Bankless - Your Guide to the Bull Run | Raoul Pal

Episode Date: April 15, 2024

✨ DEBRIEF | Ryan & David unpacking the episode: https://www.bankless.com/debrief-the-raoul-pal-interview  ------ Bankless Nation, we’re having none-other than Raoul Pal, a frequent guest on this show, who needs no introduction. Expect to understand debasement, how to navigate the different crypto seasons, and Raoul’s secular thesis. Besides his key learnings, Raoul also gives a peak into his portfolio and shares some hot takes on the current state of AI. ------ 📣 SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24  https://bankless.cc/spotify-premium  ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2    ⁠    🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo    🏠 CASA | SECURE YOUR GENERATIONAL WEALTH https://bankless.cc/Casa  🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/toku    🏙️ CONSENSUS | SAVE 20% WITH CODE BANKLESS https://bankless.cc/4aykesD  ------ TIMESTAMPS 0:00 Intro 6:35 SEC Suing Uniswap? 9:57 US Regulation Handbrakes 19:48 State of the Bull Market 29:45 Navigating Interest Rates 35:40 Understanding Debasement 47:25 Crypto Adoption 57:11 Crypto Summer 1:03:12 The L1 Race 1:07:17 The Role of ETFs 1:13:37 The Next Winter 1:17:52 Crypto Skeptics 1:22:15 The Secular Thesis 1:26:20 Raoul’s Portfolio 1:30:47 Real Vision 1:33:01 The State of AI 1:36:31 Closing & Disclaimers ------ RESOURCES Raoul Pal https://twitter.com/RaoulGMI   Real Vision Festival of Learning https://www.realvision.com/festival-of-learning  Raoul Pal The Journey Man https://www.youtube.com/@RaoulPalTJM  ------ Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://www.bankless.com/disclosures  

The entire thesis is this market is going from $2.7 trillion to call it $12 trillion this cycle to $100 trillion by maybe the end of the 3032 cycle. Wow. Wow. So this is, I think, in front of us, the largest, fastest accumulation of wealth in all human history. Welcome to bankless, where we explore the frontier for internet money and internet finance. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. you know this, the bull market is here. The question on our minds in today's episode is

what's going to happen next? So we brought these questions on crypto, on macro, and on investing to Rao Paul, who's one of David and I's favorite guests, I think, on this subject, particularly at this part of the market. And so we ask questions like, where are we in the crypto cycle? How long will this cycle last? Will it be different? Will it be similar to previous cycles? How high will it go? Which assets will benefit? and most importantly, how to make sure you don't F it up. If you're looking for an episode to guide you on what to expect next, this is it. I think the reason why we keep bringing Raoul on is that he has this very clear North Star.

He's got these Theses that he really loves. We also love theses. And they keep Rowl grounded and his feet on the ground while the just chaos of a bull market warps around him. And that's always something I appreciate. Like navigating through crypto without some sort of like North Thurbanes. star, something to keep your boots on the ground. Without that, it's hard. It's hard. You kind of need to some level of something to keep you sane. And we call this for us, Ryan, the bankless thesis. Raoul has his names for his thesis. And every single bull market presents some new thing, right?

How do NFTs fit into what Raoul calls his everything code? There's one of his thesis. How does that fit in? How do NFTs fit in the bankless thesis? All these like things that happen as bull markets present like new curveballs. can all kind of be mapped into a frame of reference, a frame of understanding. This is what Raoul does. And this is why we frequently talk to him about, like, all the new changes that are happening in the world and how it fits into the ideas that he has. And so because he is so grounded, he has come on the bankless podcast like six times now. And I've enjoyed every single one. All right. We're getting right into our episode with Raoul Paul. If you want a debrief episode, which is the episode that David and I record after this podcast, make sure you are dialed into the bankless premium feed. that's where we'll publish that.

And David, I'm excited to record that with you. I want to hear your thoughts on what Raoul Paul had to say about the Bull Run. We're going to get right to the episode. But before we do, we want to thank the sponsors that made this possible, including our recommended crypto exchange for the 2024 and maybe 2025 Bull Run. And that's Cracken. Go create an account. If you want a crypto trading experience backed by world-class security and award-winning support teams,

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program that provides milestone-based funding to promising projects that help expand, secure, and decentralize Mantle. If you want to get started working with the first Dow-ledd layer-2 ecosystem, check out Mantle at mantle.com.com. And follow them on Twitter at ZeroX Mantle. Bankless Nation, we are excited to have Raul Paul back on the show. He is the co-founder and CEO of Real Vision, which is a financial media and education platform. It's focused on macro, investing in crypto. Raul himself is a fantastic investor. I always learn a lot from him. I think in today's episode, we're trying to get a sense of the 2024 bull market, what the shape of this will be, what the contours are. David and I have going into this episode, Raoul, just listed a whole

bunch of questions we want to ask you. Anyway, welcome back to Bankless. It's great to have you. Great to be here, guys, as always. All right. So we got to start with this, though, because this was breaking right before we jumped into this room to record. We're already going off script. We're already going off script. And this seems to happen with Rao Paul episodes. I remember, Like one time we recorded, this is back in 2022. It was the middle of Tara Luna breaking down. Oh, that's right. This also feels to me at least like it could be some pretty big news. The SEC is now suing Uniswap. So this is like a fortune article that just came out. I'm not sure the details of this, whether... For the time of recording, literally minutes ago.

Yeah. So I'm not sure if they're like suing the foundation or labs or what the details of this are. I haven't had a chance to get caught up. But this feels very much like, a shot across the bow for defy like a big one so uh this is like a shot into the hole of defy yes do we know the substance of this yeah i don't we don't because you know sometimes they do this and it's kind of a it ends up being a clarification issue is like we'll absolve you of your past sins move forwards you know we don't really know yet i haven't seen the details at all yeah i may actually pay for the fortune crypto uh pay well to just get this and uh actually read this entire article here But I guess some context here, Uniswap feels like the poster child for Defy.

It's not only that. It's a U.S. developed project, Hayden Adams, U.S. citizens, lived here. The team is based in York, I believe. And it's really been a flagship protocol. Like, they have done the right things in order to decentralize the pieces that should be decentralized. And for the U.S. as a regulator to go after Uniswap, bring them to court in this way, rather than inviting Hayden Adams to the White House for, you know, like a celebration of him as an entrepreneur in that team and what they're doing in crypto.

This is akin to like taking Google to court or Altavista or something like this in the 1990s. Like, why are we doing this? And I know you're not living in the U.S., but like collectively, I'm just speaking on behalf of people in the U.S. who are crypto users. Why are we doing this to our best and brightest American projects? You know, they're all terrified of defy. We've only just heard about this. So we don't know whether it's about the KYC elements, which we understand.

stand has been an issue for defy as an industry because it didn't have it set up in the way that they wanted it. We don't know whether it's to do with the token change. I don't know anything yet. So by the time people watch this, we'll, but all sound stupid because everyone will know what the details were and we don't know anything. But it's a pain in the ass, but I kind of figured they were going to come off to defy anyway. They just, they're uncomfortable with it. When you say they? Well, the authorities, put it that way. You know, what do you mean you can have a bank without bankers. What do you mean you can have, you know, you can have an exchange without people? To them, this is alien concept because it is really the antithesis of the existing system.

So they've never been comfortable. And then they use the ridiculous KYC AML thing, which really, all KYC AML is to increase tax takes. So everyone has to declare everything. That's really what that's about. It wasn't really about terrorism financing and stuff like that. It's really about. It's really about they need to know where your money is at all times so you can't leave the system. Okay, fine. We live in their countries. They want those rules. It is what it is, but they just don't like this whole system yet. So it sounds like Uniswap was prepared for this. So they just put out a tweet thread saying today Uniswap Labs received a Wells notice from the SEC and we are ready to fight. This is the latest political effort to target even the best actors in crypto like Uniswop and

coinbase. And then they follow up saying all uniswap products and the uniswap protocol are unaffected. And then they go on in a short little thread. Again, it sounds like the details are still uncertain here, but it also sounds like uniswap. I mean, they've received a well's notice. So they were informed that the SEC intends to sue them. That's what a well's notice is. Sounds like they got this well's notice, at least a number of days ago, if not a couple of weeks ago. And hopefully they've got the resources to take the fight to the courts. I mean, because that seems to be the only way here. And I think that's purposefully done. I think it's to create speed bumps The SEC kind of often knows it's going to lose, but it does it to slow the whole industry down.

