The Pomp Podcast - #444 Raoul Pal on Bitcoin & The Macro Economy

Episode Date: December 4, 2020

Raoul Pal is the cofounder and CEO of Real Vision. He spent his entire career as a successful macro investor, retired at an early age, and is one of the most prolific investor voices on Twitter. In this conversation, we discuss what the world’s best investors are saying behind closed doors, the macro economy, Bitcoin, gold, institutional asset allocation, CBDCs, DeFi, what would change Raoul’s mind, and recent progress at Real Vision. ======================= The Rodman Law Group is dedicated to helping entrepreneurs realize their vision by helping them operate defensibly in sectors where laws and regulations haven’t caught up to the realities of the industry. The Rodman Law Group’s legal expertise combined with its understanding of blockchain technology makes it the ideal legal service provider for the industry. http://www.therodmanlawgroup.com/pomp ======================= OKCoin.com is the leading crypto exchange for both beginners and experienced users. You can fund your account in under 2 minutes, and get access to the most advanced trading engine, all while paying the lowest trading fees in the industry (0.1%). Visit www.okcoin.com/pomp and open your account today.  ======================= Digital art is here, and it's real. NFTs are selling for hundreds and thousands of dollars. The only platform I buy on is Nifty Gateway, which is an official sponsor of the Pomp Podcast.They release content from the best NFT artists in the world twice weekly, and have featured many world famous artists including Kenny Scharf, Trevor Jones and WhIsBe. NFTs on Nifty Gateway are in extremely high demand, so if you really want one, make sure to be on the website as soon as it is released. Go to www.niftygateway.com/pomp and sign up for an account today. =======================

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Raoul Pal is the co-founder and CEO of Real Vision. He spent his entire career as a successful macro investor, retired at an early age, and is one of the most prolific investor voices on Twitter. In this conversation, we discuss what the world's best investors are saying behind closed doors, the macroeconomy, Bitcoin, gold, institutional asset allocation, central bank digital currencies, DeFi, and what would change Raoul's mind on Bitcoin. We also cover the recent progress at Real Vision.

I really enjoyed this conversation with Raoul. I hope you guys enjoy it as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is a new sponsor, the Rodman Law Group. They're lawyers, and they can help you do all of your legal work. One of the most critical things I've learned over the years as an investor is the importance of working with a skilled attorney. It's vital to work with a lawyer who not only has a mastery of the law, but also an operational understanding of the underlying industry. That's why I'm excited about the Rodman Law Group, and that's why I'm excited to share them with you.

You won't find this combination of industry and legal expertise anywhere else. The Rodman Law Group's deep understanding of and passion for blockchain and cannabis industries is not the only thing that sets them apart. They've been accepting payment in crypto and Ethereum since 2017 to make their services more available to industry participants. Much like MicroStrategy, the Rodman Law Group has literally put its money where its mouth is and moved a portion of the firm's balance sheet into Bitcoin as well. They have legal expertise combined with an understanding of blockchain technology and cryptocurrencies that makes it the ideal legal service provider for the industry. They're dedicated to helping entrepreneurs navigate the legal complexities of issuing tokens, launching NFT platforms, raising capital through security token offerings, and much more. We've teamed up to give you, the listener of this podcast, an exclusive discount that you won't find anywhere else. If you use my promo code at therodmanlawgroup.com slash POMP, again, therodmanlawgroup.com slash POMP, you'll get 50% off an initial one-hour consultation with the firm and 5% off legal services for the first year.

Think about that. 50% off an initial one-hour consultation with the firm and 5% off the legal services. They're visionaries in the legal services industry and they accept Bitcoin. Go support other people who are supporting Bitcoin and make sure that you've got somebody there to help you with your legal needs. The Rodman Law Group dot com slash pop. Go check them out. This is a no brainer. The Rodman Law Group dot com slash pop.

Next up is OKCoin. OKCoin is one of those companies you got to know. they have a crypto exchange and they are on the rise. There are a lot of crypto exchanges for us to choose from. Whether you're new to crypto, an advanced trader, or an institution, the most important thing when choosing an exchange is typically how easy it is to fund your account and the cryptos you can access through it. I always recommend people to have an account on a regulated exchange so you can easily go in and out of the market using your bank account. Recently, we've seen large regulated exchanges hike up trading and withdrawal fees. That's not

cool. OKCoin is a US-based regulated exchange that serves 184 countries and is super easy to use and offer some of the lowest fees in the industry. What I love about OKCoin as an individual is I can go from registering to verifying my profile and connecting my bank account in mere minutes. In fact, OKCoin is literally the fastest exchange to go from zero to having a crypto portfolio. You don't have to wait three days for your deposit to show up. You don't have to upload multiple ID documents or do facial scans, which are super freaking creepy. They've just made it easy and simple. Go to okcoin.com slash Pomp. Again, okcoin.com slash Pomp. Go check it out. Lastly is Nifty Gateway. Digital art. That's what we're talking about. Digital art is real

and it is here. NFTs are selling for hundreds and thousands of dollars. The only platform I buy on is nifty gateway which is an official sponsor of the podcast they release content from the best nft artists in the world twice weekly and they have featured many world famous artists including kenny scharf trevor jones and who's been they're in high demand on nifty gateway and so if you really want one make sure you've got an account at niftygateway.com slash pomp this sunday jason and i will be auctioning off the very first piece out of the collection that we commissioned from Felocious. So make sure you've got a niftygateway.com account, and we will be doing it at Sunday, 2 p.m. Eastern, live auction. I'll be there in the comments, in the live chat,

talking to everyone, niftygateway.com slash Pomp. Make sure you have an account, niftygateway.com slash Pomp. All right, let's get into this episode with Raul. I hope you guys enjoy this one. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

all right guys bang bang you're in for a treat rose here uh thank you so much for doing this again sir i'm i was looking forward to when you reached out i thought this would be fun so last time we did this we did this in new york uh we did it in march i think we were one week uh early to the government mandated lockdowns uh the coronavirus kind of mania and uh you had a pretty grim message uh but one that ended up being uh fairly accurate in terms of a lot of things that were going to transpire let's just start with what has happened since march right so we had the government lockdowns how do you view kind of the macroeconomic landscape uh over the last call it six to eight months yeah so if you remember when we spoke we talked about this

three phase that happens over these kind of crises. One was that liquidation phase, which happened almost immediately I left your office, right? So that happened, that finished in the end of March. Then we had what I called the hope phase. And the hope phase was when everybody thought it was going to be okay. And we saw that there was a big lift in asset prices, everyone thought it was okay. And then I said, it's going to transition to the insolvency phase. And that's where we start to see the drag on GDP growth going forwards. And that in itself would start to see people get laid off again. The stimuluses disappear, small businesses go under, and that process unfolding.

So let's look back and forth. Okay, how did that do? So the hope phase is dead right. Now, what surprised me is the hope phase in markets never went away. Yes, the bond markets were different and the banks traded differently. So we saw this bifurcation, people call it the K-shape. But really, the markets kept hope, while the underlying economy, whether it's Europe or whether it's the US, has kind of slowed down again.

So we're still seeing, exactly as my thesis, year-on-year GDP growth, like negative 5%, negative 4%. Everyone focuses on that Q on Q number of, hey, GDP is up 34%. No. Everybody's having a really shit time of it. And, you know, the dichotomy between Wall Street and the average guy is something I've never seen in my life before. I mean, it's simply staggering. But that's where we are. We're in that situation now where this virus is going to continue longer than expected.

You know, we're going to get another spike after Thanksgiving travel in the U.S. Then we've got to go into Christmas and New Year in the U.S. They're never going to tell people not to do Christmas or New Year's Eve parties. So by the time Biden gets it in February, he's going to be peak virus. And there's a decent risk that the US is really going to have to shut down various parts of the economy to get this under control while they roll out the vaccines. In Europe, the situation has already happened. So they made the mistake of reopening over the summer, let everyone go on summer holiday.

