venture capitalists and funds just jumping into crypto, just trading it. And that's about it. Now we have actual institutional investors, governments getting into the markets, which in some way, if you on top of that, combine it with the amount of debt that we have 2008.

53:15It creates a vibe that we might have the final easy cycle and then perhaps have a copycat of 1929-ish where all of a sudden a debt bubble bursts. Can't happen. Why? so what happens in a debt deflation is the value of collateral falls in excess of the loans and so it gets pulled on yeah and the collateral gets liquidated what they learned in 2008 was a very simple trick debase the currency and the asset optically goes up that was the whole draggy thing. That was everything. So we cannot do that because we know the mechanism, the US, that is. You know, can it happen in individual countries, whatever?

54:09Yes, but not the US because it has the reserve currency. It has the fiat currency. So the 1929 scenario cannot happen. It simply can't happen. We've taken that left tail out. However, let's say, okay, Bitcoin goes to a million this cycle it's a stupid cycle it all gets out of control massive bubble could we skip a cycle that's possible could we fall 75 % rally don't go the new high we've seen nasdaq skip a cycle nasdaq skipped a cycle from uh 2001 where it fell so 2003 low it kind of skipped a cycle first before it really started going. So, you know, I'm open to that idea, but we'd have to see a full-blown bubble cycle.

55:03My guess, that's the next cycle. I think that's the whole everything AI, ridiculous, everybody knows the game bubble cycle. I mean, it's something that you phrase as the exponential age and the growth that goes along with it. but something that comes up in my mind is that crypto is very retail driven and once you get like one and a half to two percent of your savings account and all of a sudden DeFi becomes attractive and it is like 10 percent or 15 percent yield you could get the higher this cycle goes the more vertical it becomes and the more liquidity being added into crypto the more fragile the banking system will be.

55:47So there might be in my case, or in my thought process, a thesis that if this cycle, for instance, goes higher and longer than we all expect, it might tumble over the entire financial system that we used to have because of the fractionality that we have in the banking system. Just don't think. that much capital can leave so they don't allow it that's the thing yeah that's right and think of the size of money market funds think of the size of that boomer industrial savings complex think of the size of the financial system right we're just seeing such a fraction that i'm not sure it's going to be deposits i mean we've seen similar which was 1999 it didn't threaten the banking system you know that nobody wanted money in their bank they just want to buy tech stocks because tech stocks were just vertical in the fastest acceleration of any stock market cycle in in all history at the time and then there was the the blow up um so i hear what you're saying i think it more happens over time you know this migration keeps happening and that three trillion to 100 trillion is also the 500 million active wallets now to a billion active wallets.

57:08So the 4 billion active wallets to all the agents and AI agents using wallet. You know, I think it just happens over time. And I think everybody's okay with that. But, you know, if you were right, and everybody jumped ship, both ships probably sink. Yes. And that's something that we shouldn't be wanting at all. But I think to me, it's just like because of the amount of opportunities that we have, and you phrase it in the coming six years are going to be super important for yourself. I think the amount of opportunities are there, but the volatility will go through the roof. The emotional decision making and biases are going through the roof as well.

57:56there are a lot of risks implied so it might swing away that it's just too large for the financial system to handle but the question that I wanted to ask on this was like why are the coming years so important in your view? Because of what I term the economic singularity so how economies work once you understand this you understand why we're in the mess we are what's going on everything is gdp growth trend rate is driven by demographics growth so i population growth productivity growth plus debt growth so if we think about europe where you are we have aging populations we try to import labor but in every country in europe they're like well this is too much because we've got this old population and the society pushes back against too much immigration in one go.

58:59So we're kind of stuck at this thing, right? And as you get older, you become less productive. So these rapidly aging populations just look at GDP and look at the trend rate of GDP and look at the age of the population. Japan, the slowest. Italy, you know, country by country by country. It's that. And the US is better because they've got a younger population. okay what i then found is the labor force participation rate i.e the number of people in the workforce as a percentage of the total population that keeps falling over time because people are retiring but when you invert debt to gdp it's the same chart so debt growth has just been a function of demographics trying to support an economy of aging people and that's every country in the world.