This is the take that Jake Schrovinsky gave me when I talked to him last, that it might be the opinions of some of the more decelerationist regulators, especially the Biden administration, who I would classify this as, is that they might want the SEC to be even more hostile to crypto as a whole up to the point of like, you have to lose in court. and that's how regulation is determined. So if you aren't fighting and losing, then you're not trying hard enough. So go ahead and take as many people to court as possible. And then what is okay and is not okay will be determined by in which court cases does the SEC lose. And that's how regulation is set, according to one philosophy, which seems to be how the SEC is operating. Yeah, and that just slows everything down, which suits everybody, right? Because if they're all terrified about it, you can see, you know, the almost every other central bank in the world of certain size,

is working on CBDCs. The US won't because it's terrified of making the move. And the US has a history of this, and I wrote some threads about this in the past. So after the US left the gold standard, right, everybody now needed to exchange currencies with each other. And the US was like, well, we don't really want to be involved in this because they were worried about what was going to happen to the dollar. So the UK started the foreign exchange markets.

And it became the biggest market the world has ever seen. and the UK dominated that market ever since. Second one was the offshore lending in dollars. So the US was really worried about dollar circulation outside of the US. Didn't know how to deal with it. Same thing with a reserve currency we're on and fuck this up. So they just basically restricted US bank lending to various entities. So the UK started the Eurodollar market, which is the offshore dollar market.

And it siphoned through other global banks. It became the largest market the world has ever seen. The US missed all of those. So that's why LIBOR, the London Interbank offered rate, is the interest rate for the entire world or was until I've just changed to Sofa. Then it happened again in the very late 80s where the derivative market in the US was basically the Chicago Mercantile Exchange and the Chicago Border Trade. But then the Swaps market market was developed and it was an OTC market and it required bank regulatory capital. The US regulators to protect their own exchanges said, we're going to make it so hard for you to do that you're not able to. So the UK started the swaps market, which then became the whole OTC derivative market

which based out of the UK, which became a 1.4 quadrillion dollar market. So the US has a history of doing this in its fear of screwing up. I get it. You're the incumbent. You've got a fear factor. The UK has an innate ability to arbitrage that. So they see the opportunity. That's why the city of London is so big. The UK stock market's small. It's because they took all of the business from the US. And what was very interesting is they see the US fumbling the ball yet again with crypto, and the UK stood up and said, we want to regulate this properly, we want to bring it here to the city, and we want to turn this into a huge market. And they've done this. This would be the fourth time. And, you know, I remember speaking to the guys at Coinbase about

this. I think it was Brett who runs their institutional side. I'm like, he grew up like me in the traditional finance industry. Back in the 90s, all of the main offices of all of the US banks was London. Goldman's biggest office, London, J.P. Morgan's biggest office, London, Morgan Stanley's biggest office, London, all of them, because of this. And slowly, after Basel III regulations came in in the early 2000s, capital went back to the US, because the US didn't put such stringent things onto the balance sheets of the banks. So money flowed back. So it just feels that the opportunity here is this whole thing to happen all over again. It sounds like it. And I guess when you pay the.

the history like that, it does seem like the U.S. has often pulled the handbrake on, like, financial kind of changes and technologies and kind of like been a laggard with respect to that. But like, if you look at this from a non-finance lens and look at this from a lens of it's a technology, like the internet, the U.S. has also had a history of being kind of first movers, dominant like the 1990s, like building Silicon Valley, all of these things. Yes, yes and no. Yes and no. When you're in a monopolistic power situation, look at Google's inability, and I know the Google Web 3 team, well, they understand it. Yes, they do.

They think it's great. But even the CTO of Google, as far as I'm aware, is a huge Web 3 fan. But they can't do anything because it's going to disrupt their own business. So this is classic innovators dilemma type of stuff where if you're in the incumbent... The US is the incumbent monopoly of money, global money, and it's fearful of changing its system. in case it loses control of the system. So this is why they've kind of, if you think about it on this kind of spectrum, Coinbase good, finance, bad. Yeah, right. Because Coinbase is within the walls. They've now given, they've blessed them with a monopoly, basically, and shut out Binance,

which is the world's largest exchange, which is probably Chinese controlled in as much as Coinbase is US controlled, and therein lies the separation, much like Chinese tech firms, US tech firms. So this game is being played out literally everywhere we see. Even the ETF for them is quite funny because the ETF they think of is keeping the money within the system. Right. So it has to go through the intermediaries and the middlemen and all the checks and balances that they've got so they know where it goes. I actually think of it differently. I think it's a Trojan horse of Crypto Land put into Fiat World because what you do is you give people a taste of what this is and they will move out the risk curve. They always do and they'll come into Crypto Land.

So I think the SEC and the US government think that it's a victory to channel assets through the ETF. I think it's a victory for Crypto Land as a Trojan horse. A Pyrrhic victory then. So Raoul, for the rest of this episode, I think we're going to be zoomed out, and maybe we could just kind of zoom out on this issue. Do you think that these types of handbreaks that U.S. regulators are pulling right now, will that slow us down at all? And in particular, when we're looking at the bull market that we're in right now in 2024, well, that slow down the bull market. Could it disrupt the bull market? Is this an impediment in the medium to long term? No. Firstly, obviously, it's a global marketplace. Secondly, Bitcoin's got the seal of approval.

ETH will get the seal of approval at some point. What you've now created is capital inflows. Now, this is not direct investment because it doesn't go directly into crypto land. It's like a trade deal. That money gets recycled in the crypto economy and out the risk curve. Profits get recycled into VC. VC creates new products, which create the new opportunities for the next cycle. So I don't think it slows it down because that still continues. You know, mum and pop in Ohio are not going to be using Uniswap to trade, you know, some 100th token. So I don't think it really matters. The issue actually is, as you alluded to, is I just feel sorry for US innovators. Right.

I mean, that's the issue in that they're having to move. You know, I'm off to token 2049 in Dubai shortly. Dubai is attracting a ton of talent. Singapore, slow down a bit. Hong Kong getting talent back again. Europe getting talent bizarrely. Switzerland's got some great talent going on there in Crypto Valley. UK's getting talent and others are moving offshore elsewhere. So it's a shame. As we enter this bull market role, you've seen your fair share of crypto cycles. This one's

already manifesting differently. Bitcoin passed all time high before the happening, which is this hallmark of what a crypto cycle is. First, the happening happens and then Bitcoin hits all time high sometime like nine months later. Well, now that order is happening in reverse. Also, this Bitcoin ETF thing is like perhaps the reason why that's happening. Overall, there are some things about this particular bull market that are different. And this, I think, would be expected as time goes on and the crypto industry matures. Things are going to change. Like, we can't be having this like four years, like 300 percent cycles over and over and over again. Like, we have to like be less insane as an industry in order to get mainstream adoption. But overall, like, how would you

characterize the flavor? of this particular bull market as with the data that we've been able to have so far. So, you know, as I've spoken here before, this is all driven by the liquidity cycle. It's actually a macro cycle, driven by the refinancing of government debts, because everybody reset interest rates to zero in 2008. They set their government debts all at three to five years, gives us a four-year cycle. That was the exact point. The launch of Bitcoin, it's also the U.S. presidential election cycle. It's all the same thing. And election cycles, they give out candy to the kids, which is their way of stimulating. So it's all part of the stimulus cycle and

debt-frey cycle. So I don't think that changes because the debt issue is still too big. Okay. So what is the nuance of the cycle? Normally, normally, we've only got three data points, but the crypto spring, which is the first year after the bear market, this has been a strong one. you know, Bitcoin was up 150% or whatever. So that's pretty strong because we brought an extra source of demand in, as you allude to with the ETF. But that actually came later, but it was front running by hedge funds and participants. Us, yeah. Is that what we're in, by the way now, Raoul, is Crypto Spring?

Like the year after the... We're just transitioning to Crypto Summer, which is... Okay. I'll come into an essay. Okay. So Crypto Spring transitions to Crypto Summer, and that's usually happens after the halving. And after the halving, you see something that I know everybody's getting shit for right now is if you go back to 2020, after the harthing, what happened? Eith Bitcoin bottomed. It's slowly based,

and then it started outperforming, right? That's when the market takes on risk and goes out the risk curve. And that's when you start to see Bitcoin dominance coming down, all of that kind of stuff. that's what the summer is. It's also altcoin season. It's when we hit what I commonly refer to as the banana zone when everything goes bananas. Right, the bit of crypto magic. Now, this banana zone is interesting to me because we've got this new source of demand. This is the most reflexive market ever because the more people join the network, the more the price goes up. The more it encourages people to join the network, the more the price goes up. And obviously that reflexivity works in reverse, which is, why we get strong bear markets. But basically, the world is underweight this asset because it's still a new asset and it's an adoption curve. So over time, more and more people join the network as investors or users. So I think we can see a second wave of panic into the Bitcoin ETF from people. You know, I was speaking to a good friend of mine who's a kind of very well-known hedge fund manager, or ex-Hedge fund, and one of the billionaire crowd.