Everyone goes down to Spain, gives each other the virus, comes back and explodes. Genius. So the Europeans are now fighting it. they've had to lock down. It's been pretty clear by everybody from the Germans to the English to the Swedes that nobody's really going to properly reopen until March or so. So we've got this situation where the global economy, and it looks like Christmas is going to get cancelled in Europe. COVID is going to be the Grinch that stole Christmas. And that's, in Europe, huge spending. So the economy is going to be weak. It's going to be weaker for longer. All of those

shops and, you know, hairdressers and restaurants, all of that stuff that rely on Christmas and New Year, it's done. So that's the situation we're in. We're seeing the rise in Asia. We're seeing slowdown in Asia as well. It's not as bad. Yes, we know the deaths aren't as high, but it's not about deaths. It's about your mum taking evasive action, staying at home, not spending. You're not going to see her for Christmas, not bringing a bunch of presents with you, not bringing, you your siblings there. It's just natural human behavior. So, everyone just needs to ignore the politics of it. It's just humans and we just do the same kind of thing, which is we're risk averse. And government's a risk averse too. So, that's the situation we're in. So, I think we've

got a pretty ugly patch coming up. Who knows what the markets do? The markets want to look through it. But the outcome of all of this and crucially to the conversation we're going to have is, okay, we missed an entire stimulus in the US, which was the one from September, never got done. And a bunch of stuff's about to roll off in December as well. So it's a Wile E. Coyote moment for everybody, where you're off the end of the cliff, and there's nothing beneath you until the new administration gets in and they can try and get a similar package through. But we don't know what's going to happen to Georgia. We don't know whether they're going to get the Senate? Are they going to get through a stimulus package or not? Who knows, right? So

it's a messy situation. Europe, they're going to have to stimulate again. How? Well, the ECB said they're going to do something because inflation is negative and falling. But the governments themselves can't. Italy's already applied to say, can you write off some of this debt? Nobody knows how they're going to deal with this. Nobody knows how the banking system is going to work. So you've got the central banks trying to support this whole situation because fiscal stimulus is not happening. And the problem is the monetary mechanism doesn't work. So, velocity of money, every single major country in the world outside of the US is now below one, and the US is 1.2 or somewhere. So, basically, money from central banks doesn't go through the banking system and

into the economy and works. So, that's kind of what I think is coming. Obviously, through the back of that, we then get the recovery. I mean, that's a standard recession. At some point, things look good again. And then we look for the macro trends that emerge from that. How do you think about kind of the early stimulus packages, right? So we had like, you know, three plus trillion dollars. And then we got towards the end of the year, and, you know, basically politics took over. But in terms of the actual response, kind of in March and into April, if you had to give a grade, was that a A plus response, a C minus, somewhere in between? Like, how do you just think about what the Federal Reserve

and elected officials did i thought it was the fastest response i've ever seen to something that was a severe shock i mean it's the biggest shock you and i are ever going to live through in our lifetimes in terms of the economy you know um and they were quick and they were pretty big everybody did it the problem is it was all and this is what i mentioned and i've been talking about it was all short term so nobody figured out that this was going to last longer which was what What I talked about when I saw you last is like, this is a longer event than people imagine. So what happened is everything started rolling off.

And then in the US, it's so political to try and get anything done, it stopped. So they did a great job. You know, the Federal Reserve, like it or not, stopped the credit market imploding. If the credit market imploding, that's the pension system gone. And they stopped it. Yeah, it's not good that they're ending up buying Microsoft debt and all that kind of shit.

You know, it doesn't make sense. But I understand speed was of the essence at that point in time. Now, what they've done is basically destroyed the monetary mechanism, the credit markets and everything else in the interim because they basically supported everything. Yeah. And so when you think about kind of this intervention, I think there's a lot of people who say, hey, I don't like it, but they had to do it. They did it. That's the situation that we're in. I've been calling it almost like bridge the gap stimulus, meaning that they basically wanted just enough stimulus until the recovery happened. And then they could bridge that gap or that detraction in the economy. Obviously, if it's longer than you expect and you don't get more stimulus done, then you don't bridge the gap.

You just fall in the canyon kind of halfway through, which is kind of where we are. But what that does is it changes the investor landscape. And you recently had this thread that went viral around the death of macro. Right. And what it seems like is that intervention overlaid with all sorts of long term trends that are now kind of all meeting or intersecting has led to this conclusion. But maybe let's just start with like, what do you mean when you say there's the death of macro? So as a macro investor, what do you trade? What do we do? We look at economic signals and look for dislocations in markets where we can profit from those economic trends or dislocations.

And that means generally trading top-down asset classes as opposed to picking stocks like Microsoft or whatever it is. So we're looking at currencies and bonds, the two biggest and most liquid markets on Earth, commodities, because they tend to work according to the economic cycle, things like precious metals, they work according to the monetary cycle, and equities, which is the least macro because they're all based on human behavior generally. And credit markets is the other one. So OK, that's the rulebook.

So whether you're Stan Druckenmiller, George Soros, any macro legend, how have you actually made your money? On the Real Vision interview with Stan Druckenmiller, he made it very clear. He says, everyone thinks it's all about stocks and all of that stuff. He goes, I made all my money in bonds. They all have, right?

I mean, I've been in this business since 1990 and bond yields have fallen ever since. And you know, you've only had one serious pushback and they've actually been falling since 1982. so everybody's career, Stan Ruckermill is included, there has been one trade. Why bonds? Well, because bonds actually give you high returns

with very low volatility. So risk-adjusting returns are amazing, which means you can take massive leverage. So when things like the economy slows down, bonds rally and bond yields fall. And that kind of 18-month period between the start of a recession afterwards is when you make enormous returns.

They all do, they all have. that's macro for you. And bond yields are now at zero everywhere. And I think the US probably ends up with negative rates at the end of this too, much like the UK just went negative over the autumn. So we're negative to zero interest rates. So basically, there's no juice left in that trade. So the biggest trade in the world is gone. Okay, credit. I'm not much of a credit guy because you need a bit more knowledge of the underlying credits themselves. But if you're trading credit as an asset class, as many macro guys do, well, the Fed and the ECB just stopped that game, as did the BOJ. They basically said, we're not going to allow the credit markets to

price risk because we can't. And the reason being is we have this old population and they've got all their money in pensions. If you wipe out the pensions, you wipe out the savings of the baby boom generation, which is the largest generation on earth. So that's not going to happen. So now you don't have a credit market and you've seen triple B credits are now all-time low yields again in the middle of an insolvency event. Brilliant. So no mechanism to price. The equity market basically took all the strains. So the equity market, people said, well, look, let's look at tech stocks that kind of look like perpetual bonds or zero coupon bonds because they generate cash, they've got no debts. So we can price those to infinity because where

else do we put our money? I get it. Is that right or wrong? I don't know. The macro guys are all trying to figure it out, but they're very nervous of the equity market because nobody understands this new paradigm. Is it real or not? But then the big one is coming, and that's the death of the currency market. That's something that I've been talking about. If that goes, then macro is finished. Because currency, like bonds, is enormous, super liquid. It trades for 3 or 4 trillion a day so it dwarfs anything else now what we've heard from the imf the bis the bank of japan the bank of england the ecb the fed people's bank of china and everybody is this move to digital currencies and i'm sure we'll get a bit more about that in a bit but what's been clear is the imf are

pushing for an agenda which is the new bretton woods and bretton woods was an agreement amongst nations basically to peg all their currencies to the to gold and then famously nixon came off the gold standard eventually but that was a post-world war ii construct that allowed all nations to kind of not compete with each other on interest rates to build the platform of which once they built britain woods they built everything from the united nations to the world banks the imf and all of these institutions that we know so if the imf is saying this what are they saying so I've gone through their speeches and they're basically saying, okay, we're in an extraordinary situation right now. Countries need to print money to fiscally stimulate, as we talked about

earlier, but it's kind of difficult to do it. And if you fiscally stimulate to the amount that you actually need to, let's say, do proper stimulus, not just giving a check, but creating jobs by creating industries and all of those things that need to happen, well, that's like 20 or 30 or 40% the GDP they need to do. How do you do that without devaluing your currency? And the answer from the IMF is, do it all together. If you do it together, then what are you devaluing against? Well, hard assets, Bitcoin, gold, stuff like that. But you're not devaluing each other. You're not winning terms of trade. This is the idea that Facebook Libra had, which is create a basket of currencies where the dollar is one of the currencies. It's not the denominator. So if you

