Compiled by KarenZ, Foresight News
Raoul Pal, a former Goldman Sachs executive, author of "The Global Macro Investor", and founder of Real Vision, is well-known for successfully predicting the 2008 financial crisis. Recently, in a conversation with "When Shift Happens" and a speech at Sui Basecamp in Dubai, Raoul Pal deeply analyzed how to steadily accumulate wealth in the field of cryptocurrency, and discussed topics such as Bitcoin, Ethereum, Meme, AI, NFT, Sui ecology, Strategy Bitcoin strategy, investment strategy, macro trends and market trends.
Raoul Pal's dialogue on When Shift Happens Highlights:
1. How to get rich in Crypto without relying on luck?
How to get rich with Crypto without luck? Just buy Bitcoin and use DCA (cost averaging) strategy.
Newbies often fall into the trap of pursuing quick wealth, but this mentality is actually fraught with dangers.
When you start to envy others for getting 100 times return, you have already stepped into the dangerous area. Once you lose your rationality and let greed take over, it will be very easy to mess up your entire investment.
The Crypto field is rife with risks, such as DeFi attacks and wallet thefts, which requires investors to remain vigilant and rational at all times.
2. About Meme
Talking about Meme coins, Raoul Pal said that he did not hold Fartcoin, but he held SCF (Smoking Chicken Fish) and DODE. Although SCF fell by 90%, it is currently showing a good rebound trend. He especially reminded investors that no matter if they hold Meme coins such as Fartcoin, WIF or BONK, they must not let them occupy too large a proportion of their investment portfolio, because there is an 85% chance that such coins will return to zero. He was even surprised that LUNA did not evolve into a Meme coin, as he thought people would buy it crazily.
3. Stay away from market panic and return to value investing
If investors are panicking about the market, Pal suggests returning to their daily lives and staying away from the trading screen. Those 5-minute candlestick charts and 1-hour candlestick charts are actually of no substantial help in investment decisions.
Many people dream of becoming successful traders and earning 100 times the profit, but the reality is that those who can truly accumulate wealth in this field are those investors who insist on buying and holding for the long term.
4. Beware of Crypto Yield Risks
Regarding Crypto Yield, there are also risks in obtaining income through staking. For ordinary investors, when faced with an opportunity that seems to bring a 20% return, they must be aware of the risks behind it.
5. What do you think of Michael Saylor’s Bitcoin buying strategy?
Strategy's Bitcoin strategy is creating leverage in the system. Strategy buys Bitcoin by issuing convertible bonds, which is essentially selling options at a lower cost. These options are bought by arbitrageurs (option traders), who then hedge on exchanges to deal with Bitcoin price fluctuations and the risks of MicroStrategy stock options.
At the same time, arbitrageurs will also use the fluctuations in the ratio between MicroStrategy's NAV and the price of Bitcoin to conduct arbitrage, and use market tools such as the price difference between perpetual contracts and spot, and the price difference between futures and spot to conduct transactions.
Currently, most buyers of Strategy convertible bonds are TradFi hedge funds and other institutions. Sovereign wealth funds such as Norwegian Bank may only value the Bitcoin element, while large hedge funds such as Citadel, Millennium, and Point72 also conduct arbitrage. These institutions are experienced in risk management and may receive systemic support. The size of their positions is reasonably controlled and they are not prone to liquidation.
In sharp contrast, traders who excessively use high leverage face huge risks, and cases of trading failures due to excessive leverage are common in the market.
6. Raoul Pal’s Capital Allocation
Regarding capital allocation, Raoul Pal said that Sui accounts for 70%, which is now far more than Solana. Sui's adoption and developer activities are doing well. In addition, he also owns some DEEP (DeepBook), which is the liquidity layer protocol in the Sui ecosystem.
7. The value and potential of NFT
Pal is full of expectations for the future of NFT, an innovative technology that can permanently store and trade non-transferable assets. From a macro perspective, the current scale of the Crypto industry is $3 trillion. Assuming that it grows to $100 trillion in the next 10 years, it will create a huge wealth of $97 trillion; even if it is conservatively estimated to reach $50 trillion, it will also generate an additional $47 trillion in wealth.
These wealth will flow to different people. Art is the upstream of everything. As an emerging field, digital art is expected to become an important destination for wealth. In the field of digital art, we have XCOPY and Beeple, and then the generative art movement was born. I spent a lot of time talking to some very famous people, and these high-end people are very interested in this field. After crypto OGs make enough money, they have a strong desire to collect art. For example, CryptoPunk symbolizes your identity and allows you to meet a group of like-minded people. From institutions to super-rich people to ordinary people, everyone is gradually beginning to realize the importance of digital art. We are still in the early stages. I hold many works of art, and I think this is a time span of more than 10 years.
8. Advantages and prospects of Ethereum
Regarding Ethereum, the network capacity of Ethereum has exceeded the current system requirements, and some mechanisms may be adjusted in the future to return to Layer 1. The status of EVM is like Microsoft. Many banks, insurance companies and large companies in the world rely on Microsoft, not Apple or Google.
Once you have an enterprise sales model, it’s almost impossible to remove it from your company because you don’t want to change it and take risks. Ethereum has stood the test of time and is well suited to the needs of financial markets, judging by the Lindy effect (the longer something has been around, the more likely it will continue to be around in the future). Will Goldman Sachs and JPMorgan build on Solana? Unlikely. Ethereum may bring a new narrative to the market and outperform Bitcoin in the short term. Looking ahead to the next five years, unless they screw everything up, its importance will become increasingly prominent.