And he's like, Ra, when do you think Bitcoin hits 100,000? I said probably the summer, you know, with the kind of demand and the ETF. It kind of feels like sometime in the summer. He's like, you know, so much wealth is getting made in crypto, it's making the billionaire class nervous. I said, what are you talking about? What? And this was a lovely insight.

He's like, okay, there's two. groups here who all they care about, they're so rich, all they care about is where they fit on the rich table. Right, they can't be the Silicon Valley guys, but there's this whole group that compete with each other for how wealthy they are. Just like the scoreboard. Right. It's like a scoreboard of status. When you're in the top 10,000, you can kind of count your way to the top and you really know exactly where you are. And so he said, they're all going to panic that they're going to lose relevancy. So they're going to panic in. They're going to panic into Bitcoin, you know, the Bill Ackman's of this world and, you know, all of these people.

So I thought that was funny. But he also said the other group is the billionaire property developers. He goes, these guys are losing relevancy fast because of commercial real estate. And these guys have been lauding it around, you know, Palm Beach and everything else as the Kings of the Hill. And they're worried about their relevancy. Because, you know, once you worth $5 billion. It's not a wealth game anymore. It's like, am I richer than my neighbor? That's all they care about.

And so he's like, you know, I think that they'll probably get involved as well. And I think that mindset is pretty true everywhere, right? People see Bitcoin going up and then you hear that your mates, you're playing golf, we're having a drink, and he made money in it, and then you think, I've got to make money in it, and this is the reflexive loop. So that's what crypto summer is all about. It's the fomo, the madness, the insanity that crypto becomes. But it also drives adoption, drives money into the VC again. It flushes money through the system,

allows people to build new product, which is the next cycles, gains and all of this stuff. So that's great. And then we go into Fall. And this is where the complications lie. CryptoFall, which would be historically 2025, they've generally finished at the end of the year. We don't really ever know exactly. I think this cycles maybe started a bit earlier. I don't know. and falls can be the most tricky part. This summer is the easy bit. You just shut up and do nothing. A number go up.

Fall is tricky. So if you go back to 2013, we had a 50% sell-off. People thought it was done because it already gone up, I don't know, 20x or something stupid. It then corrected 50%. Everyone thought it was over. And then it moon-rocketed

in just a way you can't comprehend. Then you get to 2017. Same. 2017, everyone kind of thought it was over early summer, and then it did, I don't know, 10x from there. It was bananas, right? That is really hard to deal with because 2021 was a stunted cycle. We never got the accelerated final leg. We had the huge correction. It went up, poked its nose back up in the highs, collapsed. Everyone's got PTSD from that. The real money was made in those previous two bull marks. in terms of percentage returns, everyone now assumes it can only go up 3x from the all-time high. There is actually no evidence of that. Maybe something was weird in the last cycle, because the other ones did a lot past the all-time highs. So how I think of it is a distribution curve. Middle is it kind of does what it's supposed to do until sometime mid-H-2, 2025, it tops out, okay?

That would be normal. That would be Bitcoin as a price target of, call it 200,000, something like that. You know, 3X, the all-time high kind of thing. That's, I would give us 60% probability. I think there's a 20% probability that people are calling this a left translated cycle, i.e., we've brought forward demand because of the ETF,

it dries up, we're overperforming for this stage in the cycle. I think people saying that tend to, be one cycle people because they only saw the last cycle because others have outperformed earlier on. So anyway, okay, there's a 20% chance of that. Then there's a 20% chance that this turns into a full bone bubble cycle at 2013, 2017, because of this new dynamics. You throw in an ETHETF as well. You throw in, you know, the $65 billion of VC that went into the last cycle. Somebody comes up with some killer applications. Before you know it, there's 200 million people playing a game. stuff like this going on, okay, that could create something crazier.

And I'm continual assessing these probabilities in my head. And because there's so many people who I've noted had PTSD from the last cycle, the stunted top, it's less translated, they're going to take it away from us, starts to move my probabilities that you get a correction and then a spike. You can't predict that because everyone's going to hate you if you're wrong. like I got hated at the top last time by thinking we were going to have that. And it's also very difficult to manage. So it's complex, I would say, but we don't have to care this year, which is lovely. So I want to bring up one conversation here about the stunted cycle of last

cycle, 2021. End of 2022, we had the rise of interest rates, which perhaps it was the cause of the stunting, right? Like we maybe were on our way to do just another stereotypical cycle that we've seen in the past, but then we had the fastest rising interest rates that we've seen in 30 years and perhaps you truncated the whole entire bull market, to which the interest rates are still high to this day. We haven't really seen interest rates come down. Ryan and I, for an episode not too long ago, we were looking at the supply of M1 in United States, the US dollar, and it's pretty like insane how much the M1 monetary supply expanded post-COVID when they issued like four trillion dollars in a very short amount of time. Simi-check's going everywhere.

The supply of M1, like, quadrupled. It went from like four trillion to $16 trillion inside of 2020. And then you can see when they turn the interest rates on and you started to see that supply kind of like turn over and come back down. But like to say it came back down is just like, it's not even a blip in comparison to the quadrupling of the M1 supply that happened. Like we are just starting to marginally make a dent in it. It's almost not even there. And so like really just the emphasis here is that like all that money that we printed in COVID is still out there. It just went into like money markets. It went closer to home. It went closer to the Federal Reserve. It created into commercial bank deposits on the Federal Reserve. It stayed risk off because everyone just got walloped

in 2022 in the markets. And so to add to the case that this is the 20% more bullish scenario, since that money is still out there, it's just waiting, in my opinion, just waiting for the floodgates to open back up and for all of that real capital that's inside the traditional system to work its way back down the risk curve. And it just needs a lowering of interest rates in order to add the jet fuel onto the fire. Where there was $4 trillion in M1 in 2020, there's now $16 trillion of M1 out there now, which could all end up moving down the risk curve. We just haven't seen that move yet. Look, I think that's very valid, but let's look at the scenario where rates don't come down much. Because that's what people are worried about. Right?

We don't need to worry about a bubble cycle. It'd be nice if we get one. But what we have to worry about is the other stuff and trying to figure this out. So a lot of people on Twitter saying, well, rates are never going to go down, not with inflation this slow, right? A, inflation's lagging. All of the heavy stuff of inflation, rents and stuff lags. significantly, so it should continue to deflate. When you look at the truflation index, it keeps falling. So, you know, I still think that game is still to be played out. But let's assume it

doesn't get back down to the levels and they don't cut, or they cut a little bit, because they've got to finance the debt, right? This is the problem. This is what gold is sniffing out right now is how are they going to make the interest payments on the debt at five and a half percent rates? well, it becomes a compounding of new debt issuance, and they'll lose control of the bond market, which means they have to do yield curve control, which would be printing of money. But within this, let's assume that they do manage to get squeezing a few rate cuts, 75 basis points. Well, that reminds me a lot of 1995. In 1994, we had a massive moving rates.

Banks went under, same situation. Markets puked. They hated it. And the Fed, everybody thought there'd be a recession, didn't get one. And the Fed cuts twice or three times, 75 basis points. Nowhere near where it would come back from. And they kept them on hold, basically, until 1998 when the Asian crisis came. They'd cut it bit and then raised it once and then cut it.

But nothing, really. It was basically stable rates. So everyone's like, well, if they leave rates here, well, that's nightmare for the markets. Well, A, the cost of 5% interest rates in a market that does, what, Eath does about 175% a year annualised. So 5% interest rates are irrelevant, which is why you can have funding rates of 65% and people still pay them. Secondly, back in 1995, 96, 97 into 98, the market went up, the S&P went up 160%. And that's when people would say inflation kind of rebound. a bit, all of the usual stuff was not bad. The markets don't like rate of change. Stability,

more than happy with. Everybody adjust their costs of capital and everybody carries on their business. Now, obviously, if you bring rates lower, and they bring it lower faster and they push more liquidity, liquidity is actually the big thing in the system. And there's various ways of measuring liquidity. But liquidity has been rising, global liquidity, not by much, but enough that bottom the crypto markets and everything else, and the forward-looking indicators suggest liquidity continues to come into the system. And that liquidity ends up flowing down the risk curve or acts as a debasement of Fiat because it's a global liquidity measure which optically pushes up the price of assets. So you're saying that even if they don't decrease rates,

it's still kind of bullish crypto. I mean, the base case is that they don't. Even if they put them up another 50. Yeah. That rate of pain, that 50 base points, that rate of change is low, right? It's not really a problem for markets to digest. As we're still kind of looking at the backdrop of this crypto bull market and the summer that maybe we have now recently entered, Raoul, I'm curious on this word debasement, because that is always looming in the background from a macro perspective and the birth of Bitcoin was sort of based on the debasement story. I saw a tweet you recently put out, while everyone is worried about 3.5% inflation, which is our current inflation rate, the real issue is the ongoing 8% per

annum debasement of currency on top of inflation. Here's the kicker. Your hurdle rate to break even is around 12%. Correct. What do you mean by a hurdle rate? Does that mean like the amount that I have to earn in the market with my investments in order to not get debased? So let's first understand what debasement does. Debasement of fiat currency overall. So I'm using a global liquidity index, which is the 8%, means that as the central banks create more fiat currency, assets optically rise, particularly US assets because it's the US dollar as the global reserve system. However, variable income doesn't go up. Fixed scarce assets go up. So scarce assets go up versus your wages. P-ratios go up versus earnings. P-ratios go up. Once you understand this,

you stop fighting P ratios and saying the market's expensive. No, it's debasement. It pushes up the P and keeps the E growing roughly in line with the economy. That's the difference. So when you understand that what they are doing here is essentially creating liquidity to buy the government bonds to finance the deficits. That's they're all doing. That is at 8% a year and has been ongoing since 2008.