59:50Same thing. Okay, so we're in that trap right now, and we've got all this debt that we built up that we're just rolling, and we're increasing the debt just to pay the interest. That's the game. It's not from government borrowings in excess. They're not doing huge infrastructure spend. It's just servicing debts that keeps raising the debts. So that's creating this liquidity and debasement of currency. It's the servicing of the debt, because they don't want it to go bust. You can't let the collateral go bust because the system's too levered. Everything goes to shit. It's a down 90 % of everything and it's the end of the world.

1:00:27So they're not going to let that happen. So we're in this cycle until something changes. So you hear Scott Besson, the new Treasury Secretary of the United States, saying we've got one chance and that's to try and grow our way out. Okay, fine, because GDP growth is the economic activity that pays interest. Don't forget, the private sector's 120 % of debt to GDP as well. So it's kind of totally screwed up. But the question is, can you sustain it with an old population? It seems provably not. Can you shift it a bit? Maybe. But in 10 years' time, something like that, five or six years' time, we've got a new thing to compete with, which is the rise of AI.

1:01:17And AI is basically human knowledge, but at an infinite scale. We can create endless. We're already seeing how fast, you know, these very early crappy agents on Twitter are, but they're going in their thousands, like meme coin peripheration. So we are going to create unbelievable amounts of AI, which is human knowledge, and the applications that make it easy for us to use. So then we don't need knowledge workers. doctors, lawyers, radiologists, whatever it may be. And then the robots. Amazon now employs more robots than humans. And that's only going to keep accelerating. So that means we're going to get infinite humans.

1:02:02Or replacement humans. Which means if you think of the formula, if population growth goes infinite, what the fuck happens to GDP? It goes through the roof. But who does it accrue to? The agents, the AI companies, who? But it's not the individual. Then you've got productivity. So a lot of people argue that Europe is wasting money by all of its green energy stuff. I don't think it is. I think it's a calculated decision to increase productivity in Europe is one of the simple ways of doing it without changing the population side is lower the cost of electricity over time. and so if you do that you get more productivity you can have growth and growth will stimulate the economy this was the playbook in the 1950s in the 1950s we had the massive debt from world war ii financial repression which is debasement of currency gradually over time massive infrastructure spend eventually grow your way out technological revolution 60s late 60s 70s happen etc and a population boom, which we don't have.

1:03:08Well, we do have. It's going to be robots. So after that, when AI is everywhere and we have an age of abundance, what is money? What is money bias? What are jobs for us? What does it mean to have a business? People made all their money in SaaS businesses, but a SaaS business is just a kind of front-end software that sits on the internet and if you just give it to a powerful AI and say build me this within a year from now from today we'll be in a system that it can copy anything build any website if you say hey you know Michael's built a really cool decks and it's really different I just give it to my AI and say hey copy Michael's decks but do it in Hindi because I think the market's bigger and they'll say no don't do Hindi do Indonesian because there's an underserved market off we go right so you have no moat around any business anymore unless it's a physical thing or a hardware manufacturer hardware manufacturers look at tesla they're using robots so it's a very complicated world what are markets when you've got agi agi is coming whether it's in the next two years five years it's here so if intelligence if moore's law dictates that computational power doubles every two years what we're seeing is intelligence at AI level is doubling every year.

1:04:35So by next year, we're at 120 IQ now. Next year it's 240. Then 480. Okay, this is la-la land. What are financial markets? This is going to do better than us. There's no point in us trying to trade. So, okay, fuck. This is a big issue, but I kind of think this is all going to end in a massive bubble because we only have one solution here is to make as much money as you can in the next five or six years. Now, I'm not saying 2030 is the absolute date, could be 2032, whatever, but we have a very limited period of time where we've been given the gift of an opportunity, invest in our demise via the technology, or invest in the new infrastructure layer as the crypto.

1:05:18And I think as humans are replaced out of the workforce, they'll become more speculative in nature, and more community driven. We've seen this testing with meme coins we've seen it testing with nfts we've seen it there's a whole bunch of ways we are basically speed testing a future for humanity which is based around community maybe speculation i mean we've seen the rise of predictive markets we've seen the rise of sports betting these things have come huge but the more free time humans have and less ability to control their income, the more likely they're going to do that, even if universal basic equity arrives.

1:05:59So that's why it is a very important and very real thing is we don't have any time. That's an interesting answer. The thing is, is that there's a current question going around that there will be no jobs anymore. There's no labor market anymore, especially since robots are going to take over a lot. AI is taking over a lot now too. But that's something that we thought, I think, like 20 years ago with internet, 60 years ago, 100 years ago. And every cycle, new jobs are being created and new continuation happens on all those aspects. Why is it different this time? It isn't. This is by far the most powerful technology the world has ever seen.