think of everything else, it's like euro against dollars, yen against dollars. What they're talking about is having the dollar in the basket. If you do that, then the denominator is money supply. So it becomes a very stable thing because money supply, yes, at times it goes a lot, but it doesn't grow that much. So then what you're basically doing is dampening currency volatility down to zero. And so in that world, let's say that we play this out and they actually successfully create a basket of existing sovereign or nation state backed fiat currencies. And there's kind of this quote unquote one world currency, right? However you want to think about it. One, that kind of removes all competition between countries, right? In terms of interest

rates and all of that. But two, how does that change what I'll call just the management of monetary policy at the individual country level? Is there still some level of sovereignty and each country can do certain things within parameters? Or does it almost get consolidated in some sort of global central bank type of situation? Don't forget, Bretton Woods was essentially a consolidation. But interest rates, countries still need to borrow and lend, and there is an interest rate market. So it's not what the ECB is doing, which is creating a single currency. What it is, is creating a currency basket of which currencies move around and change their weights within it. So it's more like the S&P than it is the Euro. So it is different. But I think it

opens interesting dynamics of, okay, let's say they do this. Let's say to be a member nation of this bank core, which is what Keynes talked about back before Bretton Woods. He said, why don't you do this? It's basically the same idea, roughly. So to be a member, let's say, okay, all members are allowed to print 50% of GDP this year, all together. So everybody does their printing, everyone does their fiscal stimulus. After you do that, you're limited to 2% money supply growth. Or if not, you're out of the basket, so you get worse trade terms. Okay, well, that's interesting, because then you're actually turning it into something that has a limited money supply growth that actually looks a bit more like Bitcoin. Obviously, not in many ways, but in terms of

supply. Now, will nations cheat? Will it all go wrong? Of course, you know, they're central banks, of course. But, you know, there's interesting mechanisms that they can create out of this. And I think there was a tweet that Sahil Bloom put out today about the Overton window. This is an Overton window. Basically, anything is up for grabs, much like it was after the 1930s, when all of these institutions were built. And after World War II, too, anything can happen right now. And this is fascinating. You know, this whole central bank digital currency thing, that's going to lead us into a whole new world. But the death of macro seems like it could be a reality. Now, obviously, that's slightly flippant because macro moves around into different areas.

Now, in a world like that, what does it mean for emerging markets? It's probably exceptional. Because let's say you're South Africa. You get killed every time the dollar goes up and you can't export your goods and all of that sort of stuff. But if you have a stable currency to trade in, well, you're going to do much better. So it's probably incredibly positive for emerging markets. OK, that's interesting. What does it mean for commodity markets? Well, maybe they become less cyclical. How do countries compete with each other? I don't know. It's probably technology. It's how do you attract capital in that world when it's not interest rates necessarily? It becomes really interesting as a thing. And then how does obviously Bitcoin

and gold and stuff like that fit into that. Really interesting. So macro could shift it. Maybe it doesn't, but there's a once in a lifetime, not even a lifetime, a once in a century opportunity to change the construct of the system. Now, whether it's any better or not, I think it will be better, but it won't solve the problems. Money is a bigger problem itself. For sure. And I think one of the most interesting things is as this kind of death of macro trend accelerates and becomes kind of more real. What we're starting to see is many of the quote unquote legends of Wall Street who really are just macro traders who have done very well for themselves. One by one, they're raising their hand and, you know, kind of revealing their

interest, intrigue and positions in crypto in general. Right. Usually it's Bitcoin they start with. But but kind of you see everyone starting to not just do it, but be public about that position, to go on television and talk about that bullishness that they have behind the trade. Let's start with Bitcoin. I think last time we talked, you were kind of single digit percentage exposure to Bitcoin. And then you had kind of what I'll call, quote unquote, traditional portfolio, but traditional for you versus others. Now you are 98% of your liquid net worth is invested in crypto. I think it's 80% Bitcoin, 20% Ethereum. Let's just start with what What changed or what were the things that went into you going from single digit percentages to more than majority and kind of almost all of your liquid net worth being so bullish on Bitcoin and Ethereum?

Again, look, I'm a macro guy, so I don't expect anybody to follow me. You know, you do the same with your allocation. You're looking at it from a macro perspective. Other people can't take the risks. But for me, I looked at the situation, all outcomes for me were that this is, it rarely happens. Let's say I'm right. Deflation is persistent. The economy is worse than expected. We don't get rid of this whole economic mess until, let's say, Q3 next year. OK, so the answer to deflation and slow economy is printing of money and more fiscal stimulus.

OK, let's then push that aside and say, no, Raoul's a total idiot. It's completely wrong. The markets are right. Inflation is everything. In an inflationary market, will Bitcoin and gold do well? So here we've got a smile where the least likely outcome, which is everything just returns back to kind of 1.5%, 2% GDP growth, and we all forget it's just happened. That's not going to happen.

Simply not going to happen. And maybe it does, but that's the risk that we all run in the Bitcoin position. So basically, inflation deflation of any sort, if we look at all the past episodes, whether it was 2008, 2012 in Europe, when Europe almost went under, and then periodically afterwards, the central bank kept stimulating, didn't stop. They're not going to stop here. So that, to me, is a good setup. OK, so I've now got a good case.

So then the case is OK. At that point, I said, right, gold, Bitcoin. those are my main bets. I own some bonds because I'm a deflationist. And I had some dollars and some other trading positions. OK, fine. So then what changed is the charts. We'd all been looking at it, that the chart of Bitcoin was this beautiful, beautiful wedge pattern, triangle pattern. And it broke. So of course, I'm a macro guy. I can see an opportunity. I can see a great chart when I see one. I start saying, right, look, we've got to add to this. And, you know, I added obviously into the big sell-off as well, because I saw this pattern

emerging. So then it breaks, I start adding, okay, so now I'm over 50%. And just real quick, what were you selling initially to move capital? Was there a specific asset or were you just going across all assets and kind of taking percentage? I was just reducing trading positions because I just saw that this one had the propensity to make more money than anything else. But then it got to the point where you start looking at the charts and I started digging into the charts and writing about it in Global Macro Investor. looking at the comparisons of Bitcoin versus all other assets. And I started tweeting about this. And this is before it really started happening. I'm like, look at these charts. Bitcoin is about

to eat the world, right? It looks like it's going to become the super black hole of which it's going to outperform every single asset class on earth. I've never seen this before. Literally, I've never seen it. You know, we've seen gold might be dominant, but you might have bought copper instead, blah, blah, blah. There's nothing, nothing, not even most of the Amazon and stuff like that. It looks like it's going to outperform Bitcoin. So that's when I start saying, okay, this is the time to really go for it because it's a waste of capital to put it into anything else. Now I'm not coming at this with the philosophy, you know, the Bitcoinization of the world or anything else. I'm coming at it here as a macro guy saying, I've never seen a more dominant

opportunity in my entire lifetime. And if that is the case, it's time to really back your bet. Absolutely. And so I think it's a good opportunity. One of the things that I really enjoy when I talk to you is you talk to lots of different people, right? So you talk to people in the Bitcoin and crypto world. You talk to people in kind of the traditional investing world. Many of your friends are some of the best macro investors in the world, some of the most famous investors. And then you've got a lot of conversations that go on in the institutional world. I think most people know what's going on in the Bitcoin and crypto world and the traditional investing world. In the private conversations you're having with whether it's friends in the

macro world or in the institutional world, what is being said in those conversations? And I don't necessarily want to know from who, but just what's kind of the behind the door conversation around the macro environment and Bitcoin specifically and kind of how people are viewing this? So the macro environment, you rightly alluded before, almost everybody I know has a personal allocation to Bitcoin. Now, Dan Moorhead was first to understand that this was going to be all other assets. And then it sucked in, you know, one after the other. Probably John Burbank was probably next. And then, you know, Novo. And it just starts, you know, taking people win people in raw people don't understand that you guys are all friends right they don't understand

that there's an entire uh i'll call it generation of macro investors that basically grew up together and uh kind of you know went through their careers and somehow they went from you know one trade to the next stage to the next trade and when bitcoin became an opportunity literally it just walked down this entire kind of loose collection of friends until everyone had exposure yes i mean So if you think of the macro network, it's not that many people, right? So it's basically the epicenter was probably a few firms plus Goldman. And then out of that, a bunch of traders at J.P. Morgan and a bunch of others came out of that. But really, it was Tiger, Soros, Tudor, More Capital, Caxton, Omega Partners, and a few others were the big macro players.