It was basically agreement amongst all the central banks. that the only way out of this, this is this whole Everything Code thesis that I've been working through, is that the only way out of this was to use liquidity from the central banks to finance the government. You now hear a new word, which is really the Everything Code, but there's a new fancy expression called fiscal dominance, which means central banks become more attuned to helping the government finance their deficits than they are about unemployment and inflation. fiscal dominance is a fancy word for the everything code, which is let's debase the currency to pay the bills. They used to call that MMT. Do they not call that MMT anymore? There's another way of, yeah, MMT is kind of another way of doing it.

It's all the same thing is I'm going to magic money to pay my bills. Now, if we could all do that, we'd do that too. You know, you can't help yourself. Sounds nice. You can't help yourself. If you've got the magic printer button, you can't. So that's the 8%. So your wages aren't going up as much as asset prices arising.

So why does that matter? Well, what is an asset? An asset is a vehicle for your future consumption. You've deferred your consumption today to be able to use that money in the future. Now, why do we invest is we take on a bit of extra risk to make that money worth more than it would have been because we're taking the risk of locking up our money in an investment for a long period of time. We need to get paid for it. Okay.

And then you add in the generalised inflation rate. I took global inflation is maybe 4%. So that gives you this 12% hurdle rate. Okay. That's fine. What is the return of the S&P 500 annualized since 2012? 12%. And I've shown these charts over and over again.

Divided by the balance sheet, none of these assets have gone anywhere. There's only two assets in the world that have gone anywhere. Technology stocks, which are 17% a year. but even if you pay taxes on capital gains, you're probably just about breaking even. On the S&P, you're actually negative. Then you've got crypto, which is like an alien asset class that does something like 175% a year if you're taking ETH as your benchmark, 175% a year, including down 80% markets.

So that's how you get to this understanding of debasement. what you're trying to do is make sure your future self thanks you for the decisions you make today. But every time you try and buy something, it's now getting more expensive versus your wages. So many people of your age are seeing this with housing. It's like, fuck, how are we ever supposed to do that? That whole equation of the mismatch of asset prices, which is your future self, and where you are today, is what's driving the speculation economy. So U.S. citizens spent $108 billion on lottery tickets last year.

108 billion. It's a one in 300 million probability of winning the big lottery. And maybe winning a million bucks is, I don't know the actual odds, but let's call it one in 50 million. Okay. You can take those odds or you can go to the mean coin casino of the Wild West and you will get better odds. And that's what people have done. They've done it with single-day options in tech stocks. They've done it with options in general. And they've done it with crypto. And it's much easier to speculate in something that has a trend as opposed to a random distribution. Right. So if it's

trending, even if you buy generalized shit, you can make money in crypto at this point. But that's not an endorsement for that at all. It's an endorsement for the speculative behavior. because they don't get a chance. And this is what people also don't understand is, okay, so we try and educate them. Say, listen, if you want, just buy some Bitcoin or some ETH. Let's use Bitcoin. It's easy numbers. So they've got 10 grand in savings.

They can't buy a house. They can't make a deposit. They can't do any of it. So then they look at Bitcoin and say, where do you think Bitcoin's going to go? A million dollars. Okay, that's a 14x. My 140 grand in five years time probably still won't get me the deposit on a house. So what do they do? They look for bigger risk rewards. And they're not given the tools because

a lot of people are new investors. They don't really know. This is one of the things that, you know, you guys do and we do at Real Vision is really try and say, okay, if you're going to speculate, you're going to take more risk. We're not going to judge you for it, but we're going to try and help you do it. You know, this is this whole don't fuck this up thesis that I've got on my t-shirt. The whole thing is, don't fuck this up is something that's actually been now trending all over Twitter. In fact, somebody's even started a meme coin completely against the idea of this. So don't fuck this up. It's like this is the biggest gift, the biggest macro opportunity of all time, right? It's been ongoing really since like 2010, but investably for most of us, 2013 or so, this is the biggest thing of all time.

What is specifically? Like the crypto. Investing in crypto is the fastest adoption of any technology the world has ever seen, except for AI that's just come. the fastest accumulation in value of any asset class in all recorded history, the fastest growth of number of users, i.e. adoption of any asset class in history, the largest price appreciation in returns of any asset class in history. This thing is an alien. And it is the biggest gift to people. I've talked about this for almost a decade now. From a decade from when we started Real Vision, this is a absolute fucking gift. So what are you supposed to? to do to take the gift. Don't fuck it up. And what that means is own the large crypto that have

proven network effects. There are only three with network effects right now that are fully proven out. Bitcoin, Eth and Salana has come into that fray and has got provable network effects. There are many others that have some elements of network effects that are slightly lower down. Okay, but let's assume you can put your money in those three. You'll be fine. put 90% of your assets there. They will go up well. If you did an equally weighted basket, you'll do very well, thank you very much.

10% feed you in a D-Gen. Do what the fuck you want. And you will learn, you will learn very quickly, like all of us have. You will end up with a wallet of shame in 26 and you'll look at it and go, really, did I own that shit? But you'll have had fun doing it.

You'll have learned a bunch of lessons. And who knows, you might get the 100x. you probably won't. You'll see somebody on Twitter getting it and you'll think it can be me, it can be me, and you'll do the rotations at the wrong time. But this way,

you get to participate in the madness because it's kind of fun, but what can you lose? 10%. What's the rest of your portfolio are going to do? 5x, you'll be fine. So don't fuck this up, is that is one.

Secondly, don't use leverage. Leverage is just a way of you to have your coins taken away from you. Your one job is not. to lose your coins. You just hold them for the longest period of time, the more money you will make over time. So just don't let anybody have your coins. That's why I don't use defy. You know, anything that is involving yield is taking an extra risk. Staking is different. You've got the currency risk in staking, which is your eth goes down or your soul goes down or whatever it is.

But I assume people are prepared to do that because they're already in those assets anyway. But once you start getting to restaking or all sorts of different stuff, you're assuming a different risk from the market in which you may have to part with your coins. That is rule number one. Don't park with your coins. Do that in your 10% bucket. You want to play around with defy, do that. But just don't part with your coins. This was the same thing about what happened with all the sexes and the centralized exchanges, what happened with everything is that. The other thing is self-custody. At worst, leave it on Coinbase. It's a government monopoly. But at best, self-custody. Don't part with your coins. I've had money in MF Global when that blew

up as a bank. I lost all of my investments. And it took seven years of court cases to get them back. Everyone's going through that now in crypto. Don't lose your coins. So it's pretty simple. That's the don't fuck this up thesis. It's like hashtag DTFU. And people resonate because so many people fucked it up last time around. Yeah. Let me just plus one. That is incredibly practical advice. And I think you're right in terms of especially first and second cyclers, they need some portion of their portfolio to play the games. It almost sounds like a, you know, a section. said type class, right? This is the reason abstinence never works.

You got to teach them kind of safe investing, basically. That's right. And that's what we're talking about here in these cycles. I want to get back to that comment that you said, because some people will say, Raoul, you're actually wrong about this. You're saying crypto is being adopted even faster than the internet, but we don't

see it. Where are the real use cases? Yes, we see it in gambling. We see it in meme coins. So how, when you think about adoption, you say it's being adopted faster than the internet, faster than any technology aside from AI. How do you measure that? I was looking at a tweet and I think the source of this is crypto users, maybe a crypto.com study and partnered with World Bank, crypto users versus internet users yearly growth. And then it kind of charts over a 10 year time period,

what crypto is on a trajectory to do as compared to the early internet. And I think they measure this by the number of people around the world who are holders of crypto assets. Is that how you measure Is that a fair proxy? They're using, and everyone will debate this, but that's very mid-curve. What this is, is, okay, we're looking at rates of growth. So it says 516 million, I think the number now is 550 or something, million people. Okay, there is not 550 million people. It's 550 million active addresses.