1:06:48I agree by a long way more so than I think the splitting of the atom and this is unbelievable what is happening so it's going to change the nature of work but we're humans we still need a purpose we still enjoy we're social creatures we are apes we're social creatures we like to be around other people we like a commonality of mind we like a commonality of purpose what is incredible is web3 enables us to coalesce around these ideas and also to make money from them so let's say you're a manchester united fan rough times my man sorry the rough times currently but if you are passionate about that society you could participate in their token system and work for the growth of the club the economic growth of the club and you participate in it.

1:07:47Okay, so now you've switched a hobby to now earning money. Let's say you're a Taylor Swift fan. Same thing. Taylor Swift's economy is so big that she made a billion dollars from touring because she doesn't make any money from streaming sales. But she moved the US economy, the UK economy, the Singapore economy and the US economy so much so that all the central banks talked about the Taylor Swift effect. so what is our economy worth 100 billion 200 billion maybe more so if that was tokenized and you could participate imagine if you got her early when you first discovered her and you own the tokens isn't that not the same as owning doge when it first launched right these are all the we are testing this so we will find that it could be around charitable purpose it could be and it will be multiple communities so we're already testing this in mean coins you can be a member of one community another community you can speculate in a third community you're active in another one we saw that in nfts all the same thing and the other thing humans will do is gravitate to be around other humans so life experiences nature stuff like that becomes more valuable to us because we're living so much of our life online so you know we have an easy conversation because we met in person so therefore we kind of know each other we've hung around and that human bond is actually stronger than the bond of zoom calls and so i think humans will gravitate towards that so basically what i'm saying is humans are adaptive so then when you ask a friend who's got young kids that are let's say eight nine years old ten years old because they're going to come into a world which is entirely different where a degree university means nothing and you ask the kids what do they want to be and they want to be influencers and we roll our eyes and go this is ridiculous yet in this future society if you can create a community around you you can create value and so maybe they're self-adapting because they're seeing it online already it's the 25 year old who's pretty fucked 20 year old coming out of university okay because they really don't know and that the force of this is going to hit them when they're trying to get into jobs so they're going to have to adapt like the young kids are or they're going to have to invest everything they can into this the 30 something year olds they kind of established themselves they're doing three jobs they're doing what they can they'll invest in this space they've been big investors in this space so it's going to be fascinating but society will adapt but it will also create enormous societal pressures that i think the next election the biggest issue is going to be ai well i mean you you touched upon a super important topic, which is I think everything that we do has value.

1:10:50People might even like could be confused in six months whether we are having an actual conversation between Raul and me or whether it's an AI agent, but watching us might be having some value that you can earn indeed, which is also by we've seen some tests with walk to earn, watch to earn, all those concepts that are community and social fire driven and if you on top of that lie the indeed the 20 year olds that are like should i go to class or should i just learn like a specific skill and just do it online and make way more money money with it independent of which segment they take i think there lies a lot of like future perspectives where we're going to go to and probably also a lot of new jobs i would say jobs that are being created where you're actually getting paid for the time that you spend for something in actual value because that's also an issue currently that with the ongoing inflation it's just you're devaluing your time in your life so i think a lot of like 15 to 20 year olds and i am slightly older than 25 but i see them coming out of school knowing all these things knowing social media and I'm like okay so in the future brands and communities are going to be so big and I guess yours has been growing exponentially over the last few years that that is going to be the future but there's another side of this we are still going to compete for attention which is the whole game with AI who are very good at it so if you people don't realize this and I've talked about this a lot people need to go and check out character ai it's like for all of us it's like tiktok it's like what what so character ai are like anime characters and other characters that are ai chats that the specific characters like the good-looking bully at school that character whatever it's called has 450 million conversations already.

1:13:06And there's thousands of these things. Many of them have over 250 million conversations already. And this is kids under the age of 16 that are becoming friends with AI. Now, we're going to say that's a fucked up world, but everything's a fucked up world. The telephone was a fucked up world. The car was a fucked up world. Everything, right? The radio, the TV, everything. this is where it's going it's like tiktok we are like this is madness there is the signal of the future and it's happening at scale and when none of us are seeing it we're all talking about how cool it is to have agents on on uh twitter that aren't really very effective agents meanwhile millions of kids are already having ai friends yeah and i think in crypto we've seen some tests with AI already.

