E173: Raoul Pal: The AI Race Will Make Crypto Holders Rich

24:14Raoul Pal:And it was back at all-time highs in November. So it was actually six months of falling. So when did Bitcoin make its all-time high? December last year, I think. So it only went down the equivalent number of months. It didn't go down that long. But let's see. The longer it takes to go up, the more extended it becomes, I think. Some people talk about, I mean, there's this K-shape recovery that's been talked about for a long time in the economy and in the stock market. But now some people talk about K-shape recovery in crypto. Most assets won't come back. And worse, some companies that are doing well cannot be invested into.

24:57For example, stablecoin companies. It's extremely hard. There's no token. you have to do some private equity or VC stuff to be able to buy them. That's why people are pissed basically because they haven't really made money and they feel like there's a bunch of people or quite a lot who say actually all these crypto coins are dead, but there is stable coins, RWA, Bitcoin and a few other things that will go up, but people can't buy these companies. Therefore, they feel like the promise of I can invest early in something that will go up, which they also couldn't do in AI, right? The kind of promise is broken.

25:43Raoul Pal:What do you think about that? I think it's not true. I think product market fit wins hyperliquid. You know, you've seen it. Product market fit wins. So there are plenty of opportunities just because your bullshit token doesn't go up. You know, the market owes you nothing. You would just have to be better at doing a job. That's a good one, actually. The market owes you nothing. But people have been, that's why a lot of people left pistols over the last two years. Because people have been used to easy money by closing their eyes, everything going up. We haven't had the full accelerator, the banana zone phase.

26:22Raoul Pal:We've not had that because liquidity was still subdued in 2024. So we had good year 2022 from the low, so end of the year. 2023 was a great year. And then 24 petered out. And that was it. Bitcoin continued for a bit. But really, we just haven't had the acceleration period. So people have, the cycle has extended. And everyone's given up on year four of a potentially five-year cycle, maybe longer now. I don't know. I don't know how broken the cycle is by what's going on. It's like, you know, don't forget the K-shaped economy. So tech economy is booming. The real economy is not. So what are they trying to do?

27:04They're trying to cut rates to help regular people.

27:09Raoul Pal:The ISM that we've talked about in the past is now ripping positive as crypto rises. Same thing. And they're going to have the largest infrastructure investment in the history of the world is about to happen. in data centers and all of that build out. And that's going to employ a lot of people in construction, services, everything. And we're going to have a boom. And that money gets saved, spent, or invested. And people will come to the casino, as they always do in the crypto market. So again, I don't have an issue. I also think that people misunderstand the rise of stablecoins, RWAs, the finance system bringing stuff on chain.

27:52Raoul Pal:They're like, how do we participate in this? Just own the fucking token. It's like the underlying layer one. The layer one trade is so simple. It's so obvious. It's the big trade. It is the, I talked about this, the universal basic equity layer for all of us. If we are going to see the largest parts of the economy given over to AI and agents and they're going to use crypto rails, we just get to own the layer ones and we participate in their success. We didn't get that with the internet. And there's no excuse for people not to do this.

28:34You've been adding more, as you always do, in the nasty recent correction. What did you add?

28:44Raoul Pal:um i added some zcash why i bought more suey obviously but i added a bit of zcash last time you said because it was going crazy in december you said i'm gonna wait for it to go down and i'm gonna see how it uh how it plays out and how it reacts correct that's what exactly what i did and into the correction. I started buying some. I didn't buy enough, obviously. You never do when it goes up a lot. But because Zcash is, so we talked a lot about smart contract layer ones, right? In the world of, you know, store of value, there is only one. Well, there was only one really. But now we've got another one, which is it has a subsection of that.

29:33Raoul Pal:And I think, you know, I was talking to Barry Silver about this the other day. is to assume that it could be 10 % of Bitcoin, 5%. Great. In terms of, you know, how much economic value it has. Privacy in the world has value for people. And I think people will understand that more. And so therefore, it's a very easy trade. It's Bitcoin with privacy. Yeah. You know, I love a left curve trade and a right curve trade. Yeah. The mid curve is, well, they're going to ban it. they're going to do it. Fuck, I've lived this all through all of my crypto career, right? It's always been, they're going to ban it.

30:09Raoul Pal:They won't allow you. They won't do it. What's your left curve trade? The left curve trade is, it's Bitcoin with privacy. What's the right curve trade? The right curve trade is also quantum proof. And what you're actually doing is proofing yourself somewhat to the power of government that has AI control over the people. All of this thing, you know, the bad outcomes, it gives you a lot of different attributes that are probably very valuable. And people don't know it now, but in the future, what's the probability? It's reasonably high. Quick shout outs to our legendary long-term Windshift Appents partners, without whom none of this would be possible.

30:53Thank you to Cast, my go-to global money app to store, earn, move, and spend stable coins across 170 plus countries directly with Apple Pay or a physical card. On top of that, I can also get paid in USD and Euro with my Cast Virtual Account. Use my promo code SHIFT and my link below to get 10 % off your membership, earn up to 3 % instant USD cash back on every card spend and get up to$250 in cash for referring your friends. No banks, no borders, just money that moves with you with stable cash rewards. Big thanks to our sponsor SumSub, the leading full cycle verification platform for crypto, trusted by 8 out of 10 of the world's largest exchanges.