But what are we comparing it to, the internet? What are those numbers, IP addresses? How many IP addresses do you have? I have no fucking clue, but there's a lot. How many wallets do I have? I have no fucking clue. It's a lot. Compare them. That's all you're trying to do. So that's, you know, anybody argues in the middle is just, again, mid-curving it. Oh, well, there's not that many users.

So let's go back to the use case. Wealth is a use case. People are making money. That money gets recycled to the economy. That's good. So creating something that has value, all value is a memetic. It's perceived value. It doesn't have to be utility value. Gold is a memetic. religion is a memetic. So don't overthink that. Again, very mid-curve when people start talking about

what is the value. Okay, stable coins. What are stable coins? Remember the story of the Eurodollar market. Well, the Eurodollar market is great for companies who need to borrow and lend in dollars because most 87% of world trade is in dollars. What about people? You ever tried to go in the bank in the Philippines or India and try and get dollars? It is not easy. But now they've got to fractionalize you're a dollar market. Okay. I mean, this is dollar dominance writ large, right? Okay, so that's super interesting. But it gets more interesting than that because stable coins are being used by corporations. So there's capital controls in Indonesia and Malaysia and in China. But those two nations trade with each other a lot. So as opposed to filling out all the paperwork for capital controls,

you know, having to do all of this, they're using stable coins for instant payment. Brazil is doing a lot of this as well. So we're seeing a lot of uses of this globalized dollar market, which is the stablecoin market. It's on crypto rails. It's like private sector CBDCs. But for dollars. Okay, fine. That's great.

And that's big. Then we've got, you know, we're obviously seeing the beginning of D-PIN. That's interesting. You know, some of these are getting quite big. Helium's getting pretty big. Hive mapper's getting pretty big. So very interesting. We've got to mark that down as,

okay, there's some real use cases of bootstrapping networks by using tokenized incentive systems and build it on a Web3 stack. Great. We are seeing the financial system building on top. We know, because they've all said, and this is my thesis from 2013, the entire financial system will go on tokenize rails. Why is it not already?

Because it doesn't work fast enough yet. It's just it cannot simply support at the level of security, the financial system. Just can't do it. Now, we're getting one step closer when FireDanswer comes. Why FireDanswer matters? Jump trading. They understand the game. Are we there yet with Ethereum?

No, so it has to be a settlement layer. Okay, that's fine. Ethereum works well as a settlement layer. But will they use a regular layer two for this? What, for the entire futures industry? No. They're going to have to find something. Now, whether that's a NASDAQ layer two, well, we've just seen that with base.

Okay, that's interesting. So, look, everything is coming into place for that. And we're seeing asset managers testing out this thesis by tokenizing stuff. but we haven't even started that game yet. But when Larry Fink, the world's largest asset manager, tells you he wants to tokenize every single thing, I tell you that every single firm on Wall Street understands this too. How big of a deal is that?

That's been new this cycle. You know, I remember all the previous cycles of institutions are coming. And like, what is more institutional than Black Rock and Larry Fink saying, right, we're bullish that you... Well, I said this last cycle is like, I knew all these people in 2020, I was talking to them all. They're all building. Goldman, J.P. Morgan, Morgan Stanley, BlackRock, Apollo.

I mean, every single firm has a Web3 team, a blockchain team, all of them. So they know it's coming, but they've got the same speed bumps that we've all got to face, which is the bloody US regulators. Well, do they have some leverage there? I've always thought that, you know, the Black Rocks of the world would be a heat shield. Right. Would be sort of like they would absorb. they would push the US government apparatus in a certain direction, right? I know it's not kind of one

in the same. When they're ready, there's no point pushing for the tokenization of all assets when we don't even have a blockchain that can support it. I mean, that would be dumb. We would score an own goal, and so would they. Now, you know, Australia tried to tokenize their exchange, gave up. A friend of mine worked for London's stock exchange. They looked at it for a number of different things. Many of the futures exchanges have looked at it. We're just not there yet. We're just not there yet. So, you know, there are some protocols that are getting closer, you know, sui, which I'm on the foundation of, just so disclose, that object-based move protocol is bloody fast as a layer one and very interesting. They've got a chance. So, but we're

still not there yet. The compute's not big enough to do it to manage it all. You know, we've just seen Solana with its scaling problems. You know, Eath went through this last time. around. If you go back to the, you know, 2020, 2021, ETH was had the same problem, massive congestion issues. Bitcoin's had it before. It's normal. This is what adoption looks like. But we're just not ready for it yet. So it is coming. Gaming. That's another one. And people like, people don't really understand why we want games. Feels like a forced narrative. But the force narrative will reveal itself over time once you realize that the assets that you own in one world may be transferable to another world or just transferable into money.

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global liquidity and election cycles and what the rest of the world is doing. It just happens that the happening kind of is on that same schedule as well. That's kind of your base case for this cycle. And in the seasons themselves, so we are now in summertime, the assets that will appreciate most, do you think, is this kind of like blue chip, Bitcoin, ether, Solana? Or you also said kind of like moving out to old coins, or is it impossible to predict? Is it kind of like these narratives that pop up over time? What benefits?

So what we have observed is things that are getting adoption that are earlier on the reduction curve outperform. So, Heath killed it last cycle as a chain going from, it's been proven now, it's gone through its bad times, Lindy effect in play, okay, now it then exploded, 47x from the low, right, and then establish itself firmly as the second most dominant player in the space. If you remember last cycle, there was three breakouts, really? Well, four, one was lunar, that went. Three breakouts. One was. One was. Salana. One was avalanche and the other was probably Polygon. Now, who was the winner? Well, the one that got the most adoption end up being Salana. It was the one that came from the bottom down 97.5% from this cycle,

like ETH was the previous cycle. It's gone into now accepted as an adopted ecosystem at scale. Who's the next one? Who's the next Salana, the next ETH of this cycle? That's where the real money gets made. Because those first cycle, you've got nothing to compare it against. You can't say, oh, it's already up 5x versus it's all-time high. You've got nothing, just blue-sky charts. And that's why you tend to get these ridiculous first-time runs like Solana last time. And I'm very interested in what that's going to be. I've got two or three ideas what it might be, but who the hell? I mean, I'm just not good at this get. I'm good at the next bit, which is see what's getting adoption properly. And then that trade is relatively easy. This trade is more difficult to figure out

what is it going to be? Do you want to share any thoughts you have on what it's going to be? Well, you know, listening to people like Chris Byneski, Melton Demeres, seeing what I've seen with stuff like the Sui Foundation, I go with the thesis that there are two ecosystems that are probably going to be in the race here, the layer one race, you know, the big adoption, because layer two is a different conversation. I think it's the move protocol. That's the Sui Aptos, you know, may the best man win kind of game there, because it's different, has a lot of different use cases.

And then there's Cosmos, Celestia and others. Those feel like, okay, that's the game to be played. Maybe Avalanche again, but doesn't feel like it should have happened. It got it last cycle. It doesn't feel like it's getting full-scale adoption. It's kind of in that lower tier.

You know, layer two, that's a whole different game being played out, but that's not this game. So that's how I'm thinking about it. And there could be something else entirely that I've missed just because it's not on my radar screen because, you know, when it happens, it happens fast. Raoul, do you think retail is here? Like the meme coins that you were mentioning earlier, is that an example of retail or is that just like crypto natives playing games? Yeah, it's us not fucking around. Does retail come during the summer?

Or like, what's going to bring them? So cast your mind back to the previous time. Okay, where are we? April 10th. half of everybody was still in lockdown at that point. We hadn't had the halving. In fact, Bitcoin was still on its way down, I think, by April the 10th. I can't remember what that flush out date was. It was maybe now. Maybe it was April 10th, 2020.

I can't remember. It was something like that. So I would say, yes, it's early for retail. I don't get many messages. I still have cynical friends. I've got to be careful with this stuff. You know, I don't get them phomoing. Yeah, we will all know because you get those messages.

I've had a few, but a lot of them because they, you know, whether it's family members and stuff, they've kind of kept an eye on this thing for a while. But otherwise, no, retail's not in. And you know how I can tell? The easiest way is Coinbase Active Wallets. So they have 110 million wallets or account, sorry. And as of about six months, nine months ago, there was nine million actives. I haven't checked the last quarterly numbers, but let's assume it's like 10 or 11 million.

And speaking to the guys at Coinbase, they're like, yeah, probably assuming the market doesn't grow, which of course it will. It should be at 35, 40 million. Now, okay, the ETF takes some of that, but, you know, most young people won't just buy Bitcoin. It doesn't take long before they're straight out the risk curve buying whiff and then derivatives of whiff and then, you know, it just doesn't take long. Only with that 10% though, right? with the 10%. Let's hope.