Concepts such as Bitcoin Lightning Network and payment have limited effect on price increases. The core value of Bitcoin lies in its use as a means of storing value; the same thing will happen to ETH.
9. About AI
AI is developing rapidly, outperforming 99% of analysts. Pal thinks deeply that the rise of AI raises profound questions about consciousness and the future role of humans. He recommends that people actively participate, deeply understand and master AI technology.
Second, we don't know what this means for jobs and how we create wealth and so on, but I do know that what are humans best at? What are the things that humans can do that AI can't? It's being human.
I built an AI, Raoul, that reads the news every day, which is also written by AI, and built a chatbot trained on its own voice, with training data covering all its X content, YouTube content, and 100 books. Today, Real Vision users can communicate with the chatbot. Pal predicts that the two technologies will merge soon, and this change will have a profound impact on the podcast and media industries. In the future, the media content that everyone is exposed to will be unique. Moreover, human memory and words and deeds may eventually become the "nutrients" of AI, achieving a sense of "immortality".
10. Market attention and selection of high-quality projects
This is an attention game. People's attention to key tokens is scattered, and the duration of many narratives is relatively short. Pal emphasized that holding Bitcoin is always a wise choice. In addition, buying Solana at the bottom of the cycle and buying SUI last year are also good strategies.
Investors should focus on the top 10 or 20 tokens, focusing on projects that can continuously increase network adoption, which tend to have higher investment value. According to Metcalfe's Law, the potential of a project can be evaluated from aspects such as the number of active users, total transaction value, and user value.
Bitcoin has a large number of users and sovereign countries participate in its purchase, which is why Bitcoin is more valuable; Ethereum has a large user base and rich applications. Although the emergence of L2 makes the situation slightly complicated, it still has significant value. Investors should actively look for projects with both growing numbers of users and valuable applications. For example, when Solana was at the bottom of the cycle, the developer community continued to grow and the number of users remained stable. The emergence of Bonk further strengthened the market's confidence in Solana (Note: The host said that in a previous conversation with Toly, Toly mentioned that Mad Lads was a turning point for Solana); Sui is the same.
Highlights of Raoul Pal's talk at Sui Basecamp Dubai
1. Macro core factors: liquidity and currency depreciation. Cryptocurrency and the economy present a four-year cycle, which is rooted in the debt refinancing cycle. Since the global debt was high in 2008, we have been maintaining economic operation by borrowing new money to repay old debts.
2. Population aging and economic growth: Population aging leads to slower economic growth, and more debt support is needed to maintain GDP growth. This phenomenon is common in many parts of the world, and the correlation chart between debt and GDP can clearly show this dynamic.
3. Liquidity drives everything: The Fed’s net liquidity is the core indicator. From 2009 to 2014, it mainly relied on balance sheet expansion to provide liquidity, and then added tools such as bank reserve adjustment. At present, total liquidity (including M2) is crucial, and it has amazing explanatory power for the trends of Bitcoin (90% correlation) and Nasdaq (97% correlation).
4. Currency depreciation mechanism: Currency depreciation is equivalent to a global tax. The global implicit inflation tax of 8% per year, plus the explicit inflation of 3%, means that you need an annual return rate of 11% to keep your wealth from shrinking. This explains why young people are flocking to the crypto field - traditional assets (real estate, stocks, etc.) do not return enough, and they are forced to choose high-risk assets to seek excess returns.
5. Rich-poor polarization and crypto opportunities: The rich hold scarce assets, while the poor rely on labor income (purchasing power is declining year by year). The crypto system has overturned this pattern - young people seek breakthroughs through high-risk assets.
6. Crypto asset performance: 130% annualized since 2012 (including three major callbacks), Ethereum 113%, Solana 142%. Bitcoin has increased by 2.75 million times, which is extremely rare in the investment field. Crypto assets are gradually becoming a "super black hole" that attracts funds.
7. Sui ecosystem has great potential. DEEP (DeepBook Liquidity Layer Protocol) has performed best recently. The SOL/SUI ratio shows that SUI is relatively strong.
8. Analysis of current market misjudgments: People often interpret current market narratives (such as tariff panic) based on liquidity conditions three months ago, but this is biased. In fact, the tightening of financial conditions in the fourth quarter of 2024 (rising US interest rates, rising oil prices) has a three-month lag effect. The economic surprise index (comparison between the United States and the world) shows that the current economic weakness is only temporary. Looking back at the Trump tariff cycle in 2017, the US dollar rose first and then fell, and then liquidity drove asset prices up sharply.
9. Relationship between global M2 and assets : When global M2 reaches a new high, asset prices should rise simultaneously. Taking Bitcoin as an example, its price trend usually shows the characteristics of breakthrough, retracement, and then accelerated rise in the "banana zone". Compared with the 2017 cycle, Bitcoin rose 23 times that year. Although the current market is different, it is expected to still have considerable gains. The market is currently in the correction stage after the breakthrough of the first part of the "banana zone" and is about to enter the second part. Usually this stage will usher in the altcoin market.
10. Business cycle and Bitcoin trend: The ISM manufacturing index is an important forward-looking indicator. When the index breaks through 50, it indicates that economic growth has returned, corporate earnings have increased, and capital reinvestment is active. Bitcoin prices will accelerate. If the ISM index reaches 57, the price of Bitcoin may even reach $450,000. The recovery of the business cycle and the increase in household cash have led to an increase in risk appetite. At this time, the investment logic of altcoins is similar to that of junk bonds and small-cap stocks.
Note: Raoul Pal is also a member of the Sui Foundation Board of Directors.