31:43If you're building in crypto, you already know. Fraud moves fast and regulators never chill. Sumsup gives you full cycle verification in one stack, KYC, KYB, transaction monitoring, and even full travel rule compliance across 1 ,800 plus virtual asset service providers. Their AI flags suspicious behavior and account takeovers in real time before damage is done. Check the link in the description to learn more. When you add an asset like Zcash, how do you think about allocation? portfolio wise you have like a target i want to put like five percent ten percent you just say i

32:21Raoul Pal:have a dollar amount unfortunately it's just been trading too strong so it's yeah it's been crazy yeah so i didn't i just i was going to buy some and then i bought some and then i was going to buy some more and then i forgot because i was traveling and then it's like oh fuck it's up 50 percent and then i'm like i'm not going to do this even though i know they're probably good prices but But you know what it's like. I didn't execute it well. So, yeah, we'll see. I won't switch around my existing portfolio for it, I don't think. So this was new cash? New cash. But we'll see. You mentioned hype before.

33:00And I talked to Dan Tapiero, and he mentioned hype multiple times without me even asking about it. So I was like, oh, the macro guys talk about hype and hyperliquid, which I think everyone kind of started to realize during the war and the weekends, oh, this thing is actually helping to price oil markets during the weekends when there is war. And you're a macro investor, so you must have thought like, wow, this is like something really new and kind of crossing the chasm into like mainstream and traditional finance, which is what we're really trying to do in crypto. What are your thoughts on Hyperliquid and what these guys are doing?

33:41Even on the hype token, are you not tempted to do something about that?

33:47Raoul Pal:If I don't use it, I wouldn't buy it. And I'm just not a trader. So we talked about that. It's just not for me. I don't use perps. I don't use leverage. I don't use any of this stuff. So I get it. But it is a niche within a broader ecosystem. And it's a great one. You can have great niche products. but it has no real moat around it. I mean, Robinhood are going to come after that as fast as they can, and eventually Coinbase too. Now can HyperX execute them? Possibly, probably, I don't know. Don't really have a view on it, but it's not my trade. Now, 24-hour markets, great, but I mean, literally everybody's talking about that.

34:26There's a saying in finance and investing, and I think in life in general, in hindsight, it was obvious. Yes. It's often said by people who have regrets, who missed a trend, didn't invest. We're lucky to have you here, Raoul, the man who can read long-term trends. And you're saying that there are a couple of things that are actually obvious in foresight. Let's go through them one by one. So people don't have an excuse in 10 years to say, in hindsight, it was obvious. The first one you mentioned before, smart contract layer one will accrue a larger percentage of crypto total value over time as the investable infrastructure layer.

35:11Yeah. Can you explain?

35:13Raoul Pal:So this is the universal basic equity idea, right? For the first time, we've got a globalized infrastructure, digital infrastructure, unlike the internet that we can participate in, that the AI and others will use, and we get to reap the benefits of them. This is the trade-off we're giving to them taking part of our knowledge work away, is they're going to give us the ability to make money from their economy that they create. Over time, the layer ones, people don't understand this, is the layer ones, if you think of all big networks that are important for infrastructure, whether it's operating systems, whether it's cloud, all of that, there's basically three to four main players.

36:01Raoul Pal:Then there's a bunch of specialists, and then there's a tale of stuff. But it really accumulates to three or four to five people. This will be the same. So it's going to be around three, four, five chains as layer ones. Then there'll be specialists, like Hype is a specialist. Can that continue to one vertical niche thing? Okay, great. There'll be somebody who does something slightly different, privacy, but that's really on the Bitcoin side of the ledger, which is a non-smart contract. So the infrastructure layer becomes much more important than people understand. We've talked about it in the past.

36:36Raoul Pal:Every ticket becomes an NFT. All of these things, the whole finance system comes on board. That's all accruing value to layer ones. How I try and explain the value of a layer one is Ethereum. OK, so if you were to pull the plug on Ethereum today, how much economic value do you destroy? I mean, huge. Every layer two. All of DeFi. All of the real world assets. All of NFTs. Everything that's been built on ETH goes to zero. ETH is probably undervalued for that already, let alone the growth rate of these things. And let alone thinking, well, the finance system is going to come a lot on ETH and layer twos and stuff like that.

37:21Raoul Pal:So that's how you've got to think about what is the value of that infrastructure. And so if you think of Bitcoin, Bitcoin has one job and it has one target, which is global savings. And so Bitcoin is a power law distribution, because over time, you can only get to 100 % of global savings. Infrastructure layer can scale infinitely, which is why, again, Google and all of those companies have just been like that on the log regression channel. So that means for you that the layer one, whichever you choose, ETH, SOL, SWE, should be a majority of your portfolio. I still think, you know, I've done a lot of work.

38:05Raoul Pal:I just presented this, Sui Live, about this. For me, and I know I'm biased because I'm on the board, but this is from deep analysis, it is clearly ETH has the largest amount of economic and intelligence density of any of these. Solana has proven. And then we're talking about, remember, three or four. Who else? The only one through the analysis that I got to was Sui because it has more TVL per user than Solana does. And it's a lot younger. And when the market fell 80%, it didn't lose any economic density. In fact, maintained it. There was only three tokens that maintained economic density, ETH, Solana, SWE.

38:50Raoul Pal:And when you look at SWE on a bunch of other bases, you've got the output of intelligence because it's programmability, the speed, and all of this stuff. So I just think there's a basket of four or five you can own, layer ones, and you can go to the beach. And in 10 years time, you can fly back from the beach in a private jet.