Well, I want to go back to the conversation we were previously touching on, which is like the layer one race, the layer one game. Because I think you identified a pattern that I really want to talk about a little bit more, where you have, like, Ethereum had its breakout year in 2017. And then it's like maturity year in 2021, where we discovered 600 gway gas prices and then like the first reactions to Ethereum. Bitcoin went through that same cycle, one cycle earlier, right? It had its breakout year in like 2014. And then its maturity year actually, like, coming into its, like, more modern shoes in 2017. Solana had his breakout year in 2021. That was its first big introduction into the world.

And now it's having its maturity year. You're seeing this with, like, just the bottleneck that's being hit with the failed transactions in the Solana ecosystem. So now it's having its maturity year. And you're kind of just saying, like, hey, like cycles repeat. Every single bull market, we seem to get, like, a new layer one player entering the game. And then there's, like, a handful of contenders here. Do you think that this is a game that always is played, like every single cycle? We get like a new layer one to really be a new valid player.

We go back to our previous conversation about where are the use cases for blockchains? And do we have suitable blockchains there yet? The answer is no, probably not in their current form. Now, many of these evolve. Like Ethereum keeps evolving. It gets better and better. It makes greater opportunities. It created this time around the greater opportunities for layer twos by collapsing the fees and all this kind of stuff, right?

We're getting there, but there is still space. probably for four or five blockchains that dominate and then over time maybe it migrates down to three. Whoever they may be, we have no idea. Because even Bitcoin has come into the race

by actually allowing some development on the bloody thing now. Right. Finally, granddad woke up. And so I think it repeats for a bit. Then we're going to get, at some point, whether it's this cycle or next cycle, we're going to say,

we're going to have to ask ourselves, have we overbuilt block space? Because every capital cycle comes through this, right? The mobile phone cycle, the 3G, the 5G, the broadband, fiber optic, I mean, they all do it. So maybe that just means that, you know, everything passed number three, four, or five just never recovers even close again. Maybe that's one way. Or maybe we miss a cycle at some point because we've got so much excess capacity. Don't know. I'm still thinking that one through. Certainly. Yeah, well, at the very least, at least we will be able to know what

crypto can really do when it has abundant block space. That's always been a mystery because we haven't really seen what we can do with like literally free transactions. There's been like a number of startups and a number of chains and other projects that that we look at in the space that are now actually getting into the world of just like, oh, we're going to just pay our users transaction fees for them. We're just going to eliminate that from their entire experience because block space is so cheap. So we actually don't know what that unlocks. I mean, cloud computed this. It's exactly the same. If you just step back is all of these people are in the business of selling block space with an incentivized token to do so, right? It's no different than any other network structure, cloud computing being one of them.

And in the end, there's still quite a lot cloud providers, but 80% of the market is in three different companies. And then there's, you know, others that you'll use. There's a general level of interoperability on the internet generally, and it kind of works. It feels like it's going to be that. and then the excess capacity of cloud means that it just costs us nothing now. You know, we're storing, you know, terabytes and terabytes of stupid photographs

that will never look at again because it costs us like $2. Okay, so while it's fantastic that we have entered this world of abundant block space supply, and finally we get to like really take off the brakes of what it means to be like a blockchain developer using, you know, trustless block space to do your crypto things. I do also want to identify a line in the sand

that's being drawn here. that like you identified earlier, which is like the ETF line, Bitcoin has its ETFs. I think Ethereum will get its ETS. It's pretty well assumed that Ethereum, whether it gets it at the May deadline or at the November deadline or in 2025, like whatever, it doesn't really matter. It's just assumed that Ethereum is getting its ETF. And then down below the ETH network in the market cap stack, like any other network is like minimum three years plus before getting an ETF. And three years is like very optimistic. Like first you have to get your futures, ETF. And then you, you have to get your futures ETF. And then you, you know,

have to get your spot ETF. And so there's like a line that's being drawn between Bitcoin ETH and the rest of the market. How do you think about this particular part of this phase of crypto? I don't think it matters. Okay. Right. Between Bitcoin and Eith, you capture the essential entire narrative of the space, which is internet compute, you know, the value layer of the internet, all of the big picture ETH stuff. And with the Bitcoin narrative, the store of value, the anti-debasement, the whatever, right? So you've covered both. the technology investment and the money argument. Now, I know everyone fights over all this shit, but let's just simplify it.

So you put the RAAs, the boomers through this channel. The millennials can put it into their 401K, which is actually a very big deal and may change what the structure of bear markets look like, because you can put every two weeks your paycheck into this. Interesting. And then what that creates is the whole ongoing risk curve. You don't need Solana or Avalanche to be created in ETF. It doesn't make a difference.

doesn't need the direct flows to win. The narrative needs the direct flows to win, and it comes through out the risk curve the other side. So I just don't think everything needs an ETF. So you're saying as so long as the pipes to the top of the market, the Bitcoin, the ETF, so long as those pipes are sufficiently wide, then capital will get recycled, and the benefits, the tailwinds will be blown down the market cap sack. And so like all of the other chains will also experience the positive effects of the ETF. Yeah. Yeah. Yeah, exactly. Now, at some point, we will get an index ETF. That's interesting. Just explain a little bit more about that, an index. You're talking about the entire crypto market cap or like a selected basket.

Elaborate a little bit more on that. Well, because of the complications of how many things are in it, you don't want it for everything. But, you know, the top. There's a meme coins I would exclude from that index. Yeah, like 99.99% of them. But call it top 10, top 30. You know, because you want to get some of the non-Lair 1, layer 2 stuff. You want to get some of the D-PIN and gaming and AI and stuff. So call it top 50.

App layer. Yeah, top layer. You get app layer, network layer, because those are the two things here. It's the applications layer and the network layer. Yeah, you just have like a BlackRock crypto 30 or something, right, you know, rather than an S&P. And, you know, how I think about this and, you know, I've got an asset management company, exponential age asset management. We have a fund of funds, which invest in crypto hedge funds. The entire thesis is this market is going from 2.7 trillion to call it 12 trillion this cycle to 100 trillion by maybe the end of the 3032 cycle.

Wow. Wow. Okay. That's just that log adoption curve that I showed you the internet. It backs out, same numbers. Same numbers if you back out the logarithmic regression channel of Bitcoin. You get to these numbers. So this is, I think in front of us, the largest fastest accumulation of wealth in all human history. I know it sounds bananas now, but when we double a 2.7 trillion market cap, you know, five, whatever, but once you double a 12 trillion at the peak of the cycle, it's 25 trillion, double it again. Okay, these numbers start getting la-la land.

That's exponentials for you. So you need to capture the two parts of this equation, which is the network layer, which is where that value really gets accrued and the applications layer. The applications layer is twofold. One is some of its tokenized, and other is the equity layer. You guys had a VC firm, so you are capturing a lot of the applications layer. And all I'm trying to do here is capture that. This is why it's so important.

The whole don't fuck this up. It's like just don't lose this. It's not complicated. It's not hard. Right? It's difficult. But it won't be ETH and Bitcoin to the cruise. They get to a certain level, but it's the whole tail of the space being worth more as you start

building use cases and whatever. that's where the real game gets played in the end. The real anchoring is here. And that's why an index will do very well over time. And we've seen that from the NASDAQ. New technology comes in, ends up becoming Microsoft at the top of the pile. And it starts moving the whole index. And then it concentrates.

And then more money flows into the index. It flows into those. And before you know, you've got this reflexive loop going on. But we don't have that ability right now. So, you know, it's a complex game, which is what we farm out. to hedge funds to do it because it's their job and give 14 hedge funds. I mean, there is a tokenized. I haven't used it, but there is a tokenized index. Somebody's got token. I know how legal it is, what we can do. There's also the bit-wise have got a product, but then those are closed-end funds

and that have this own set of problems. So it's not solved yet to make it super easy. Well, we've talked about the seasons of spring, summer, and fall. We haven't yet talked about the next winter. And I don't want to be a buzzkill on this episode, but I'm interested in what you think the next winter will actually look like. And you mentioned something interesting just in passing. You said just the existence of a Bitcoin ETF means millennials can maybe dollar cost average paychecks into 401k, and that's different. Are there any factors that make you think that the next winter, whether that comes in, you know, 25, 2026, something, wherever the timeline is, do you think that that will be different? Or do you think we end up with something like 2022? And man,

In 2020. Deep winter or shallow winter? Yeah, it was painful. We had scammers, we had grifters, we had insolvency. I'm glad we're done with that. I don't know if this is the worst winter. The ICO-mania bull bust was bad. But, like, this seemed also pretty bad.

Are we in store for another long, like, Game of Thrones-style winter here? Well, they all last the same period of time. Wait, didn't the 2022, 2020? I thought that one was meaningfully shorter than the 2018 to 2020 bear market. They're all generally a year. They just feel like misery and death, right? They do feel bad. It do feel really bad.