and those alumni are everywhere so Dan Moorhead is ex-Tiger I think he was ex-Goldman as well Dan Tapiero was ex almost all of those you know I was ex-Goldman and then I was running a large hedge fund so I was a salesman at Goldman so I knew everybody so I've been in the middle of the whole lot so we all know each other and if we don't know each other directly we know of each other because it's not a big universe of people, but it had tremendous influence and huge amounts of capital. And it was a very exciting industry because back in the day, these firms could have 15%, 20% volatility and had huge bets. So you'd get to hear famous people like, well, famous in our world, Nick Roditi, who was actually the big swinging dick at Soros. He lived above a store

in Hampstead High Street in London, completely below the radar screen. But he was the most aggressive risk taker I've ever seen in the industry. Even Stan Druckenmiller says, I think Nick killed Stan on returns, but his volatility was enormous. The size of the risk this older, very quiet guy would take was astonishing. So anyway, so that macro world had high risk taking and high returns. In came the pension funds, in came the insurance companies, in came the sovereign wealth funds. And they said, well, we don't want you to be so risky. And they're like, yeah, but you're not going to get the returns. They're like, well, we don't really care. So they crushed volatility down to 5%. Comes the rise of millennium and all of these big platform

plays where they have lots of traders, low volatility, much lower returns. 10% is a great year. And so what happens is these macro guys start either turning into family offices, Lewis Bacon from More Capital, George Soros was first, Julian Robertson. I mean, they all did because they're like, fuck that. You know, I want to make money the old fashioned way, which is not by having assets. It's by taking bets. These guys are the great speculators. And then some of those guys went, this Bitcoin thing's interesting.

Now, most didn't get it in the beginning. They saw it as a trade. And then everybody saw it, started to see it. oh my god there's a parallel universe coming and it's all going to generate alpha because there's no capital and not enough knowledge in the space because everybody in it was a technologist and none of these macro guys were in it yet so the macro guys went here's an opportunity for us and one by one they all start going have you seen this you know you know if you ask mark yusko if you ask Dan Tapiero, they will say that they really got into this at a global macro investor

roundtable of mine. I think it was either in Cayman or in Spain, where one of the other global macro guys, another ex-Goldman hedge fund guy, says, by the way, I started a crypto, a Bitcoin exchange, and you need to find out about Bitcoin. This was 2012. And we started learning about it from them. And that network then spreads, starts talking about it. So we all kind of got polluted at the same time by similar people. It's a network. And that pollution is, you know, so cut to, I get a phone call on Sunday.

One of the, again, I can't mention him. He's one of the most famous hedge fund guys in the world and one of the greatest traders I've ever seen. And he really made his money in money markets. He's a rates trader, right? He has a world with no interest rates. So, you know, and I've been bugging him about this. I mean, he's been in crypto for a long time.

He knows it. But I was bugging him like, there's only one trade that matters. And the conversation on Sunday is, yeah, there's only one trade that matters. And so, with somebody like that, who's got world-class experience, access to enormous amounts of capital, I'll just kind of call it brass balls in terms of the experience of taking big bets with big volatility, what do they do when it clicks? Do they go, let's go 90% into a position? or they kind of have their hands tied because of who their LPs are, the fund size, the position sizes. And so they may only be able to get, you know, 10% or 20% exposure.

And then they've got to figure out what to do with the other 80% of the bucket of capital. Firstly, he's a multi-billionaire. That helps. You know, he doesn't need to become worth $100 billion. It's just, it's not relevant, really. So it's the game now, right? It's the game plus making sure that his capital grows a reasonable amount without blowing up, right? That's the game. Once you've made your billion, you don't want to lose

it. So, yes, exactly as you said, he's in a slightly unusual situation. I can't reveal why because everyone knows who he is then. But to take an irresponsibly large bet within the fund, not easy to do for the LPs and everything else and the other reasons. But in his personal wealth And parts of the portfolio, you allocate to VC, you allocate to crypto itself, you allocate to other opportunities, you just get involved in the space. And a lot of people, people like John Burbank, they did the same thing. Get involved in the space. You guys did the same thing. It's basically the same bet. It's layer on that bet in a number of different ways. And then let's see where that goes. Others, yeah, I'm sure we're going to see people taking more aggressive risk,

but most people in the hedge fund structure can't. We will see one or two, I'm sure. There are crypto hedge funds out there that have done astonishingly well anyway. I think a lot of those are going to get bought. So I was speaking to a crypto hedge fund. So this is another part of what's going on is they're all being bought.

I mean, again, it's just consolidation of kind of the new age hedge fund being bought up or consolidated with the older hedge funds who have lost the ability to get volatility and drive higher returns. So let's go to the new area. Look at a firm like ARCA.

I always use ARCA because they're super interesting because they're doing a, you know, tokens-based kind of bottoms-up investing strategy, up 300%. There's massive alpha in that space. You know, everybody calls them shit coins. Nobody wants to be involved. So you do your homework, you can make returns. And there's a ton of firms doing different strategies, all got huge alpha. The hedge fund industry has no alpha.

There's nothing. It's excess capital, too many machines and restrictions on volatility. So there's massive alpha. So these hedge fund platforms are going, okay, uncorrelated, gigantic alpha. Nobody's seen this. A lot of the macro guys will have seen it in the emerging markets in the 80s and 90s. Other than that, we've not really seen it in our careers. But one thing that you're mentioning here that I think is really, really important for people to understand is, and you actually tweeted about this and I loved it, which was, look, I belong in no group. You can put no label on me, right? I basically look at charts and graphs and assets and the macro environment and trends and data and metrics, and then I make decisions. But you can't put me in a bucket. So the labels don't fit. And the reason why I bring that up is I heard from a very dear friend of mine once that he said, you know, Steve Cohen, as an example, could sit down and look at a chart regardless of what the asset was and start trading and be successful doing it.

Right. You just have some people who it doesn't matter what the asset is, what they're looking for is the volatility. They're looking for, you know, all sorts of kind of market structure, things that they can then exploit for profit. Right. And that's basically what a lot of these traders and whether it was currencies or some other commodity or whatever, like that's what they were doing. What I think is interesting is the difference between Bitcoin and, you know, quote unquote shit coins and kind of the rest of the bucket to somebody who is looking at it from a a holding standpoint. Right. Or an ownership standpoint. I put them in the investor or the saver category. There is massive, massive difference. you could draw a line in the sand that ends up literally having tectonic plates shift in the

earth because they're so different. But when you look at it from a pure, I'm a trader and I don't care if I'm trading gold, dollars, Bitcoin, or a shit coin, all I'm looking for is volatility that I can capture returns on. All of a sudden, now you start looking for where is the opportunity. And I think what I hear you saying is like, it's definitely not in the traditional assets. It's in this new world. And then each person has kind of preference or an advantage in certain assets within the new world that they're going to go try to expose if they're a trader. So, well, here's something interesting about it is that's how it starts. And then they start understanding about this new world. Now, whether you anchor on Bitcoin or you

anchor on some other thing, you'll anchor on something of which you start building your knowledge base. Same as you when you got into the space, same as everybody does, right? So what happens is they come into it for the trade and stay for the future because we're macro guys. And I say this a lot and people don't really understand. We live in the future. We look at possible futures and try and predict them based on everything from charts to flows to fundamental analysis. And that's why they stay. And that's why they're agnostic to the tribalism, because what they're saying is, OK, we see this. I don't care where the Bitcoin wins. I know that this whole space is going somewhere and I want to be involved. And then, you know, so I've now got a future framework and I'll trade accordingly. And to come into it with a narrow mindset means that you won't be open to opportunity. Now, maybe the Bitcoin maximists are dead right and Bitcoin outperforms everything.

Great. The macro guys will also be on that trend. That's their job to isolate that trend. It's like otherwise saying, well, I'm a currency trader and, you know, well, I'll only trade dollar yen. That's ludicrous. Nobody does that. People look for the opportunity.

And then, but these guys are bringing real capital into the space too, because they are investing in startups, you know. Again, people philosophically say, well, it's, you know, those speculators, they're just taking advantage of this whole kind of Bitcoin philosophy. No, they're not. They're also feeding capital. They're bringing a lot of capital into businesses that are building on all sorts of networks. Some will fail.