39:14I thought we don't like to travel anymore. If it's a private jet, it's different. I don't know. I've never flown in a private jet. So not yet. Not yet. In 10 years. In 10 years. Layer ones that can output the largest amount of intelligence per unit of energy will outperform over time.

39:39Raoul Pal:Yes. So this is this, I've not really fully released the entire thing on the universal code. I've written about it. People don't really understand it yet. But there's a set of operating principles that are observable and provable and understandable of how the universe works. the key one is the entire universe from atomic structure to solar system structure complete and continues to convert units of energy which is the fixed all the physics says is you can't destroy your career energy and out of it comes intelligence we're part of that process and ai is part of that process and blockchains are the same process everything is they all are networks as well.

40:27Raoul Pal:Every single one of them are created by networks. And so what you've got is an intelligent network of compute and storage which is blockchain. And money, as we talked about, why does NVIDIA get more money than anybody else? Because they're creating more intelligence output than any other company on Earth right now. Why is Anthropic doing it? Because they're producing more intelligence output. It happens literally everywhere. Why is the NASDAQ outperformed? Once I discover this universal code, I see it everywhere in everything it's the organizing principle of the universe and what you find is all geopolitics is based on it all of what human activity is based on it everything is based on it so that's what this is about is anything with more intelligence does well how can you measure that for a layer one to know which one you should bet on or which ones you should bet on so intelligence comes in many forms firstly intelligence of human capital how many builders programmers developers then what is the programmability and efficiency of that programmability how fast does that blockchain convert energy into programmable outcomes so eth in this case is actually not great but eth wins massively for the number of developers and economic density the lindy effects the security all of that right so it's it's very solid as i've said it's like the microsoft you know you don't get fired for eith you got solana which is much more efficient much faster much cheaper um easier to deal with than eith uh less developers but good good density um you've got three which is much earlier but as we said it's uh it's things like programmable um block times block transactions of a thousand transactions within one block, it's like a different order of magnitude than anything else.

42:23Raoul Pal:Its speed to finality is a different order of magnitude. Its programmability is a different order of magnitude. So what you've got is provable intelligence. Now, it doesn't mean anything unless you can prove that, hey, how many applications does it have built on it? How many applications per user? You know, that kind of stuff. You start to see these metrics and you can see density forming. It's still not there. It's still early. You want to see a large portion of stablecoins versus TVL, which is like that is stored energy in the system, ready to be deployed into the system. Right now, SWE is like, SWE's TVL is equivalent to the stablecoin size.

43:06Raoul Pal:You want to see twice that or more. When you get to ETH, you see huge amounts. So there's a bunch of indicators, but what you're looking for is what can you do with the chain, how little cost. So when people look at blockchains, they look at discounted cash flow analysis to value them. How much fees does it generate? It doesn't generate fees. It's so expensive. It's fucking nonsense because the very purpose of a network like this is to be the cheapest, fastest. Yeah, absolutely. So if you use discounted cash flows, you miss the actual signal, which is cheapest, fastest, most programmable will outperform over time.

43:49the biggest user of DeFi and crypto payments will be AI agents, and their scale is infinite. Yeah.

43:59Raoul Pal:So we've talked about crypto payments, right? I'm just setting up some agents now. And a lot of the time, you'll start to hit walls for API calls and all of this stuff, and there'll be a payment. And it'd be 10 cents, whatever the number is. You've got tons of these micropayments to make and then larger economic transactions because they can do other stuff. Fine. We kind of all understand that bit. The DeFi bit's really interesting. DeFi's actually much better suited for machines than us. You don't even need a front end. I was speaking to one of the guys at an event last night. I'm like, why even bother with even a website or a front end or anything?

44:36Raoul Pal:Just attach, allow the agents to come, do their job, leave in the fastest possible least friction because that's what wins this game. And so what will agents do? Well, we're talking about a multi-chain world. They're going to end up with even stable coins on three different currencies or four different currencies. And they're going to want to rebalance. If they want to put it into, let's say, they've got different transactions, they've got different currencies, they will have treasuries. Of course they will. And how will they swap? DeFi. And they'll do it instantaneously without any human involved.

45:10Raoul Pal:And we don't even see it. We won't even see the transaction. And so they're going to be the largest users, sir. How can someone bet on that? Buy the layer one. It's not that complicated. Now, I know layer ones may not be the raciest bet. You might not make the most money. And fine, you can go to the casino if you think you're a good VC investor and find which are the protocols that are undervalued versus, you know, are they getting adoption effects, all of that. That still applies. You can still do that work. It's just hard. I can't do that. And even the good ones can get hacked, as we've seen.

45:47Raoul Pal:Yeah. Or have like indirect. That's still hard. That's going to be difficult. It's very difficult for them to destroy a layer one. It's very easy to draw an applications layer. So for you, DeFi is not dead. Because we've heard now, I had like some people who are actually pretty big telling me, man, this DeFi thing is dead. After what happened in the last two months, all these mega hacks. How can a bank come and say, or a financial infrastructure come and say, I'm going to use my client's money on this DeFi stuff that can get hacked$300 million? So doesn't it just force people to build better products?

46:25Raoul Pal:I mean, that's the answer, right? We're not building good enough products. Now, don't forget, why have we all got Norton antivirus or whatever on our bloody computers? Because they get hacked. This is not just this. It's everywhere. Every single bank has a group internally that has to deal with hacks. They have a reporting number of X percentage is stolen from the bank. But they don't make a big deal of it because they don't want to disturb people. But it happens at every level in everything we do.

