‘I started in 2020, all in on Bitcoin, and then started shifting towards Ethereum. I bought a basket which included a bunch of metaverse plays, some social tokens, some layer one other stuff, and I basically kept that. I don’t think I’ve traded anything apart from buying some NFTs. Then yeah, the only other major switch was I sold most of my bitcoin for ethereum about six to nine months ago.’ – Raoul Pal
In a 43-minute interview with Layah Heilpern, macro investor, Raoul Pal, discussed many topics about crypto but first he discussed what was in his bag and where he believes the market is going.
Pal was once all in on Bitcoin but switched mostly over to Ethereum, calling it the greatest trade he’d ever seen. Pal stated that he’s currently got 85% ETH and the rest with NFTs and other coins. In this interview, Rafael Powell took some heat after his 20k ETH call fell woefully short, but in this interview, he gave the reasons as to why his bullish ETH price prediction didn’t come to fruition and where he sees this current turbulent market going.
But before we listen to Raoul, make sure you hit the subscribe button and watch until the end as we give an update on the current market conditions and updates on current news.
Raoul Pal retells,
‘I think two things happened first. First, price got ahead of network activity, so what happened was that people weren’t there, or there wasn’t a lot of new transactions in the network; either the value transacted wasn’t going up, or the number of new wallets or active wallets wasn’t going up, so price went up and the network didn’t, and it didn’t stick.
The issue was inflation, so why does inflation matter? Well, because the crypto’s still a retail network, right? It’s really driven by retail and if you’ve raised prices on people and wages don’t go up as much, they’ve got less discretionary income. That discretionary income was the dollar cost average that went into crypto and so people stopped because they had to pay their grocery bills or their rent. That’s why it just stopped. It shows how macro economics influences crypto markets in ways that people don’t quite yet understand, but that was the big thing that happened at the end of last year and has continued to weigh on the market this year because network growth hasn’t really improved, we’ve seen rotations within the market. We saw people switching from each to layer one and we saw NFTs hold their value, you know, as people are reallocating what they’ve got in the market, generally reallocating ETH. You know, a lot of bitcoiners, you know, tend to stick with bitcoin, but a lot of ETH people reallocate different parts of ETH, like you know, NFTs particularly got a lot of attention.
The balance of probabilities is that we made the low last year. We retested the low this year, and I think the low is in, but who the hell really knows, right? You know, I got the back end of last year wrong like everybody else. I thought, you know, we were going to get this run and we didn’t see it. I think we’ve thrown a war 8.5% inflation on the Fed by raising interest rates all at crypto. We’ve thrown the Chinese ban, we’ve thrown so much at it and it didn’t make a new low. Usually that’s a signal that the market kind of has found its bottom and so now we’re looking for okay, what are the upside catalysts?
The upside catalyst would be if economic growth starts slowing. We’re likely to see long-term assets that tend to outperform in low-growth environments, and crypto tends to do very well in that kind of environment, much like Cathie Wood’s ARK does with those kinds of longer-term assets. That’s what we’re looking for as the spark. I think there is a change in structure so people fear inflation less and fear growth more. I think it’s over because the market is much larger than it was and bitcoin is not as dominant, so at the margin, the four-year cycle will have an impact but not as large an impact as before. You know, for example, the ETH 2.0 thing is going to create a potential dynamic that’s different. I think the cycles have changed. I think you know, over time, these very volatile trends get less volatile. We saw that with Amazon in its early days. It was like 95% up and down, then 65%, and then it just gets less and less and less as more people join the network.
It’s the same with crypto now. You know, there’s 600 million people, 300 million people using it now, so what’s happening is the volatility has dampened, so you know, I think the new down 85% is the new down 50, where we are now, so it’s kind of like we’ve had a bear market .We’ve been in a bear market for a year. You know, it could go down 65%, possibly, but you know it’s unlikely to go down 85%. People have a very recency bias and they only know what they know, and people who’ve been in the Bitcoin market have only been around a network adoption model for a decade, so they’ve only seen a few cycles. But if you go to Facebook, Amazon, or Google, they’ve all had these for decades and you can see how they work and they tend to lower volatility over time.’
If you want to watch the full interview, check out the link in the description. What do you think of Raoul’s thoughts here? Leave a comment.
A quick update on the market:
- Bitcoin broke the $40,000 resistance level, making its way back up to S40,198
- Ethereum broke the $3,000 level, trading at $3,061 at the time of writing.
The bears seem to have taken control of the market as the top two cryptocurrencies are down double digits in the past seven days, with Bitcoin down 11.9% at the time of writing and Ethereum down 10.6%. The data is showing bearish for both ETH and BTC as derivatives show pro traders are bearish and the number of active entities remains bearish for bitcoin. If you want to learn more about that, check out both links in the description of the top 20 coins.
- Terra showed the biggest movement in the past seven days, down 26%.
- Within the past 24 hours, Shiba Inu showed the greatest recovery, up 21% as it was recently added to Robinhood for trading.