1:13:59I don't know the name anymore, but there was some sort of Twitter account that actually created a trading bot that did make some money. And now we have Goat, as far as I know. Yeah, which is terminal truth. I'm in fact interviewing Andy this afternoon about AI and another guy called Ryan who works with him who built another one, which is a charitable base one called Forest. Just, again, this is experimentation early phase, which is what do agents do if given money? And how can AI spread memes faster than humans? Which goes back to the idea is we're going to be competing for attention with AI. So it's not straightforward.

1:14:37Therefore, the more straightforward thing is become a tour guide of the jungles of South America. You will not be replaced. Well, so now we know what you're going to do in like six years from now. Well, that's why I've got a house in Little Cayman. It's an island of 150 people. And it's the last place that robots are coming for. well yeah i've actually been having discussions with my girlfriend of like what are we going to do in a few years from now and maybe just go to a small island and enjoy life but when we're talking about that and when we talk about the coming few years with crypto a lot of those questions are coming to me like how can i build something as in a portfolio i know that you've been talking about is to not have a completely diversified portfolio because everything is just correlated as it is.

1:15:28Like, if someone is completely, relatively new or has experienced the previous cycle, has PTSD, how can you get yourself going with the portfolio?

1:15:43You have to accept the risk. There's no other way of getting the returns. Now, even if you were to mirror it and put crypto and NASDAQ, they still go up and down in the same cycle. Because everything is correlated to the business cycle and the liquidity cycle. So you kind of have to accept, can I deal with the massive drawdowns to have the massive upside? And if not, you just ratchet down the risk curve, which is then you go to tech stocks. And if that doesn't work, then you get to like the S &P 500. The issue is it doesn't really outperform debasement. so your salary which doesn't go up as fast as debasement investing in the S &P doesn't get you ahead of the game so you only have two choices and it's the realization that you are going to have to take risk so then how do you take risk effectively firstly have a portfolio that is sensible which is i own the the largest tokens you know if you're gonna do one thing i'm going to own bitcoin and e if you're going to own three own bitcoin ethan solana maybe whatever right do that also maintain an income then when your portfolio goes down you're okay and then think about this idea that i have about taking lifestyle chips off because if it really matters to you that now your portfolio's up and you're terrified of losing that money because it can enable this in your life but then do that thing in your life if it doesn't really matter because you're living in a house or you're doing whatever you need or you're really young and it's like it doesn't matter to me yet if i could just go for it and then use your income when you can to buy the sell-offs so it really does depend um there's no easy way around it.

1:17:36It depends on your risk tolerance and your understanding of how rewards are generated. I think I agree on that sense. And I think that having a large portion in your blue chips, which is often being said about Bitcoin and ETH and Solana makes a lot of sense too. The question I often get though, and probably you will get this as well, is what about ETH? what's happening there? Should it still be there or should it be changed for let's say Solana? So my view on ETH is they have overbuilt for the current requirements for the requirement current demand for block space or for their block space because this was the layer 2 scaling however However, if you are anybody in the financial industry, if you're going to build anything at scale, you will probably only do it on ETH because you won't get fired because it's safe.

1:18:39It's distributed. It is interoperable with so many different areas. It's proven. So if I think where the financial industry will go, which is a quadrillion dollar industry or more, it's going to go there. Bitcoin, yes, as a collateral, for sure, and as an investment vehicle. But in terms of building on top of, I think that narrative will catch hold and ETH will pay catch up. And I think the next cycle, we'll see ETH scale, much like we all see Bitcoin scale. You know, will something flip each other in that thing? Maybe. Who the hell knows? You don't need to make that bet. So I don't worry about ETH at all.

1:19:26but again our job is to make as much money as we can in this cycle if you know we've been around you understand how to allocate assets so in which case i don't hold much the only ether hold is the long-term nft collection that i've been building um and i've been mainly long solana well i think we're a little the opposite of each other there i'm heavily exposed to ETH at this stage. I'm heavily exposed into... One of the things is I missed Solana, so I'm kind of fed up by some emotions of missing the run, which is a bad thing to have when it comes to investing. The second thing is that I think that at this stage, DeFi is so undervalued that there's such a big market still about to enter, and where are they going to go to?