46:56You said before all financial rails will move to blockchain rails.

47:00Raoul Pal:So this was a prediction. I went back, searched in GMI. I made in 2014. I said, that's before smart contracts I said this is the infrastructure rail for the entire financial industry blockchain and I've been saying that ever since and I said you can front run the institutions and now they're all announcing it why? because it's a more efficient way of output of energy and you can still front run them but it's the most single efficient way for the financial system to operate the financial system will always move to the most efficient rail Why? Because you make more money. It always works that way.

47:41Digital art, your favorite one, will accrue vast value over time due to wealth effect of the above?

47:50Raoul Pal:Yeah, you and I have talked about this on the podcast in the past, right? If I'm right and I can't say I'm not going to be and we go to$100 trillion over time, that's a fuckton amount of money. And that is humans participating in what is going on, right? We're participating in the machine economy. Fantastic. The crypto rails, the finance system, they're taking our money away from us by coming into this. They're taking our rails. No, they're going to rent our rails off us, and we're going to earn the tokens. So we're going to make the money out of all this. And at the end of it all, we'll have made a decent amount of money.

48:27Raoul Pal:And people will buy trophy assets. And we're going through the most ridiculous point in all of humanity. we're going through the point where we are not apex intelligence and art records all of the stories of our time the culture of our time this is the single biggest moment in all of humanity is happening as we speak I mean what a time to be alive and tell me that art is not going to be important that's fucking ridiculous what's the time frame for that because I bought a bunch of CryptoPunks and XCopy I don't look at this anymore you know the thing that you don't want to look at because it's like this thing is not moving the time frame is much longer yeah but don't forget it's a function of the vibrancy of the crypto economy so you have to wait until crypto is worth 10, 20, 30, 40, 50 trillion to actually see a massive difference because people will buy the moment let's say ETH goes from wherever it is today 2.5 or whatever to five.

49:34Is this ever happening again?

49:37Raoul Pal:I was talking with Dan Tapierro. We are allowed to have nice things. I know nobody believes it. No, but it's been... Everyone thinks we've been robbed of the whole game. It's been five years of pain, right? So I was talking with Dan Tapierro and we're saying like, this is kind of like, for a lot of people, when Nasdaq is up to X, Bitcoin barely has moved in five years. Obviously, it depends on what time frame you take. But if you look back five years, it feels like a lost decade for a lot of people going crypto. When you ask Dan that and me that, we'll say, well, imagine what happens when it breaks out.

50:07Raoul Pal:That is accumulated energy that happens. Because we know what's happening. It's fucking obvious that they're going to be doing all of these things. The governments will continue to debase currency. The financial industry will build on these rails. The agents are coming. It's fucking obvious. So therefore, when it does break out, the accumulated energy that it has is going to be something dramatic. And people have forgotten what the energy looks like when it hits those markets. They've forgotten how vertical. There's been a long time. Because people are looking at, you know, Micron or Intel or whatever.

50:42Raoul Pal:And they're like, oh, my God, look at Intel stock. 10-year consolidation. Explosion. I mean, literal explosion. I kind of think that's where it's going. Now, is that this year, next year? It doesn't really matter. But even when ETH gets back up to the highs of the range, let's say, you'll see a lot more activity in NFTs because people are feeling more confident. But if it breaks through, then everything changes. How the hell do you structure an NFT portfolio? So I'm actually going to launch a fund on this because so many people came to me and said, well, I don't know how to do it. And I know how to do it.

51:21Raoul Pal:I know the best people in the world are doing this. So I think we're going to launch a fund, XPAM. We'll be able to hopefully announce a partner that we're doing it with, which will be super interesting. We're just kind of finalizing that now. But otherwise, you know, it's not easy for somebody who doesn't know how to do it, having talked people through it. How would you structure an NFT fund? that's because i know the space very well and the people who are going to be involved in this know the um the space extremely well so the fund will be structured for grail assets so these are the really expensive super scarce ones that already have proven social consensus for example so what's a grail asset one of a one of one x copy uh alien crypto punk a uh sam sprat one of one a Beeple one of one.

52:17Raoul Pal:These things, proven value, trade anywhere between$600 ,000 and$10 million,$20 million,$30 million. Then the next tier down is the interesting tier. There's good convexity, which is the artists that have social consensus, have long-term proven value, particularly in this sideways market in ETH for a long time that capture attention there's a whole group of those who can get wildly re-rated and so they may trade at let's say For example Die with the most likes who's a very fantastic artist that is humorous, kind of gross but what he's doing is commenting on the decline of middle America it's like a really important commentary but also with the love affair from middle America because he's from Indiana.

53:14Raoul Pal:He lives in it, sees it, and it's amazing work. Likely because of the importance of what he's cataloging is going to matter. And he's very unique in how he does it. He's kind of like the Huntress Thompson of artists. So I think that's important. There's another German artist called Kim Assendorf who's at the cutting edge of AI and art where he's got these incredible 3D art, but it's made of a number of pixels. But you can define the number of pixels because each pixel itself is a token. So every pixel has value, and he's got these incredible things. And these things, these kind of collections are somewhere between, you know, the really high quality ones of those are somewhere between 20 and 40 ETH.