Some will succeed. So when we go back to your asset allocation, having that perspective in mind, what's interesting is you were bullish on gold, Bitcoin, and inflation hedge assets in general. You now have basically sold, my understanding is, all of your gold, or majority of it, and your 98 liquid net worth um allocated to bitcoin and ethereum uh i believe it's 80 bitcoin 20 ethereum correct me if i'm wrong there but just walk us through why sell gold to increase the exposure is it there's just more upside and stronger conviction in the trade is it something that happened in gold i think gold goes up but bitcoin's gonna go up a lot more it's that moment

when you have the light bulb moment is you know fuck it there's a time to stand up and be counted this is your opportunity. Now, could I be wrong? Of course. But this looked to me like the best single macro opportunity I'd seen in my entire life. And I've seen a few good ones. I had a great one with a bond trade last year and early into this year and stuff like that. But this is better than that. This is a once in a lifetime bet. And when you look at those charts, you see gold breaking down versus Bitcoin and stuff like that. You think, I understand portfolio diversification. I understand why it's important for many people. But I'm in a position where I can take this bet because A, I have income streams. B, I don't have any debt. And I'm not

using leverage. So therefore, if it all goes tits up, I'm fine. But it's a very, very big bet. I've never taken a bet this big. So one of my questions was going to be, have you ever done something like this before so that's good to know the second thing is there's a lot of people asking uh when you say liquid net worth do you consider when you put trades on the percentage of liquid net worth and total net worth or do you just think of it in kind of the constraints of what your liquid net worth and the percentages of an individual trade i don't run my life like a portfolio i think it's wrong and i know people do this concentration on total net worth i explain that more why you don't Yeah. So I, it depends what you're in this game for. I'm not in this game for money.

Money is a lifestyle token. And for me, what I care about is my quality of life. And again, I'm not talking about, I need to have a jet or whatever. It's about the quality of life. You know, can I, can I live in a beautiful house? Can I afford to eat at a nice restaurant? Can I do certain things? And so for me, the primary important thing for me is where I live. and property that I have that I use. I don't rent anything out that I have, they're mine. And they increase my quality of life. And so that's what I'm looking for.

And so I don't think of, I need to grow my net worth. I'm lucky, I've made some money. I've got what I want. Now, so then the speculation for me is A, the intellectual challenge, but B, you want to make sure you've got enough money to survive and do things. And, you know, cause there's always something you need to do. You know, I need to do a ton of work on the house in Grand Cayman and that sucks up a ton of money and,

you know, all of that stuff. And that's how I think of it. I just think of it as tokens. And if you get rich enough, then you probably give up with that game and you go and do something that you think is worthy because you've only got one life. And if it's not, it's not all about making money. It's about having the best quality of life that you can possibly achieve for yourself and your family. Absolutely. 20% into Ether or Ethereum. Explain kind of what the thesis there is. Is it a market structure thing? It's a smaller market cap. And therefore, if everything goes up, it should go up more. Is it something around kind of the value and the technology? What's driving the interest? There's a hunch that I have, and it's only a hunch, hence why it's a

much smaller position. There's a hunch that from all of my conversations around this whole space that there is a massive amount of human intellectual capital working in that particular space because of the flexibility of how Ethereum is based. And there's a load of flaws. There's flaws about everything. So I'm not saying it's a perfect world. I also don't think of Bitcoin and Ethereum as the same thing. Bitcoin to me is this pristine collateral. It's perfect. I don't need... Now, whether everybody builds a lightning layer and all the other stuff on top, great. I own tons of Bitcoin. But I see the amount of intellectual capital that's going into the Ethereum space. And I'm thinking, there's a chance that something really, really big comes out of

this. And so I think of it as a platform. And it's a very crude way of looking at it. But if I see a lot of people all building on one platform, then the probability, you know, as a VC, the probability of one of those bets paying off huge, let's say DeFi ends up being on there and it becomes a real thing, whatever it may be. Who the hell knows? Could be intellectual property rights. I don't know. Don't care. The point being is, I think there's a chance that Ethereum can have a larger market cap than Bitcoin. And that doesn't make it a better currency or a better investment. It's because by the nature of a platform versus an asset, you know,

gold is the purest form of money that we've had. And it's a $10 trillion asset. The currency markets trade $4 trillion a day. And they're not, they're not in any way the same shape or form, but it's a bigger platform because more people use it. So the currency market overall is worth more. So I just think of it in those terms. And again, it's a very macro way of looking at it, which is not interested in the fight between the technologies and what tribe believes in what and how many coins can you measure and what's the total supply. It's like, okay, there is a chance here that this does really well, but I don't have enough conviction to make that my large bet. My large bet is Bitcoin because I have full conviction. Got it. And so one of the things that's so interesting, whether it's you or other macro investors, the common theme is obviously courage, conviction, but also open mindedness.

And I think that one of the things that crypto probably doesn't do a good job of is encourage the open mindedness. Right. It's very kind of tribal. Whoever's right, wrong, whatever. It's just a full out, frankly, kind of intellectual war. It's like this war of attrition when it comes to ideas, which there is very strong benefits and there's some healthy nature to that. But when you look at it from a pure kind of trading and investment standpoint, having the open mind to read things, look at things, understand new things is really important. And so how do you one stay open minded as you get older, you get more experience, you kind of have seen things and you don't fall into the trap of like, I've seen this before or I know how this is going to work. or I'm the smart person in the room? Are there things that you do, content that you consume? Like, how do you keep an open mind

kind of year after year after year for long periods of time? One thing I've learned is you need to think more about human behavior and incentives and why people are doing things. So as you alluded to, why is it so tribal? It's actually a throwback to 2016 when there was a lot of these projects rising.

Nobody knew who was going to win. Everyone put their money in them, and you want your own to win, right? It's like going to the horse races and saying, my horse is winning. Sports teams, right? And that war is still being fought, and it's a false narrative now. Because Bitcoin's dominance as what it is, is now established. It's clear. It's institutionalized.

That's over. So does it matter about the rise of these other things? They're not in competition with each other. But human behavior is driving that. And I think as a macro guy, it's actually to my advantage because if you call it shit coins, I want to know about it because I know there's opportunity because you're being dumb. And you're being dumb, not that you might be right, but you've got a closed mind. And if I'm up against somebody with a closed mind, I can find an edge. And that's how I look at this. And I look at this whole space and I say it's a very narrative-driven space. It's all behavioral-driven.

So use that behavior to your advantage because within that is something interesting. I'm also intellectually interested in the future because that's what I do. And if somebody tells me not to look at Ripple, I will go and look at Ripple because you'll not tell me what to do. and I will find out myself what its flaws and what its potential benefits are and assess the probability myself. I may reach exactly the same conclusions as you. I may reach a completely different conclusion, but imagine if I do, and I don't own Ripple. I don't, you know, I'm not getting into that fight, but let's assume I think it's got a 10% chance of becoming something much bigger, but the whole market is giving it a half a percent chance. Well, that misalignment

in risk reward, it's a huge opportunity. That's what we do in financial markets. We have to remain open. You know, you can't trade financial markets and go, well, I'm only going to trade Apple. And every other company's a fraud. They're not as good because their phones aren't as good. I mean, it's ridiculous. What we look for is, okay, where is the secular trend change? What's the best vehicle to express that view in? Can I diversify that view? Can I add juice to that view? Can I create alpha around that view? So that's, that's why I come at it. And I think all the macro guys, you know, Dan Tapia, we all kind of exactly the same way, Dan Moorhead, we just, we just come at it differently. And I understand that some of the crypto community

doesn't like that because it feels like we're kind of abusive of the space, but, you know, much like I talked about with regulation, I get people upset when I said regulation is a good thing. Well, if you want to get rich, people kind of have to come into the space. And talking, you know, I joke about this, talking about cyber hornets, I'm sorry, it's not going to bring a single corporate treasurer or a single institutional asset allocator into this game. And if you want to get rich, you need those guys to come into the game. It's a really difficult thing because people don't want the traditional financial markets in this space, but they need it for it to go up. It's kind of weird. Well, and I think one of the things that you're really describing here

is kind of the trend of technology adoption, right? There's kind of these different groups of people that adopt things. And so, you know, the most extreme example is pretty much every electronic-based technology was adopted by criminals first, whether it was beepers, cell phones, you know, VPNs, all this kind of stuff.