Eats was literally six months. Peaked at a trough of Eath was six months. Uh-huh. Yeah. So, but we like this narrative, oh my God, it's fucking drama. It's like, listen, cycles are a function of the space. Everybody is so scarred. If you're in this for the long run, accept them.

don't even care about them. I didn't do a damn thing over the last down cycle because I've been through one before. So I skipped one. I've done two out of the three. So I've got my stripes. But I did what I didn't do the first one. I did properly this time, which was I bought as much as I could, given whatever cash flow I can, I could get in the depths of the bear market. And I bought two things.

One was Ethereum and one was Solana. And I did exactly that. And it compounded my return. So before anywhere near the markets were through all-time highs, I was through all-time highs. I did the right thing. And people think they can be clever and cute. They think, I'm going to time this thing. We've already talked about how difficult crypto fall is.

Do you have a spike? Does it finish early? You don't know. The easier game is to say, I don't care. I'm just going to continue buying it. But then there's another thing is like, some people, particularly in the first cycle or even the second cycle, it starts to really matter. Like, I can do with this cash. I want to buy a house. I want to do that. Do that. If you're lucky enough, you could sell half your portfolio, completely secure lifestyle gains in whatever that means to you.

And then you just run the rest and enjoy the bare market for the ridiculousness that it is. All of the drama, who's going to go bust, whose leverage got caught out, all of that. Just go with it. It doesn't matter. As long as you had self-custling your tokens. really none of it touches you. You just kind of laugh at it and then try and add to it. So you take some off the table if you want. I didn't purposely because I did not want to take anything off the table. I wanted to just keep adding to it. Because here's a different thing. So let's say you put $1,000 in. It goes up to $10,000. You're feeling amazing and you time the top. You time the top. You take it out. Your $1,000 means a lot to you. And the market's now down

75% you will not put in $1,000. You just won't do it. Everybody psychologically thinks, well, I just take out the top and buy it back down. You won't. You'll put in $100. And then before you know, you're chasing it all the way up and you've just fucked the whole thing up to start with. You just don't need the stress. So take some chips off the table and just run the rest and then add when you can. Raoul, the way we're articulating this is like, you know, this is our fourth time around for crypto. And you said this is the biggest wealth generating opportunity. And it's the obvious trade maybe to like to ever exist in our lifetimes and yet and yet smart investors quote unquote are still missing this and there are many skeptics like you mentioned you still have friends

who text you and you have these skeptics you put out this tweet that said i find it interesting that most of the world's greatest macro investors are big crypto and tech investors both public and private markets so you mentioned stan d drunken miller paul tudor drones alan howard steve cohen some of these. But you said many macro posers, I think you're saying, who wish to emulate them on X are still skeptics. Quicks are posters or poses. Yeah, yeah. So there's a lot of posers out there, posters on X who are still skeptical, yet some of the brightest macro minds are bought into crypto. Some are not, though, who are quote-unquote smart investors. What is keeping the skeptics away from this asset class? Who still remains to be convinced? So if you are an equity stock-picking

hedge fund manager who's famous for his long short bets to admit that there's basically a free trade that's been on the table questions your whole purpose it just that sounds like just ego oh yeah well don't forget you've got thousands of investors you're managing 50 billion of their capital and you just go you know what this trade's better i'm off like at that there's a real psychological hurdle to admit that long short value investing whatever doesn't outperform. And what you get is that classic bell curve that I now find everywhere it is the most important chart of all time is like number go up. On the left, number go up on the right. In the middle is no, it's impossible to can't you see the risk you're taking. It's cyclical. It goes down 80%. Blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah,

blah, blah, blah. They're all in the middle of the bell curve because they don't want to accept the simple, stupid facts that a network that attracts more people is worth more. And in crypto, you happen to be able to own that network. It's just, it's built for number go up. But they just think, well, this is crazy. Yes, it really is that easy. If you are actually, and that's why, if we talk about why you'd own the top three over anything else, it's because those networks have been adopted. So just add incremental people in, number incrementally go up. It's just not complicated. but God people complicate this whole game and they find it as if there's a philosophical war that they have to have. It's because it questions everything. You know, I got to this that in 2021,

and I started really uncovering this everything code and the debasement and everything else, and I divided everything by the Fed balance sheet, and I saw that technology and crypto were the only things that outperform. That shattered my macro old-school beliefs that everything, that tech, I've been in forever, but tech was a bubble, that it was just always overpriced and can't people see, and one day it's all going to crash and blah, blah, blah, and then I realized, no, it's just network effects. These companies just keep growing. And it took me a while to completely abandon my framework where I would be looking for the down cycle to make the gains because they come fast in a down cycle, if you're sure, and completely switch mind. Most people won't do

that. I completely changed my framework. And then when I started, dividing NASDAQ by Bitcoin, because it's got the longest history, it's down 99.97%. So what the fucking point is? They're owning anything else? Even adjusted for the 97.5% fall, the 85% fall, the 75% fall, even adjusting for all of that, it's beaten the NASDAQ by 99.97%. So I'm not beating it by 97%. Nasdaq's underperformed by national. 99.97%. I was going to ask you coming into this at the end is just to kind of summarize how you think of yourself as an investor. If you're to sort of classify yourself, you know, there's fundamentals investors, there's, you know, long short types of investors, like maybe you're a macro investor.

But in hearing you talk this way, I feel like maybe my observation is like maybe you are doing two things like really well. One is like you are a debasement avoider. So you look at debasement and you try to avoid all of that stuff so that you can preserve your wealth. And that's, seems to allow you to pick the asset classes that are most interesting for avoiding debasement. Without any ideology. Yeah, without ideology. And then what you do is you layer a second layer of analysis here, which is like you're looking for network effect. And you're measuring that network effect, like through some metric, pretty obvious metric that's out there and open in public. And then you are disciplined with those. So you're avoiding the basement, picking your asset classes,

and then you're looking for network effect and investing in that. Is that a lot of an accurate kind of framing of how you think about the world and what you do? What would you add to that? So what you've done there is identify my secular thesis. So I'm actually a long-term investor that uses a secular thesis. I used to always have a secular thesis and then use the business cycle more and be in the timeframe of the business cycle. This would be like, when am I going to time the top in crypto. But I now actually am 80% weighted to the secular thesis because that's what all the gains are. And it's a bit mid-curve to be fucking around with the business cycle too much. It was great to get me my entry into ETH and Sol in 2022 because I used my liquidity cycle framework, the business cycle framework. Great.

It'll give me some idea of when I might want to take some lifestyle chips off the table. So I don't run everything through the winter, not because I don't want to. It's because I want to take some chips off the table. to do some lifestyle stuff. Okay, fine. So actually, I'm a secular, long-term thematic investor that have broken it down to a couple of simple KPIs because I like to keep things super simple. And then I use a business cycle and a bit of charting to help me understand where I am in that journey. That's it. What's the secular part? Secular trend is a long-term trend. So demographics, right? This is all driven by demographics

because it was World War II that drove people to have too many kids, which drove the wages never going up because there was too many baby booms in the workforce at the same time, which drove the American dream dying, so they borrowed more money to make up, which drove the use of monetary policy and ongoing debasement of currency. And that was the birth of Bitcoin because the banks blew up. It's all driven actually by the demographics post-World War II. That's a secular thing. India is the opposite demographics, right?

28 years old, average population, 1.4 billion 28-year-olds. Pretty smart, probably going up, because GDP growth equals population growth plus productivity growth plus debt growth. India has low debts. Productivity is increasing as you come out of the fields and into the productive economy, particularly India because it's got this whole fintech layer. And then you add population growth. Well, they got plenty of those, and they're 28 years old. So secular themes, long-term, decade, two decade themes. Those are really investable and make, they're easy.

They make any idiot money. Technology. All you had to do was by the fucking NASDAQ. So all you had to do, you had to do one trade in your entire life was just by the NASDAQ. And you'd have done absolutely fine. And outperformed 99% of all hedge fund managers,

half the VCs on the planet, and every active fund passive, I mean, just won the game. It's just a secular trend. So what is your portfolio like these days? Like in terms of like percentage, crypto percentage. And you know what? I know your style. We're not looking for anything exotic, right, unless you want to disclose. But a boring portfolio can be a fantastic portfolio.

But I'm curious, how do you think about allocation across different crypto, non-crypto asset classes and just things generally? So people shouldn't emulate me because I've got a lot of experience with risk taking and I'm comfortable with the risk that I'm taking. I don't use leverage, you know, I use external custody, multi-sig, all of the things, you know, and I'm very focused on my thesis, which is, you're dead right. It's the network thesis. So I then look at charts of assets relative to each other. So I was looking at the Bitcoin ETH chart, which I followed closely, which has been unperforming and I think it's basing, as we talked about. But the chart to me that was a standout in 2022 was the sole ETH chart.