54:06Raoul Pal:call it 10 to 50 ETH that bucket of people some of those can get wildly re-rated now don't forget ETH can get re-rated too the convexity in a trade like this and we've talked about this in the past is absurd if an artist gets re-rated from 20 ETH to 200 ETH and there's plenty of things that trade at 200 ETH that's a 5X in that in that and let's say over the next 10 years where's ETH? 10 years? I have no idea But let's say it's 20 ,000. Well, that's a massive 100x return. Because you get 10x on the NFT and ETH terms and 10x on ETH. Because as we talked about in the beginning, the ETH economy is not the same as the dollar economy.

54:54Raoul Pal:If you're rich in that economy, you'll spend more in that economy. What kind of investor might be interested in investing into an NFT fund? So we've spoken to a lot of people. There's a lot of family offices, general high net worth people who are curious, who've been in crypto, but non-crypto people who are interested in the art world. The other group is there's a lot of crypto OGs who've made a lot of money out of the space and have never bought digital art. And they're like, yeah. And I think it was a big move when Mickey Malka bought CryptoPunks IP. It's made it public. Beeple is still very well seen within the space.

55:41Raoul Pal:And people are starting to get it that you can't be in this space and not have one of the best product market fits it's ever created, which is digital art on chain. And so I speak to a lot of them. So I think a lot of the crypto OGs will buy art because all of the tech tycoons bought art, all of the real estate tycoons bought art, all of the hedge funders bought art. as soon as people make a lot of money, they buy art. Quick shout out to the legendary team at Jupyter, the DeFi super app. Anything you want to do on chain, from trading to earning yield, you can just use Jupyter. Personally, I recommend getting the Jupyter wallet on either your phone or your laptop.

56:1810 times faster and 10 times cheaper than the competition. You're going to love it. Thank you to the awesome team at Athena for backing today's conversation. Athena is one of the fastest growing projects in DeFi with over$7 billion in stablecoin supply and an average 11 % APY on SUSDE. And importantly, zero DPEGs since launch, which is exactly what you want from a stablecoin. Go check them out by following the link in the description down below. You mentioned Grail's one, right, before. Does that mean that... I was talking to Jeff Park. Oh, it is. Sorry, before we get to that, I missed a couple of parts of the fund.

57:00Yeah, because that's why I'm... Okay. It's actually linked to that, probably. I was talking to Jeff Park, and we were talking about... He was Bitwise advisor, and then he worked with Pomp, and kind of Bitcoin analyst, and we're talking about real estate. Yeah. We're talking about real estate in New York. Yeah. And the ones that actually are really worth, are very valuable, are the ones that are$20 million penthouse, right? Those are the ones. But the$1 million flat actually doesn't really get value over time. So similarly, talking about NFTs, you talk about the grail, the$5 million punk, alien punk.

57:44Well, I have a bunch of punk, maybe two or three, I don't know. They're not grails. Is this my$1 million flat in New York City? like should people only focus on like the top grail nft or what's the a all of this will get

58:01Raoul Pal:re-rated it's still so small so the whole space is going to get re-rated secondly what you've got is a small apartment in a great block right because in that block is the alien punks and the cowboy punks that have sold for 20 million, 30 million dollars, 20 million dollars, 10 million dollars. So you're living next to the billionaire, billionaire adjacent in the right neighborhood. Okay, that's a pretty good deal. You know, I feel better now. Yeah. Now, thank you for making me feel better. When you're, if you're, if you're searching, if you're trying to make money and not just buying art for art's sake, which is I highly encourage everybody to do.

58:42Raoul Pal:But if you're actually trying to build a portfolio of this, then the issue is somewhere in the middle tier, there's artists that never get re-rated. It's like bands only get so much popularity. Doesn't mean they're not great bands, but for some reason it just doesn't become bigger. That's the risk. Is that the right neighborhood? Do the right people want to live there? It's the same thing. but this would be more for artists or could be the same maybe the the board apes don't get related yeah maybe the punks that's right some punks don't get really related for some reason some punks they will all get um but which ones outperform i don't know um but maybe apes is a good example maybe i'll never make my money back on my ape that i bought at the all-time highs Okay, fine.

59:33Raoul Pal:So maybe that's not how it works. The other part of what we're doing in the fund, which is interesting, is we're also going to be lending against NFTs. Interesting. You can do lending markets on Gandhi and a few other places, and you get great yields, like 15 % plus, against assets that the fund would buy if the lender defaulted. So you get them at a good price. and then with the yield, we will obviously cover some of the funds cost but also reinvest in more emerging artists. So you're trying to support the entire ecosystem and add liquidity because there's tons of people who are sitting on an alien punk, well there's not tons because there aren't many of them, but an alien punk and they want to borrow a million bucks because they want to buy a house.

1:00:20Raoul Pal:Well that releases liquidity or they want to buy some more art. It just releases liquidity, let it slosh around. So we're doing all that and then we'll form some sort of club around this as well to introduce the investors to the artists themselves so they can start their art journey themselves by buying art directly.

1:00:43We talked about AI before. Is Bitcoin a proxy for AI as a trade?

1:00:53Raoul Pal:Yes and no. I mean, because Bitcoin is going after global savings, but a global savings should go up if AI changes economic growth. So therefore, that increases the eventual outcomes for Bitcoin itself. I think that there will be enormous amounts of liquidity from the private sector coming from debt that's going to feed this cycle. And that liquidity is debasement of currency over time. So that's good for Bitcoin. And Bitcoin is a digital store of value. And we're creating an increasingly digital world with digital intelligence. So yeah, it's fine. I think the layer one smart contracts are a better bet on all of this.