Now, they were doing it because they were constantly playing a cat and mouse game with police, right, or law enforcement. And eventually that stuff gets normalized and accepted in the mainstream. And so I don't see anyone walking around being like, ah cell phones those are bad those criminals they started using the cell phones first right bitcoin for a while that was the narrative was oh criminals use it now i think we're kind of

escaping that and people are realizing hey this isn't just about criminal activity or anything like that so there's pros to the adoption the one thing though is that many of the people who are early right and if it works they get financially rewarded for being early and having the courage and conviction to do it but it also the narrative does change right and to your point the narrative has to change for some people to come in and you get almost now uh kind of the suits versus um you know the the uh well look you know what it's like with music right when you you say oh yeah you know i love xyz radiohead i like them in the early days right that's the standard line and it's the same thing nobody wants it to change because they want to have it as they want it to be as they see

it the problem is this is a network it's a live living breathing thing the narrative is going to change the space is going to change and there's nothing you or i can do about it and that's the beauty of it that's the beauty of a distributed network is it's nothing down to us we're irrelevant in the picture all we can do is is get involved and not involved as simple as that for sure speaking of getting involved uh institutions seem to uh be racing each other to uh to get in on the trade or get exposure. I joke and say that obviously, you know, kind of retail or individuals were first, probably one of the first times in history that one of the best, if not the best trade in a decade, individuals beat Wall Street to the trade, right? And that's hard for a lot

of people to comprehend from the media to large asset allocators, even to some individual investors. Now, what we're seeing, though, is it's almost becoming cool or becoming necessary to have a Bitcoin strategy. And so it started with a lot of kind of the macro investors that we've already talked about. Then we started to see a couple of corporate treasuries. Now it seems like every large institutional investor on Wall Street, whether it's Guggenheim, whether it's Larry Fink from BlackRock, everyone is commenting about it. And it's hard to understand kind of how serious some of them are, right? Some of them are actually changing documents and positioning themselves to get exposure. Others are saying, ah, maybe it can become something which isn't

quite as far how do you view the institutional interest right now and then let's talk through kind of sequentially once an institution says we need to do this what is that process going to look like and is that something that happens quickly or is that still a 6 to 12 month exercise uh for capital to flow into the space so um before we get into a lot of that you raised the use terminology that i've used for seven six years in this space seven years which is everybody know how to have a Bitcoin strategy. So I've talked about this, and I talked about it a long time ago, is from what I could see, what I could see is there was a number of these narratives that happened to all corporates at the same time. So I saw it in the late 90s is we need to have an

internet strategy. And before that, it was obviously a computer strategy. But from my career it was like we need to have an internet strategy then 2003 it's like oh god we need a china strategy right so everybody piled into china then 2010 it became oh we need a social media strategy as social media kind of took over the world and then we've had in the last four years we've had probably a split between we need to have a video strategy which is one of the reasons we set up real vision and the other one is probably an ai strategy you know data big data strategy and i've been saying for years the next one to come is we're going to need to have a bitcoin strategy you know or it's a blockchain strategy or whatever the whole space

is so that is happening right so that's a rolling process as the adoption of technology continues at a relentless pace so from the conversations i've had it's usually a passionate person internally so there's a passionate person at the largest family office one of the largest family offices i know i can't can't explain where it is because they'll give it away um and he's been writing white papers for the head of the family about bitcoin because that guy can make massive change and you see that adoption it takes it's a fight we all those people have to fight internally, because somehow you need to get other people and a group of people involved. That's going on. Then, on the other side of it, we've got the market cap going up.

So, at $100 billion, nobody cared. At $300 billion, it matters. At $1 trillion, I need to be involved. So, suddenly, if it's $1 trillion, I need to be involved with the supply constraints in this thing. It's a $5 trillion asset before you know it. So that is going on. They are all having the conversation, but this is what I've been talking about, and I'm doing something about it myself now, is this community doesn't speak the language of those people. It's like me screaming at you in French. And you're like, I don't understand you. We've got to stop speaking in terms of Bitcoin philosophy and all of this stuff if you want adoption if you don't and you just want to talk about that stuff that's fine too

so what are those what language do we need to speak we need to speak the language of and i've talked about this barra b-a-r-r-a risk modeling that's an msci owned product there's a couple of other products like it which is what all the big asset allocators use for modeling risk and deciding what assets and how they fit in a portfolio but nobody talks this language nobody talks about kind of the full correlation analysis and all of these things and portfolio effects that needs to happen corporate treasurers they need another set of stuff and this is why and this is going to annoy everybody this is what investment bankers are so good at investment bankers are the people who know how to speak to these people

what is happening is the investment banks have started to talk about this and i'm getting phone calls. On a personal level, many of them are involved. Structural level, they're not ready yet. But those bankers are coming out of banks, leaving them and saying, OK, I can help. So speaking to another guy today from a firm in the US, super interesting, setting up a – they're just kind of launching, but it's big. And it's all based around custody and brokerage for all of these wealthy families and these institutions based out in New York. They're hiring these investment bankers because they know exactly how to speak to asset managers. So those conversations will happen. I'm trying to get a paper written by a Real Vision member who happens to have been one

of the guys who worked at Barra and all of this risk because I've been reaching out. I said, can I help? I said, yes, please. Can you just write me the paper that we all need to circulate to everybody to drive the next phase of helping these people get these people across the line? And so why is everyone's mind changing all at once, right? Whether it is individuals, whether it's macro investors, institutions, now you see even governments and corporations, everyone seems to be talking about this. And one of the frameworks that I use is Bitcoin is very quickly transitioning from contrarian trade to consensus trade. And obviously, in that transition, if you are in before the transition, that tends to usually be a good thing because the consensus trade is kind of what drives the U.S. dollar price of an asset. But what is it? Is it the macro environment? Is it just the lights clicked and the career risk is taken away and now Stanley Druckenmiller and PTJ are in or what is it? All of those are signals. The actual things is all of us are uneasy. We've been uneasy since the financial crisis and probably since 2000. Anybody involved in financial markets has had a sense of unease. We've also had a sense of optimism about technology. And here are those things meeting. Here's the technological solution to the unease that we've been feeling.

um and so i think that's why it's resonating and people come from different angles whether they're technology this is an amazing future or like this is all fucked i need something to help me the life raft all of those people are coming together that's quite a super narrative and i think it's dead right as well i mean this is why i mean when i look through the other side i think we're going to this is a fourth turning moment i think the entire financial structure of the world is in flux and if this moment gets seized upon properly everything will change now it doesn't mean we'll come up with a perfect answer maybe bitcoin ends up being the solution at the very end but we got a lot between here and the very end to go i mean that's a couple of

decades so walk me out um kind of in your mind 10 years from now 15 years from now what does that look like? Is it the hyper Bitcoinization that kind of hardcore Bitcoiners would describe? Is it something else? Like when you look out and you're talking to one of your macro investor friends or a family office or an institution, they say, hey, you got a lot of money allocated to this investment. Where are we going? How do you answer that? Okay. So the gateways that I'm looking for on a very macro perspective is, okay, we've seen the fintech layer being built. we've seen the banks kind of go okay this is going to happen what do we have to do we've seen capital coming into the space to allow these people to build stuff we've seen a various different

platforms and different solutions to different problems and solutions to problems that aren't problems either so we've seen that okay so that's great that's where we are now so what's the next big catalyst next big catalyst in prices institutions but they're not what's driving this space. The next part, because it's the disruption of money that's going on, the next part is what the central banks are screaming at everybody, is they are going to change money. And my belief in that is they are going to change money, not only just in the basket that we talked about, or some way, shape, or form, but they're also going to change monetary and fiscal policy forever. They're going to blend. So central banks will be able to do direct stimulus.

now that means the rise of behavioral economics which has been used in silicon valley for a long time facebook's built on it network effects metcast and all they're all the same thing that is going to come into this space so that means they can penalize you with negative one percent interest rates because you're a saver and give a student positive interest rates or they could they could do anything they want within programmable money now benoit courier from the ex-ECB, now the BIS, talks about this openly, that the central banks are going to go down two different paths. Some will just have a digital currency, which is just digital fiat, but it allows much easier transfer. And others will do programmable smart money.

