Raoul Pal Reacts To Bitcoin & Crypto Crash

Raoul Pal Reacts To Bitcoin & Crypto Crash

I use a theoretical number, so I think it was if you put 10 grand into that first bet, it would have been worth 1.4 million by doing the right thing buying reasonably low and selling reasonably high, and timing the market that was a small fraction. It was in fact I think I’d make 20 of what I would have meant. If I held on and then I went back and looked at. Well, what did I actually do? Because I massively increased my position in June. I still underperformed by 5x. Then I’m like what happens if I’d done the right thing. What I should have done which was my framework, which was you buy it, when it’s on sale, when there’s blood in the streets. So, I went back and looked at the bottoms of the bear markets assumed. I’m an idiot and I can’t catch the bottom of a bear market and miss it by 30. 

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Just put the same amount in each time that I started with that 1.4 million would have been there. Had I just doubled down each time or whatever the numbers go exponentially larger and that really stopped me in my tracks. It’s like here’s me doing the right thing buying when it’s in a bull market selling when it’s in a too strong a bull market buying when it’s down a bit. I still didn’t do as well as just holding it my framework is this is a long-term trend right. We’ve got at least another decade in this at least probably two or three decades but this part of it is going to continue to do very well. Sure bitcoin over time as it gets more users and more adopted won’t go up as much each cycle. But there’ll be plenty of others and plenty of opportunities. So, what we should be doing is using this thinking of the money you put in as your retirement money and writing it off and then just adding.

If you’ve got money in a bear market now. The problem is most of us don’t in a recession. But a friend of mine taught me very early. He said: REL is a key thing I’ve learned is he who has cash in a recession is king. So, that’s a combination of income and opportunity. You’ve got income, you’ve got some cash and now everything’s on fire sell prices. You’re the king. Price is rising, inflation is evil for our savings because the dollar in your bank account is worth less than a year’s time. It’s currently worth eight percent less which is quite a lot. So, this weird situation where we have to take the pain. We’re told we can’t buy as much and we’re forced into it by rising our mortgage costs and our food costs. 

All of this stuff will slow down, people will be put out of jobs a bit that kind of stuff. Then the overall demand in the economy comes down and prices come down. So, we’re all collectively taking the pain for this inflation that was created out of a whole bunch of different things from the pandemic through to supply chain issues through to underinvestment in commodities, through to the shift to green energy. All of these things have created this moment in time which is tricky. If we relate it to for example the crypto market so why did crypto stop going up well? It was macroeconomic factors and people like, well, what’s that got to do with crypto? Well, really simple is it’s a retail-based market and about sometime last year prices started to rise. So, people could afford to dollar cost average less so then there’s less demand for crypto the price of crypto falls it’s as simple as that we know that there is the global economy is splitting regionally that there’s a bunch of.

Let’s go back to the US dollar. The US economy is 25% of the world economy. As we said, a huge amount of the world’s debt it’s 100% of GDP. Tthe real problem is 80% of all trade transactions on Earth are in dollars. So, the US is 25% of the economy but dictates 87% of everything else that happens when the dollar goes up the dollar goes down. Everybody pays the price if the dollar interest rates go up. Everybody pays the price and everyone’s kind of had enough of it. It was known as the global reserve currency but it’s too big as a percentage of the global economy in China, and Europe. Everybody said we need to change this and obviously having control over money is power, so the Chinese want to create regional power and that will happen virtually. There is no way we can stop it. I think we have a tendency to look at everything through western eyes which is a change of the global order system. There’s a great book called the fourth turning. I think i’ve recommended it before everybody should read it. This is the full turning point. It’s exactly what’s happening and that’s not like geopolitical doom and gloom. It’s actually driven by demographics and the changes in the opportunities and the threats that happen over it. But what we’re doing is we’re moving away from an old system into a new system. I don’t think it’s going to be a one currency system. I think we’ll just regionalize it as the end of the world. We’ve been to worlds like this before. People think of it as cataclysmic because it’s changed from what we know. But really is somebody in Indonesia better or worse off. If they don’t use the US dollar better off are they better to borrow and lend money with their main trading partner which will be China better off.

It’s going to happen and it’s just splitting apart now. Does it end up in two economic zones or three or does somebody try to build an alliance of a globalized currency which is something that’s been talked about. The bank or idea of something that better reflects global trade may be too. I don’t know but change is happening and you can fear it. You’re not gonna stop it when the brits were the predominant power in the late 1800s early 1900s (just before world war one). The world was pretty much the most globalized it had ever been. world war one and two got rid of that. Then it created another re-globalization which was the rise of the US and now we go to a deglobalization. These things are kinda normal now how fractured do we get? Does Europe fracture into different regions? 

Does Spain fracture into different countries does the US? Is that on the table? I mean the Catalans want to separate, and the Basques want to separate. We see this all over. Those could happen or they may not happen but over geopolitical time spans they will happen because it’s always happened Italy wasn’t a country and we forget this. We just look at the present state and assume that’s the same. So, these things do move but it sells a lot of newspapers and eyeballs and attention span to worry over it. Most of the time, you shouldn’t have the opportunity. We want to worry about the existential crisis, its very human trait is to go back and read literature over the millennia. It’s always about we’re all gonna die, it’s a survival instinct within humans. It’s like we’re all gonna die. Everything’s terrible and it is terrible. If you’re living in Ukraine now, it’s absolutely awful. But, as all of those people who came out of World War II who end up having kids, things do, go on things, do change over time and so  -always out of bad times eventually leads to good times. It’s the same with investing that cycle is pretty common and it’s a very human trait foreign 

This article is a transcription of a video made by Jamie Tree

Original video: https://youtu.be/Y-gpwR8gGss