1:01:42Raoul Pal:They just don't feel like it yet to people. And the market can only have so much focus at once. And we've seen this before in crypto bull runs. It focused on three things and it can't see the rest and everything pauses for a bit and then it rotates to the next one Because the market only has so much attention so much capital at any one time You said everyone is so focused on the crypto cycles When the big picture is so fucking obvious you would never sell if you don't have to yeah I saw that was a I Mean I've obviously known this for a long time but I'm just realizing now with the agents and the finance, with all of the things we've talked about, the endless debatement of currency plus the agents plus everything going on chain, it's like, why would you sell this?

1:02:36This is a massive shift in mindset that I realized I think gets much easier when you start to generate quite a lot of income, right? Yeah. because otherwise you might have a job which is the majority of the people and you make money but your dreams and hope are in crypto and you but you're like I want to trade this thing because maybe my income every month is good but it's not enabling me to have an exceptional life and I will need so much time but when you start to make more income this becomes so much easier yeah

1:03:17Raoul Pal:it is and I know people, you know, it's hard for everybody. It's hard. But really, if you logically think about it, we know where the world is going. We kind of know where the market cap is going to be over time because it's following Metcalf's law and you could just draw the log regression channel. So why would you ever sell it? Yeah, never sell and buy every month. I mean, at some point you get back to like the very basics after so many years, which is just never sell and just buy every month. So it's the left curve and right curve is here, right? And as I said, I mean, this is humanity's pension plan.

1:03:56Raoul Pal:This is what this is now, because we get to invest in the infrastructure rails of which all the agentic economy will run. We get to do that. It's a pension plan. It'll bail you out of everything that's happening. You just have to do it, which is why, you know, I first said the economic singularity is coming, and you've got, at the time, six years. And now it's, what, four years away. You've got four years to just own as much of this shit as possible before you go into the biggest moments of uncertainty. But I think blockchain survived through the other side. Corporations have no idea what's going to happen over time.

1:04:29Raoul Pal:But blockchains, oh, yeah. Can you prove with actual numbers what we just said, that buying and holding and ideally accumulating every month or when crypto market go down massively outperforms trying to trade cycles? So I have done the work because I've been building an indicator for Real Vision to help people with this. And what I basically said is if it's two standard deviations oversold on that log regression channel, between one and two, you buy. It compounds at a stupid rate. Now, if you sell, how much do you sell at the top of the cycle? Here's the problem. Or how much do you reinvest back in the bottom?

1:05:18Raoul Pal:That's the hard part. Let's say you get one, two opportunities to add every four years. Maybe one in the middle cycle, one at the end of the cycle. You've got two opportunities. is you just save up money between each one of those. Do nothing, do nothing, do nothing. You get that, like we've just had, you buy. You go away, you keep saving money, you do that again. Okay, that's doable for most people. Keep adding to your bet as much as you can. That obviously outperforms everything, because you never sell. If you sell at two standard deviations, how much do you sell? Or one standard deviation overbought?

1:05:59Raoul Pal:Two gives you the least signals, but it's a better quality signal. And this is where the problem is. If you take 25 % off, yes, you've got lifestyle chips, but then you've got less money in the casino. If you take 50 % off and you say, well, I'm going to add that back at the bottom, good luck doing that. Good luck. Because people can't do it. We're seeing it now. Yeah, it's too difficult. People can't do it. They're doing it now and they're chasing all the way up. And you tend to fuck it up. So on paper, you could be an absolute amazing compound performer if you could buy the bottoms and sell the tops.

1:06:34Raoul Pal:I've been in the industry for 35 years and I don't know anybody who can do it I saw you recently on this traders podcast and I mean I have a bunch of friends who are traders and we all know all this stuff but like it was kind of funny because you were saying that on a traders podcast when this guy is literally selling trading to all his audience and the truth is the truth right well look there are look at how many traders there are and look at how many of them actually made a lot of money consistently over time from trading. So people would say Paul Seder-Jones, Lewis Bacon, Stan Druckenmiller.

1:07:11Raoul Pal:They also made a lot of money out of asset management fees. That's where they made a huge amount of money after they got big. But yes, some of those guys, Lewis, Paul, and Stan, are all like five standard deviations talent. This don't exist. Most people don't make money. Why is it that every brokerage firm, their most profitable customers, the people who make the most P &L are dead ones? I mean, I've seen more and more of these crypto traders who are not, and there's not many, who are not like loudmouth and who used to make money trading crypto in 2019, 2020, 2021, saying, I lost my edge now. And the only money I made, I mean, I made a lot of money, but I lost it all, right?

1:08:04And I still made a lot of money, but it's just because I was buying, I was holding Bitcoin. And I was doing nothing with it. And all the money I made actually comes from that.

1:08:12Raoul Pal:Yes. Yes. And look, the people who've made the most money out of crypto are the people who don't trade it. You know, I've used the example of people like Wences Caceres or even Dan Moorhead. All of these guys have made a fortune by doing precisely fuck all. And yet everybody wants to be the next trader who scalps it. And it's like, I don't get it. I just don't get it. And then it's all about emotion. And it's like angry when it goes down and like overjoyed when it goes up. And it's such a waste of energy. You're saying doing fuck all. Dan Tapiero would say you're being patient, which is very different.