And clearly, people at the ECB are very interested in programmable smart money, because they've got a banking system that doesn't work. Velocity of money around the world is zero, on less than one so monetary mechanism doesn't work so you need to change everything i mean they're literally going to change everything i think what you're talking about and i don't think people really understand this but this is uh this is you know level 401 501 in the college course right but is essentially having monetary policy customized and personalized to the individual level and people can't think about that because they've never seen it before but i it sounds like you do as well fully believe that that is coming and it is part surveillance state it is part uh

you know superpowers for a central bank it is part technology advancement like all these trends coming together but this idea that i can actually treat you differently than your neighbor is the dream of a central bank it's also look if i was given the same set of issues let's say we're not going to get rid of central banks and go to bitcoin overnight and i'll come on to that process So let's say I wanted to solve the problems that we've got now. This is genius. This is literally genius. Because if you have big data sets and behavioral economics, you can do some really, really powerful things. now the flip side is it's terrifying because it can be used nefariously and governments are governments and they will edge towards that we get that right i'm not saying that it's good but it is also extremely good if we had this in place through this crisis we just had or the last

crisis we would have solved it so much faster what interests me again it matters not what my opinion is. It's, is it going to happen? And what do we do? And again, people just get angry about it. I'm like, you can get angry all you want. If it rains tomorrow, you can get angry about it, but it's raining. Whether you like it or not, deal with what is. This is coming in one way, shape or form. So, okay. We're now in the central bank digital currency world. We're five years out. That's when it's going to happen within five years, right? So the world's changing. It's a big explosion. The central banks have all said, we want private sector to build up the fintech layer. Happy with decentralized finance, happy with Bitcoin. We just regulate people on and off

ramps, make sure everybody can use it. Let's go. That's what the stage has been set. So then what's the next stage? Well, this is all for money still. And governments are governments, so they're going to use it for nefarious means over time. And we're going to get a bit more uneasy again about it. So what are we going to do? Well, there'll be some Latin American countries bored of having currency crisis after currency crisis say, well, you know what? I'm going to put Bitcoin into my reserve

because Bitcoin at this point is probably a $10 trillion plus asset. You know, that's when I think it's worth a million dollars. So five, six years time. So some country, Costa Rica goes, you know, we're going to hold our reserves in Bitcoin. And then they get rewarded for it. Like Michael Saylor's just been rewarded for putting it into his company, right? It's the same process.

And behaviorally and game theory will tell you that everybody else will start doing it. So then you have hard currencies versus other currencies, and it puts pressure on those other currencies. And so that's the process that can lead to hyper-Bitcoinization. Does it get there? Who knows. But that's the process. I want to throw out one kind of variation to this scenario. Because I think what you just described is what I'll call the central bank perspective.

How does the central bank eventually adopt it and we get to hyper-Bitcoinization? But one kind of stepping stone in that direction that I've started to think a lot about and I want your opinion on is actually switching cost and friction between currencies is very high right now. If I have dollars and I want euros, for most people, that means literally going to the airport and going to a currency changer and getting ripped off and exchanging money. At the most basic level or fundamental level for the majority of people, that is currency trading or exchanging. Obviously, as you get to more sophisticated levels of the financial sector, that can become easier, less friction. But for the everyday person, it is super high cost and super high friction in order to change currencies. Well, if all of a sudden all of the currencies are digitized, you have a digital dollar, digital euro, yen, everything, and you have Bitcoin and you have everything else. and the adoption of digital wallets goes through the roof because now everyone needs a digital

wallet, we're going to enter this world where the switching cost is the click of a button. So I can go from dollars to Bitcoin to Euro back to Bitcoin to dollars with literally just the click of a button. And so one of the things that also going along this lines of kind of customization or personalization of monetary policy is we've all have this mentality that you do everything in the same currency in your life. And the only time that I would go from dollars to another currency is if i'm traveling but is there a world where maybe what we see is the united states says hey we want dollars for taxes for example or you have to make payments but if i'm not actually spending if i'm not conducting a payment i will keep my wealth

in bitcoin for example right so i use it as a store of value and then when i want to come out all of a sudden i click a button i you know immediately transition into the dollar or digital dollar and then i spend it and so you now can almost get into this multi-currency type uh modality that allows people not to be siloed or kind of confined to a single currency in their life. They can now use currencies for different purposes based on the advantages or disadvantages that that currency and that monetary policy provides. But I don't hear people talking about that. And maybe it's just because that world's never going to happen. I don't know. That's how every family office lives. Every single family office has done that for 50 years.

they have a base currency where they have their expenses or their cash flow. Let's say they still own a business. Many of them will choose gold as a base asset. And they'll switch around currencies accordingly for interest rate differentials or other advantages. So that is normal. It's just not normal for average people because the friction costs are too high. But for wealthy families, it's normal. For hedge funds, it's normal. For asset allocators, it's normal. So yes, I think that's right. I think gold, I've always talked about as a personal reserve asset. But it's clunky. By actual physical definition, it's clunky, right? But Bitcoin, as you say, I've got my wallet. I keep everything in Bitcoin. I flip an in and out of where I need it,

pay my taxes. I have to go to the store. Store doesn't use Bitcoin because they're in the tax system fine that's no that's no problem um and i think that is part of the world that we will adopt it because it has uses for us but that's the same use that the costa rica or whoever adopts it for the same reason and that's it's that process of choosing it as a base currency for everybody that happens over time behaviorally just because survivor takes the winner takes all essentially but but yes people are going to get uses and again they have no understanding what's coming people just don't understand the amount of tokenization that's about to happen all right you are one of the most intellectually honest and open-minded people i know so i've been looking

forward all day to ask you this question i want you to flip around on the table and argue against your bull position what is the bear case for bitcoin and what would have to happen for you change your mind and sell your bitcoin firstly and obviously price action and that's not you know oh i'm raul get scared as the mean you know don't scare raul it's like we can't we can't roll it's like it's like if there is a structural change in the pattern here's something i've I've been thinking about that I don't think anybody's thinking through, right? Come all in institutional investors, right? We want you in. Okay. Then we've got a problem is we're going to have to start dealing with month-end rebalances, quarter-end rebalances, where they become massive

sellers. If Bitcoin goes up 100% in a month, which we've seen many times in the past, they end up selling 50% of their Bitcoin. Okay. That's suddenly a massive supply change to the market. So maybe the structure of the market changes in a way that doesn't have the risk or reward that we're all expecting, because we're all a bit backward looking. You know, I look at my price projections from a number of different angles, but maybe the structure of bringing institutions in changes entirely, in which case the volatility gets massively dampened, the price spikes get dampened, and in which case you don't really outperform, let's say, emerging markets that's a that's a possibility that's out there that people aren't thinking

through the more liquid a market the less the volatility the less the upside the upside is so big right now because nobody's in it now are there other market structure things that you would put alongside that so that's one kind of red flag or thing to watch are there other things that you would put in that category i would say that if china nationalized the miners or did something something completely outside of our expectations before we can diversify the mining pool i know people are trying to build it off gas flares in texas and other stuff which is great if something happened there where somebody could control it which i don't believe can happen but you know all sorts of things i don't believe can happen can happen um so there's something

something there would make me concerned you know if i thought about what freaked me out in 2017 and why I got out early was people started forking the thing. And we didn't know whether forks were going to work or not. Were they going to take half the liquidity and ruin the whole thing? I didn't know. So I'm like, I'm out. So something of that kind of nature would make me think. I don't know what that is, but, you know,

there's a lot of smart people developing a lot of things, and who knows what comes along. Obviously, regulation. Should the regulators completely change course? All I see is positive regulation. But if the IMF stood up and said, we've agreed to move to the central bank digital currencies, and as part of that, every member of this basket has banned all cryptocurrencies. And they come with prison sentences or whatever.

Yeah, clearly, I'm going to change my mind. Well, I don't know, will I change my mind, not change my mind, it kind of makes a better case for Bitcoin. But you know, I was gonna say, there's two arguments there. The price goes down or actually the price explodes upwards. Yeah, I kind of value my freedom and I value my freedom. I don't want to go to prison and still be managerially free.

So I don't know. So it's difficult. It's difficult. And that makes me nervous when I can't find anything obvious. But my guess is with a strong, powerful force like this, whatever will stop it is not obvious, which is why I thought maybe just the flows from institutions where like the hedge fund game when I started was 15% volatility

and now it's 6% volatility and, you know, maybe it changes. And then it becomes a different game. If that's the game, then the game is build applications on top as fast as you can. Once the volatility dies down, you can do anything with it because it becomes less of a speculative asset and it becomes an exchangeable asset. It becomes money, basically, more moneyness.