1:20:17Most likely, most of them are going to eat. Then after that, you probably have Sui. There's some DeFi starting to fire up there. I just don't see that much on Solana yet, except for all the trading on Dexas taking place in Mean Coins. I just believe that DeFi is going to be the next big trigger when it comes to the market. So, I mean, in your opinion, what type of narratives are going to push this market forward? from here? I think the narrative is going to be Bitcoin flows and then people going out the risk curve as people build. Look, we still haven't built gaming at scale. Off the grid. Avalanche built, well, back to that.

1:21:04But I think Siri's sweet spot is that as well because it's super fast and super effective at certain things. We haven't seen the wholesale conversion of Web2. We haven't seen payment system integration outside of stable coins, and I'm talking here about maybe Doge on X or whatever it may be, right? We saw a bunch of these guys experiment like Reddit last cycle, but didn't because of regulation, but the regulation changes. So I think the lack of regulatory headwind will create opportunity for a lot of the people who haven't been in to come in, and that'll be enough. I don't think you're wrong about DeFi.

1:21:42I do think DeFi is not easy to use for non-crypto natives still. So it needs to be embedded in a simpler way. What that means, I don't know. Does regulation mean that the ETH ETFs give yield? Okay, that's a big game. Yeah.

1:22:00So I don't disagree. I think ETH will do very well. I have no issues with it. Yeah, I have no issue. I've seen your point of view that as rates get lower, more people get pushed to DeFi. I think that's probably pretty true as well. I think that's pretty interesting. I do worry about the restaking yields. Really? Why? Well, I've been in finance long enough. There's no such thing as a 20 % yield without commensurate risk. I mean, it's just every fucking time. And so nobody knows where the risk is. Everyone goes, well, it's a smart contract. It's all fine. But what's the other side of the risk equation?

1:22:45Who's doing the borrowing? Where's the leverage coming from? Where's it ending up with? And who blows up? It's just a matter of who blows up. So that's why I don't like it. I understand if you're very crypto native, you understand the risks you're taking. You do it for periods of time when you think it's relatively safe. But it's not like, oh, I can ride out the bear market in restaking yields. My guess is half of this stuff goes negative. I've been going through it with the DeFi yield back in the day. but the thing is that you've got a lot of revenue generating protocols at this point for instance if you go to hyperliquid as a dex i think it's a good interface it's pretty easy to use the only concern you need to have is that you need to have a decentralized wallet to make actually execute those orders and that's where the trick comes in metamask is not going to attract billions of users it's super hard to handle but if you have an integrated wallet that is super easy on your telephone to use or on your mobile phone to use then on top of that having all the regulatory frameworks that is putting back pushing back a lot of those projects to not launch on a and launch on the decks it's going to increase the defi markets where for instance hyperliquid coming back to that point you can also like get a revenue by staking the actual token which is i I think the last time I checked, the APR is like 20 % or so.

1:24:14But that is backed by revenue. And a lot of the restaking protocols or early stage projects that are saying that they have a high return or high yield is actually just to attract stakers to grow the ecosystem. But in my opinion, you shouldn't be needing those stakers to grow the ecosystem. The ecosystem should grow by itself, by the product that is being built. but we kind of need restaking or is your thesis on restaking different

1:24:52revenue goes up revenue goes down and once the restaking yield disappears we don't know who's caught the other side of some of this stuff what i do know however is that if you look at the the leverage being created by micro strategies it's actually ending up in traditional hedge funds who are more practiced at risk taking. And so maybe it's more manageable. We don't know. Somebody will probably get over their ski tips and blow up. But I think the nature of liquidity providers will change over time. So I think we all see the large lending pools of the banks and the asset management firms, the Apollos, these kind of people.

1:25:41enter the lending markets, and that will make it far more robust. It'll bring yields down, obviously, but I think it has a chance to be far more robust because of regulation. The other mismatch we've still got in crypto is the VC market versus the hedge fund market. So the hedge fund market is way too small versus the overall size of the market and the overall size VC. So traditional hedge funds are$4 trillion in assets. Crypto hedge funds, even with the recent rally, maybe$10 billion max. So$10 billion is the entire professional capital in the market that's trading, providing liquidity outside of the trading shops, of which there's like five or six of those unregulated market-making shops.