1:08:53Raoul Pal:It is. It's actually like you did the thing, you bought the thing, and you're being, it's not that, you need to reframe your mindset, which is, and I think it's Paul Trudeau-Jones who said, I want to make money in a trade or long-term trade by staying as long as possible, right? Which is the same thing. Yes. And so go back to this universal code framework, output of intelligence, the intelligences, the trade working out, compounding its capital, all of that. The units of energy. Just think of that. Think of the units of energy use of buying some Bitcoin and doing nothing. That is the most efficient trade you'll ever do in your life.

1:09:31Raoul Pal:But what we do is the inefficient, which is use vast amounts of our energy, mental energy, emotional energy, because we want to trade it. So what you're creating is a system that is, by definition, less optimal. Why does more volatility make people think that crypto is easier to trade? Well, because they're short-term time horizon people. So more volatility for people who are short-term. There's people who can make a living from that. It's just very hard. Even Peter Brandt's like, it's a terrible way to make a living. You know, he's a long-term, you know, he's been doing it for 40-odd years. It's not an easy way to make a living.

1:10:10Raoul Pal:None of the pit traders from Chicago really enjoyed it because it's hard to pay your bills by timing markets and the emotional, you know, it's not efficient use of your energy in the end versus in a secular bull market, just owning the asset. But yes, people can trade around it. And people may want to do it because it makes them feel good burning that energy doing that. They should just... It makes them feel productive probably. Yeah, go and play with AI and just hold your Bitcoin. You know, do that. Use your productive energy somewhere else. Yeah. Because it's not the optimal outcome. How can people develop patience and conviction when their portfolio is down 60 % to 80 % and stays down bad for a month like we just had now?

1:10:58Raoul Pal:Yeah, I don't even care. That's the thing. I don't care. I live off my salaries and income. And if I've got excess capital and it's oversold enough, I'm like, great, I could buy some more. Has my thesis changed? Is tomorrow going to be more digital than today? Yes, keep going. If it's two standard deviations oversold, you should be great. I can actually make more money in the future. But people don't see that. They think the opportunity cost is I've lost money now. I'm like, no, you can actually make more money in the future because you can compound and add money. People can't see this. And so it doesn't bother me.

1:11:37Raoul Pal:And, you know, I've gone through all of these in the past. And I now know what to do, which is just buy the fucking dip. You fucking idiot. You fucking idiot. Unless, you know, all of a sudden you believe that crypto is never going to come back. It's never going to get used. Which is just so improbable. So then just buy the fucking dip, you idiot. And then again, you know. It's free money. It's free money. It's people say, then people start buying the dip too early. I get it. It's not easy. So the discipline is one or two standard deviations oversold on the log trend. Do that. If not, do nothing.

1:12:21Raoul Pal:Just let the trend play out because it's noise in the middle. And if it goes wildly two standard deviations overbought, you have a massive bull run, sure, take some money off. Go and buy yourself something. If not, you don't need to do anything. You really have to have traded to really, yeah, you'd have to trade like three times every five years. That's with taking money off or twice every five years just to add to your bets. Do you think you'll be able to sell some when you're to standard deviation above? Yeah. Yeah. If I need to, if I want to, if I want to buy something, if I want to take some lifestyle trips, yeah.

1:12:58Raoul Pal:It's hard to do, right? Right now, for example, the semis, the SMH and the NVIDIA, and Google have all gone through their two standard deviations on their log trend, the long-term one. So now you have to ask yourself the really difficult question, which is, okay, they can bump up against it for a long time. We've seen that before, right? But the question is, was 2022 a new shift in trend because of what is happening, where so much capital goes into anything that produces output of intelligence that we're going to change and accelerate the trend. Or, you're saying probably? Probably. Or? Or it's a bubble.

1:13:44Are people always trying to justify what's happening by saying it's a new paradigm shift, as usual? And you see these charts like that, and at some point...

1:13:53Raoul Pal:We've lived through two paradigm shifts. One was the internet. Yeah, it had a big correction. But it was real. It was an entire paradigm shift. This one is much bigger. So if there's any true paradigm shift, the largest in humanity is when we're being replaced by Apex intelligence. There's got to be a probability that this is going to hyper-accelerate. Now, does that make sense? I don't know. When Anthropic is growing at this speed, Google's like forward revenues at 22 times. It's nothing for a company growing at this kind of speed. I mean what is going on here is insanity And it's not P ratios going up.

1:14:33Raoul Pal:It's fucking earnings going up Everybody's making a fortune and everyone's like it's a Ponzi scheme from one's lending to the other No, they're all making money from this massive Cambrian explosion of intelligence and the demand for it The demand for intelligence is infinite

1:14:54Which is perfect for the next question because crypto has been boring now for a couple of months or a year. AI has been going crazy. We are at a parting shift but we don't know what's going to affect the prices of AI. The charts of AI are like that.

1:15:16But when you see charts like that, you want to FOMO. Why should people stay in crypto, both investing and building, when AI is where it's all happening, and we seem to have these crazy up-only charts and get-rich-quick overnight possibilities like we had in crypto in 2020 and 2021? People don't have to stay in crypto.

1:15:38Raoul Pal:Your job is to be a mercenary for your own capital. you want to make the most money over time. For me, I still think it compounds higher returns than most of these stocks. Not than, you know, some of them that get fully re-rated. You know, I've been in a trade, Rocket Labs, which is, you know, a New Zealand US company that sends rockets into space and is one of the only other private companies actually sending rockets with government contracts. I don't know how much it's up since I bought it. I don't know, 13x or something. Okay, so there are those opportunities because we're going through this world and people should seek those opportunities.