And that was the chart that got me buying Solana and then going All In. Much like I went into ETH All In in September 2020. Right. I just did it earlier in Solana. And so I am 90, 80% sold. All of my ETH is now NFTs. I've been buying high-end art NFTs. I then have a bunch of the portfolio in the fund of hedge funds in exponential age asset management. And I have 1% in stupid ship, like WIF and Doge and Bonk, got all of those.

But that's 1%. So even when I post about it on Twitter, I'm sure some guy is going to, some joker in 2026 is saying, you were recommending WIF. Just to be clear, I've got like, in all of meme coins and everything else, 1% of my portfolio. I'm 90%, 80% salama. Well, like part of our target audience, I think, is the up-and-coming investor who might be on their second cycle, like maybe even their first cycle. And I think a lot of people are entering crypto for that once in a lifetime opportunity, right? And they're focused on how can I become financially independent. Besides kind of the

don't eff it up strategy, which is a good kind of like, you know, general advice. or maybe that's the ticket. How do you think they should invest, like, how do you think they should approach investing in general in terms of where they should allocate their time, resources, all of these things? I think the important thing is the DTFU strategy, number one. Second, educate yourself.

Educate yourself from the right people. So get your sources of information from the right people and actually do some education. There are available courses, you know, that are free or paid that are valuable. Like, in fact, coming up next, we've got the Festival of Learning and Real Vision. There's tons of people coming to that, and it's free, and we're there to teach you how to trade in mean coins, how to trade in NFTs, and we've got a bunch of people who really know

this stuff. There's a whole thing on Solana, there's a whole bunch of other stuff, all about learning. So I go to Realvision.com forward slash festival, I think it is, and it's free. Go and do that. Educate yourself, because then eventually, let's say it's cycle two, You too can take the Heathbet of the last cycle, the Salana bet of this cycle, whatever it is. I'm still not good enough to do the next bit, which is like, who's going to be the next one of this? I can do that.

Who's going to be the number three? That's easy, easier. But you can't do that without educating yourself, studying the space, understanding the players, listening to the narratives, finding out where the opportunities are. So that's the key thing. DTFU, just keep it simple, stupid, but learn. And next time around, you'll really make money. Well, this has been a lot of fun.

Thank you for guiding us through this cycle and giving us some context here. I think you're the perfect guest to have on this. So aside from the Festival of Learning, which you just mentioned, what else you guys up to at Real Vision? Yeah, look, the other thing is I've got a YouTube channel called The Journeyman. And if you heard me speak, you can hear that what I'm actually looking at is a very big secular thesis about where this is all going and why it matters. So the journeyman is my journey to the nexus of macro, crypto, crypto, and the exponential age of technology, because we're all going

to that place, which I think of as some sort of economic singularity, which is something I'll come back on and talk another time to you guys about. But I interviewed some incredible people on that and to nudge people along. And I also do some other stuff, like some lifestyle stuff. I did some longevity interviews. I've got one about wine coming up. Just because we're all in this journey together, right? And we want to have some fun. We want to learn some stuff en route. And so that's what the journey man's all about.

So if you haven't watched it, just go over there, subscribe to that. You get some killer content. We will include a link for sure in the show notes. I'm curious, has the AI bug gotten to you, Raoul? It's a part of the exponential age for sure. It's a huge tech theme. I was probably the first of the kind of major podcast and stuff to cover this. Because Emmad Mostak, who started Stability AI,

who you guys know, I think. Yeah, we just had him on. Yes, yes. Emman was an old friend of mine. It was a global macro investor subscriber. Oh, no way. Oh, wow. I've known him for like 15 years.

That's right. He used to run a fund, right? Yeah, I've known it for like 15 years. It's part of his background. So we had him on before ChatGPT3 came out, before everything, just as he was launching. And so, yeah, I've been, I've got a whole research service called The Exponentialist with another person called David Matin. It's paid service where this is all it's about.

Right. Now, blockchain technology is part of it. But it's the whole exponential age. It's AI. It's robotics. It's EV. It's Internet of Things. It's blockchain technology.

It's genetic sciences. It's the science of longevity. It's all of that. And we cover it all. This portfolio. All of that stuff. It's really, really fascinating. You know, the one thing I wish about all the AI stuff and cool stuff that's going on is that

I wish it was a bit more accessible for unaccredited investors for kind of retail. That has been the beauty of crypto, right? Anybody in the world anywhere can buy Bitcoin. doesn't matter how much net worth they have or whether they're accredited investor status whereas you know

the open AIs of the world and the chat GPTs it's all VC stuff and it's much less accessible for kind of the up-and-comer you know learning investing in this field it's even worse than that nobody gets to look in an open AI

right yeah right this is basically a monopolistic play and they've created a monopoly alongside another monopoly which is Microsoft Facebook Facebook Facebook have their own monopolistic play with Lama. There's no look in here. Now there's another issue that I've got with this entire space.

I think OpenAI are using some form of early stage AGI to build product. Sam Altman has said all the way through is I can't take you to there without going through steps because you're not ready. I think they know what there is. And what you do with an AGI is like, how do I get the world ready for AGI? Well, you build out these incremental things. and this look at 500 people 500 people build products across so many verticals and every three month destroy all competition every single time if you just observe what the fuck is going on here we've never seen anything like this this rate of innovation speed of market and total

disruption of existing players that happens makes me concerned that as it becomes normal to use AGI or AI to build product. So Ryan and David have this new cool product. This is amazing, you know, looking decentralized application with funky UX and it's really interesting. I just give it to my AGI and so just copy that. Make it better. But do it for the Indian market because it's bigger. And it would say, I don't do it for India. Do it for this, this and this market because this market's growing and you'll get a dot. What world is that? How long does anything last? Everything becomes like a mean coin at that point. So I don't think. I worry actually about things like venture capital in 2030-something. 2030, I've used as the date.

Beyond that, I don't see how vehicles for long-term capital cycles will work in very short capital cycle markets. I think the only way is to tokenize this stuff. And it becomes, how much attention does the product get before it gets disrupted? You know, again, this is a much longer conversation we shall have that I can't do today. But this is where I think the world is going. And this is just part of the big picture that I call the economic singularity. And so this AI thing, I think it's good that it's not investable as well. I think it's going to destroy so much capital because of this dynamic. The dynamic is everybody gets replaced by who's got the fastest and best AGI. And then you're going to get into what the hell is a financial market when there's an AGI?

How do we even stand a chance? But this is a topic. Stuff I write a lot about in the exponentialist, it's super interesting. Well, I think we'll have to leave this episode then, since we're a short of time on a to-be-continued. And we'll have to bring you back and talk about the intersection of AI and even crypto. Maybe crypto's got some tools up its sleeve to kind of stave off some of that capital destruction, at least some of the centralization. Yeah, one of my greatest mid-curve moments this year.

I've been trying not to mid-curve things. Try to be dumber this cycle? I've been trying to be dumber. And the dumb one is like, we all saw WorldCoyne. Everyone laughed at it. Blah, blah, blah. And they were here in Cayman because their foundations here. And they asked me to come on this panel with them and I was chatting to them.

I'm like, why, what are you doing? Why did you just create the world's worst narrative possible? And they're like, yeah, we kind of got it wrong. You're still down what it is you're doing to me, please. Because I can see you've got this passport and this. this net thing and this proof of humanity, blah, blah, blah. And they just answered with such perfection. Well, Sam figured out in 2020 that the AI he's building is going to create a huge problem

on the internet where nobody's going to know who's human and who's AI. So he built WorldCoin. I'm like, if you'd have said that, it would have got up 50X in the first few days, but they didn't. And then I walked away from that thing thinking, and it had been stuck at like $1.5 for ages. And I'm like, I should buy this, you know, because this makes sense to me. And then I mid-curved it. Yeah, but is the hardware worth doing it?

Is their approach right? Blah, blah, blah. What are people going to say next minute it went up 10x? I'm like, moron, Ra. Sam Altman says good. Buy. Simple. You know what?

Sometimes I feel like our service as podcasters is to take the stuff that right curve people say, really, really smart people say and then distill that so left curve people can actually understand it and invest in the concept. So I don't know if we're providing that service sometimes on bankless, but that's what we seek to do. Raoul, this is always excellent to have you on the show. Thank you so much for joining us. And enjoy summertime. We're in summer.

So it was just kick back and relax and we can just enjoy this thing, at least for a few months. Exactly. This is not the year we have to worry. Of course there'll be gut checks. There'll be complications. Generally, summer. Summertime, the living's easy. There you go.

Bankless Nation. This has been Raoul Paul. Got to end with this. Of course, you know crypto is risky. You could lose what you put in. But we are headed west. This is the frontier. It's not for everyone.

But we're glad you're with us on the bankless journey. Don't F it up.