1:26:34But the hedge funds are too small. So what's happening is VC is getting tokens, they're coming onto the market, and they're falling 80%. Almost every new coin does. Why? It's because the secondary market's not liquid enough. And there's too much liquidity in the primary markets. That actually creates a supernormal profit for hedge funds because they can buy great tokens very cheaply after they come out. But over time, that will arbitrage and we'll find an equilibrium that is more similar to IPO markets. But right now it's dysfunctional. Like DeFi is dysfunctional because the leverage is not in super professional hands, which is what we learned last time around with 3HRsCapital.

1:27:21I recently have jumped myself into the venture capital game, which I had the ethical idea that going from being an influencer KOL where there are a lot of bad actors is that once you step up and become a VC it's a good world where everybody just cheers for each other etc etc however there are a lot of unknowingly unexperienced VC guys out there just investing into protocols as valuations that I'm like, I wouldn't be doing that. I'm not going to name some, but a lot of VCs were spending money into protocols at billions of valuations just to gather management fees from their clients by keeping on investing into crypto.

1:28:13And I think we're currently seeing that, indeed, there are just a few hedge fund traders. I mean, the OTC markets are barely opening up and there are so massive discounts taking place at this point. I mean, some coins can be bought for like 40 % to 50 % discount at this stage because there's just no one buying them. But on the other hand, the venture capitals are just overexposed. And I think in terms of group of companies that are going to be hurt in the next cycle, it's going to be the venture capitals. Can't be different. And they got hurt last time around as well. But they had the one trick up their sleeve is most of them don't even care about equity anymore.

1:28:54They get decent returns from the token side, but we've got this issue of this mismatch. So it's very interesting. I set up an exponential age asset management, which is a fund of crypto hedge funds, because I think there's more opportunity in the secondary markets than there are in VC markets because of the excess capital in VC, meaning it's driving up valuations, which drives down future potential returns. While liquid markets, there is still a disconnect. So, yeah, we'll see how it plays out. But it's very interesting. From my perspective, actually, if you're a retail investor at this point, or actually in my case, if we are an investor, liquid assets are providing such a big opportunity in terms of risk and return that you could have because you can buy a certain asset that is yet to go up and you can liquidate at all costs and all times if you want.

1:29:47while if you're a venture capital and you invest into something, you don't know which valuation it goes live. You don't know whether the exchange screws you over. You don't know whether it's going to be postponed because the timing is off. So I think the liquid markets and also the secondary markets are a good market where it goes through. And one of the concerns that we have, which is one of the final questions that I wanted to ask you is, if someone is listening to us today, to you, and says, okay, the next few years are going to be super important. All those altcoins and crypto is going to go through the banana zone.

1:30:26They go up vertically. How are you going to handle those emotions and how are you considering taking profits? Like I know the feelings from the previous cycles and the amount of cheer that you had, but actually during those moments you should have been rational. There is a trick. And it was taught to me when I was running a hedge fund. The trick is every trade you do, you give an entry, a stop loss if you use them, or an idea stop loss when your idea is wrong. Because it's difficult to use stop loss in crypto unless you're really short-term time horizons. But an idea stop loss is it's not scaling.

1:31:06We're not seeing adoption. You know, they're not meeting their roadmap, whatever it may be. A fundamental stop loss, basically. Yes. but what you do is you write down your thesis you then write where you're going to take profits so on the real vision platform we have this in our trade ideas to force people to do this i was forced to do this when i was starting to run a hedge fund a guy said look here's the trick of managing your emotions is take the emotions out your emotion is finding a great idea that's your emotion the rest it needs to play out and it'll play out one way or the other you'll either win or you won't and if you do that one trick of writing it down and holding yourself accountable you won't get that ridiculous FOMO with it could go up another 10x it's like I was happy to take profits here so I should take profits here and yeah I know but uh probably there will be coins that are going to be going through mass cycle adoption or, for instance, a coin goes 200x and I did a 10 on 15x on it.

1:32:25There's always the temptation to get back into it. I know. I still have it. We all know, my friend. It's really hard. It's really hard. and in the end you've got to realize that if you get back in at a higher price you're assuming more risk so had i had when i sold bitcoin i'd bought it at 200 sold at 2000 10x fantastic in my world at that time that was like heroic trade and it went up another 10x i did not buy back in and I was comfortable because I'd made 10x and I told myself it's okay because if I had then realized oh fuck I should get back in I buy back in it's 10 ,000 it was only like three weeks that it went from 10 ,000 to 20 ,000 and then back down your risk increases so much further than an entry price at 200 so you just have to realize you just have to become a little bit more stoic and say I'm happy to accept what I've got and not what could have been because there's always somebody on x that's making more money than you there's always somebody who's talking about the trade that did 100x that you never got there's always somebody laughing saying look how much money I'm making in mean coins you don't know the truth you don't know how many zeros they've had you don't actually know their P &L you don't even know if they've got a hundred dollars or a hundred million dollars you don't know anything so you've just got to step back and say what what matters for me am i trying to compete with random people that i actually don't know the truth about or am i trying to unfuck my future and if we try to unfuck your future it'll try and stop you taking too much risk at the wrong time maybe you need to become a little dutch