1:16:21Raoul Pal:But can crypto, could SUI do a 13x from here? Easily. Could ETH do a 13x? Yeah, why not? Over what time period? I don't know. So it's always the superior to an individual equity. But if you want to buy the NASDAQ or Bitcoin, when you look at the ratio between the two, put the standard deviation bounds on, where are we? Two standard deviations oversold. So Bitcoin and crypto is as cheap as it has been in its long-term uptrend versus NASDAQ. OK, that's it to me. Sounds like you should be allocating more to crypto than you are to the NASDAQ. But that's not to say there's not a lot of equity opportunities as well.

1:17:03Raoul Pal:That's great. Bitcoin and crypto is as cheap as it has been in its long-term log trend. People have been struggling with crypto markets for a while now. Help us get optimistic or give us some hope for 2026, 2027. Yeah, so we know that the banks are coming. Stablecoins are big, right? This whole next 24 months is stablecoins. It's going to drive a huge amount. I do have one. I do have a Cast card just so you can get that because I know they're one of your sponsors. They're going to be very happy. I haven't used it yet, but I don't like spending my crypto.

1:17:46Stablecoins is big.

1:17:47Raoul Pal:Yeah, stablecoins are big. It's going to grow massively. So we'll see a massive explosion in that. The Clarity Act, it's going to get signed. That allows pretty much everybody to start building on blockchain. So that frees it up. Global liquidity is going to increase. We still got to roll and pay for like$8 trillion of interest payments to come or$6 trillion of interest payments. So we need to print a shit ton of money to come as well.

1:18:18Raoul Pal:crypto has as cheap as it has been against many asset classes and it's been in a mega trend don't see that stopping so you've got a cheap entry point with accelerating use case with large amounts of money coming to it you know trillions of dollars stable coins are doing like run rate of like 100 trillion a year it's crazy and that all is underlying use case for for chains and it's only going to increase and then we've got the agents So I'm like, okay. And liquidity, they're going to keep debating because they have to because the interest payments are due. The business cycle is running strong. That means people are going to have more earnings and more earnings get recycled into speculative assets, savings and other things.

1:18:58Raoul Pal:So it's like, okay, well, here's the perfect storm. Hunter Horsley's been talking about this. A whole bunch of people are like, Christ, if you want to put a perfect storm of upside here when the market is so miserable about it because it's gone down and then sideways. And it was oversold as it has been by most metrics. We had the fear and greed below 10 for I don't know how long. It was the longest period in history. We had the lowest reading in the history of the index. And we're probably going to resolve war in the Middle East permanently, which I think is the potential outcome here. Yeah, I mean, what else do you want?

1:19:37Raoul Pal:So that's the bull case. The bear case is we don't solve war in the Middle East. It then drives much larger inflation than was expected. The tightening cycle comes, the business cycle gets snubbed out.

1:19:54Raoul Pal:And capital starts getting starved of that to draw liquidity. That means there's less financing available for the tech companies. That means the rate of intelligence slows down. China would have to be going through the same issue, because if not, the US would have to just print money to fund it. So there's always a bear case to it. I don't see it yet. What's the probability for that? I think it's probably 70-30, 70 positive, 30 negative.

1:20:28You're an amazing investor and you're an amazing person also. What do you want from me?

1:20:34Raoul Pal:Nothing. I don't trust you I want you to come back on in another continent later this year yeah we haven't said this just so people this is we've now done London that was the first wasn't it Singapore the first Singapore London Dubai Dubai Miami yeah so we need to figure out where the next one is doing pretty good yeah I borrowed this question from the Invest Like The Best podcast what's the kindest thing that anyone has ever done for you

1:21:11Raoul Pal:when I listened to Paul T. Jones answer that question I mentally prepared thought you know what is that

1:21:23Raoul Pal:and now I don't really know

1:21:28Raoul Pal:I can't think because everything is made out of kindness You know, kindness is a real attribute that makes the world go round. It creates positivity from people. It creates opportunity just by being kind. And people do it unexpectedly all the time. And I can't think of a particular moment in time because there's so many moments where people have been kind. To be honest, I thought the same. I was like, I don't know how I could answer this question. like literally no it's a tough one but don't forget he cheated because he knew he knew in advance he could prepare everything and he's got to come with a great thing to show what a great philanthropist he is he said we're not going to do it at the end we're not going to do it at the beginning let's start with that so people remember so then also you know being a speculator is not a very nice thing to be able to lead with but being a philanthropist and I built Robin Hood because this kind black man helped me as a kid you know is a much softer way of introducing yourself thank you so much Raoul for doing this for fifth time this is me showing you kindness I look absolutely so boring I'm bored every time I look forward to the sixth time already and I'm sure everyone does too he has no choice now I don't want to do it you keep doing this to me he's not being kind everybody thank you so much see you next time it worked it worked As you probably know by now, I host some of the biggest names in Bitcoin and crypto on my podcast, but a lot of the best stuff never makes it on air.

1:23:08The Shift newsletter is where I share that raw behind the scene alpha, the insights, stories, and lessons straight from my guests that you won't hear anywhere else. If you want the real insight take on Bitcoin and crypto, join my newsletter, The Shift, in the description down below.