So, and I think that that is, if you were to ask kind of the believers of Bitcoin, So not traders who are just looking from a financial return perspective, but people who hold it and believe it's the next global reserve currency, etc. This idea of the transition of narratives, kind of the endgame is it is a stable asset that can be used as a medium of exchange and a store of value. Part of what you're almost describing is like there's this tradeoff between if I am a trader and volatility gets dampened, that's a negative. But if I am a holder and I believe it's going to be the next global reserve currency, that dampening of volatility actually furthers my argument that it should be the next global reserve currency. Like there's this yin and yang almost at play between those two things. And that's right. Right. Because what we're trading is the adoption curve. That's all we're doing.

We're just trading Metcalfe's law. Right. It's doing this. We're trading this. The top of the curve is full adoption. And that's OK. Everyone has to play their part in that. and the end of it could be that Bitcoin is the world's reserve currency. Okay, we have to change an entire global mechanism for that to happen. Great, we can all make money doing that too, because people are going to be building businesses. There's a whole world of stuff out there. But for me, looking that far out, I'm interested in it. I think it may happen. I think there's a reasonable probability over time. I don't know how long that time is. And all I do know is from here to now is a long time.

Absolutely. Another question that a lot of people had was you've got this massive position right from a percentage base of your liquid net worth. What are the triggers that you would look to to sell? So in a bull case, the price goes up, there's certain events that happen. So one is just like what would cause you to sell or incentivize you to sell? And then two is how would you structurally go about that? Is that a single trigger? I'm going to sell my entire position or is that I'm going to sell into a bull market? market how do you think about it basically the answer is when i talked about lifestyle tokens okay i am actually taking another huge risk is i built and run a business and that's been a risky hard-working enterprise and i don't take any money out of that business i draw extremely small salary so for me i have foregone current returns for future returns so if bitcoin goes up a lot i'll take some chips off the table and so then i can know okay fine anything happens i'm safe i've always trade from position of security. And then I just run the rest.

Now, yes, I would probably scale out over price objectives and hold a core position over time. Because I do think it goes a lot further up over time. And so, you know, can I suffer the downside? Will it be a 90% downside this time? Highly unlikely. It'll look more like a commodity cycle, so probably 50%, 60%,

but it could be, you know, the usual three or four years. And, you know, I would happily participate in that, you know, and just not worry about it. If I took some chips off the table, everybody's safe, I can do what I want to do, and I don't have to worry. What are the charts or metrics when you wake up every morning that you check first? And I think of that as kind of the things you check when you first wake up have the highest level of importance or signal. What are those things for you? So next to me is my Bloomberg screen. So, I mean, my Bloomberg screen is one whole group is all stock markets,

and I actually don't look at them a lot. Well, I kind of do, but I don't really care because I don't even understand it any longer. They're so driven by human behavior that I'm like, whatever. I look at the bond market because the bond market is the truth of what's going on in the underlying economy, so it's always useful. Quick check of bond yields, going up or down, anything going on. Quick check of commodity markets, just because, again, there's somewhere between sentiment and bonds.

they're kind of economic but slightly and then i check uh currency markets of which i include bitcoin as one of my currency positions so that's what i i just very quickly glance that okay so now i know what's going on then i go to news so i start start with twitter unless you've been on my feed asking questions and i'm like fuck i can't even look at anything on it so that i'll flip to the ft and you know flip through some headlines or bloomberg and when my twitter feed is cleared up i'll go back through it and be able to read uh what's going on because twitter is a great hive mind i also use the real vision exchange there's some really smart people on that um i'll then go and see what content was out on real vision that morning and you know i'm up early

so usually i'll watch a video on real vision go through this go through my email go through all the markets all between kind of five and six five and six thirty in the morning You mentioned Real Vision. It has become one of, if not the go-to resource for kind of macro content. For those that don't know, Real Vision is basically take all the great aspects of YouTube, but bring the smartest people in finance on and basically they interview each other. And so you can imagine the quality of the information, the insight and just kind of what you can glean from that. How has it gone so far? And kind of talk to us about the growth this year, the launch of the crypto division, I guess you would call it, and kind of how you view the progress of Real Vision so far. Yeah, I mean, one of the premises behind Real Vision is that financial sense of unease. You know, it was all within all of us.

and I knew that people needed better information. So that was the premise behind it. Democratize that information. Don't just give it to hedge fund guys like me. Let's give it to everybody. So that was the idea. And that premise obviously came to life over this period. It's like everyone needs to know.

So that's been great. That's really helped change me. I get emails every single day. I mean, walls of emails, LinkedIn messages, Twitter, thanking us for doing what we've done to empower people. So that's been great. We launched a community because people want to speak to each other because they're really smart group of people. Our users,

our members are the learning tribe. I did the thing I asked them to make a video to say about who they are. Cause I didn't really know you've got this breakdown of, you know, 52% U S and 45% financial market professionals. Who the hell are these people? Amazing. We've got like 300 videos. We've got neuroscientists in South Korea doing neuroscience while watching real vision video, listening on his ear pods. One of the guys working on the biggest telescope in the world in the Atacama Desert, an astrophysicist, is watching Real Vision while he's waiting for the stars to come out to taxi driver.

I mean, but they all come with knowledge. So that whole community thing is exploding for us. And then so the business is doing really, really well for us. And we're just becoming a kind of a center of this community, of the financial community. and that's great where we all kind of work play together like you know i'll come on your podcast you'll come real vision we all part of the same community and real vision is becoming the kind of meeting place for all of that and many people came to us and said you need to do something crypto because one thing about real vision was we're unbiased i may have a view but i'm not

real vision real vision is you coming on and talking to somebody else or you know one person interviewing another it's it's it's the broad exchange of views so somebody said listen we've got a problem in the crypto space we need to be able to talk the language out of institutions we also need to be less tribal and more understanding of each other of what's really going on out there because this is a broad shift and many big players came to us and said can you do something about this so we decided that we would launch something in the spirit of crypto we thought we'd do it free and the only way of solving for free was working with some of the you know best partners in the world so we've done with block fire and silver gate and we're just

and that's another sponsor. But basically, we've created Real Vision all over again, but just crypto. And that's every aspect of this, from Bitcoin maximalists to people doing weird little applications somewhere, everything. Because we want to just make sure

that the playing field is leveled. Just because you were in early doesn't mean you get all the chances. That's not fair, because that's the same as the financial markets were before. What it is here is we're democratizing this too and get everybody into the space. And it's been amazing.

I mean, we only launched a week ago and we've got 50,000 people on the platform already. It's crazy. Yeah, it's huge. I mean, people- I love the internet, man. It's amazing. It's amazing.

So, you know, it's growing fast. But Real Vision itself, even the YouTube, the standard YouTube channel, we now have 400,000 subscribers and like 3 million views a month. and podcasts, our podcast now does 650,000 downloads a month and we're launching four more podcasts. We're launching education as well.

We've got whole education tiers coming free within the content. So not only, because again, you and I know a lot of people don't understand what we're talking about. So what we're building in is education into all of those membership tiers that's free, world-class knowledge. So you can get your education and then get the content to help you figure out what's going on. makes so much sense all right before we wrap up i want to play a rapid fire game with you i'm

going to throw out a word or a phrase and you just mind dump on me whatever comes to mind yeah first up is bitcoin winning ethereum interesting xrp hilarious central banks net sellers of gold Boring Stanley Druckenmiller Legend Paul Tudor Jones Mentor

Kathy Wood Amazing Federal Reserve Boring Janet Yellen In one word You can do multiple words interesting to see where this goes that's a central banker running money running fiscal

policy which is what i was talking about before and lastly financial markets under a biden administration same as it's ever been it's pretty good where can people find you on the internet and find out more about real vision yeah find me on twitter i'm always hanging around causing trouble or answering questions i you know i do get involved so at raul r-a-o-u-l gmi and um real vision crypto because i know a lot of people watching this crypto people just real vision crypto.com or just go to the home page and click on the crypto bit and it's free so just stick in your email and you're wall to wall a fire hose of content listen man as always it's a pleasure we're gonna have to do this again and hopefully next time we do it uh we will not be in covid

time so we can do it again in person. Yeah, we'll get you to Cayman next time. I'm definitely game. Peter McCormick's coming, so perfect. That's right.