1:34:33i'm ready half Dutch it's enough for me yeah well you're taller than me though so i mean just um final question Ro um i know you're a hard-working well content creator but also entrepreneur doing all sorts of stuff what makes you and happy what is your end goal?

1:35:00Well, partly it's money and security. But it's also this is the biggest macro opportunity of all time. And so partly it's ego. I want to nail this. This is the big one. I worked my entire fucking career for this one bet. Here it is. And I'm going to take that bet in as many different ways as possible. The other thing is I understood very early from Occupy Wall Street onwards that it really mattered to people and that they needed to unfuck their futures and that it's creating societal discontent. And if I can help as many people as possible and it aligns with my own personal goals, well, that's a win-win.

1:35:49that's kind of like the idea of that community idea where you can participate in a community well my community is people who want to unfuck their future and you know what it does it for me too it does it for the system wide as well because we need it because the system is broken and it helps people so if you've got such alignment of interest and it's the greatest macro trade of all time. Got to do it. Well, thank you very much, Raul, for spending some time with me on this podcast. I've been following you for years and watching your videos, so I would love to see them progress over the years and see where we go to through this exponential age.

1:36:33Thank you for being here. It was a wonderful conversation and I hope to see you in the next year again on this channel discussing everything that we do. Any final words that you would like to say? I've actually got a document that's free. If you're joining Real Vision, which is free, realvision.com forward slash join, there is a whole document that's there for you around how to unfuck your future and also the six years idea. And I think people find it very useful. So if you're watching this and you care about what you're trying to do, it's free to join Real Vision. It's been a superpower. That's changed many people's lives.

1:37:11So realvision.com forward slash join. I'll make sure that the link is in the description beneath. So if people want to go to Real Vision, then they can easily click on the link in the description. So once again, thank you very much, Raul. Thank you, my friend. I'll see you soon. Have you ever wanted to trade Bitcoin, but haven't dared try? With Plus500 Futures, you can trade crypto without the hassle of opening a wallet. With just a few clicks, you can register and start practicing with their free and unlimited demo. See a trading opportunity? You'll be able to trade it in just two clicks. Feel ready?

1:37:44You can move to real money with as little as$100 once your account is approved. And the great thing is that in addition to crypto, Plus500 gives you access to a wide range of instruments. S &P 500, NASDAQ, gas, and much more. Explore equity indices, energy, metals, forex, and beyond. With a simple and intuitive platform, you could trade anytime, anywhere. Experience the fast, accessible futures trading you've been waiting for with Plus500. With over 20 years of experience, Plus500 is your gateway to the markets. Visit us.plus500.com to learn more. Trading in futures involves the risk of loss and is not suitable for everyone.

1:38:19Not all applicants will qualify. Plus500, it's trading with a plus. If you like this episode, I'd love for you to head over to realvision.com forward slash join for a free membership. Start your journey today to unfuck your future. Just one click away. Have you ever wanted to trade Bitcoin but haven't dared try? With Plus500 Futures, you can trade crypto without the hassle of opening a wallet. With just a few clicks, you can register and start practicing with their free and unlimited demo. See a trading opportunity? You'll be able to trade it in just two clicks. Feel ready? You can move to real money with as little as$100 once your account is approved.

1:39:00And the great thing is that in addition to crypto, Plus500 gives you access to a wide range of instruments. S &P 500, NASDAQ, gas, and much more. Explore equity indices, energy, metals, forex, and beyond. With a simple and intuitive platform, you could trade anytime, anywhere. Experience the fast, accessible futures trading you've been waiting for with Plus500. With over 20 years of experience, Plus500 is your gateway to the markets. Visit us.plus500.com to learn more. Trading in futures involves the risk of loss and is not suitable for everyone. Not all applicants will qualify. Plus500. It's trading with a plus.

1:39:35Thank you.