“It’s nothing about the philosophy of Bitcoin that people like to think that I’ve changed my mind on. It’s nothing about what I think the future of Bitcoin is which I haven’t changed my mind on. I wrote the first macro strategy piece on Bitcoin, I think, ever published back in 2012. I’ve maintained that view, but my job as an investor is not to have my philosophy rule my investments. Some people can. And that’s okay. I have no issue with it, but what I started to do was understand what drives the price of Bitcoin and what drives the price of digital assets overall. And that’s when I started digging into Metcalfe’s law and network adoption models and I realized. Okay, now I’ve got a pricing framework for this stuff. So then I started doing the work and I saw that the ETH network was growing faster.”
Earlier in the year, during a twitter battle with Bitcoin strategist Greg Foss, Real vision, CEO and macro guru, Raoul Paul, revealed that he only owns one Bitcoin. The information came as a big surprise to many members of the Bitcoin community because of how passionately Powell speaks and tweets about the world’s largest cryptocurrency. While responding to a tweet from Foss accusing him of misleading people to trade bonds, Pal revealed that he owns one Bitcoin because of the questionable attitude of Bitcoin maxis. Here is the tweet:
Before he dropped that bombshell, Pal in previously revealed that he owns more Ethereum than Bitcoin, yet no one expected him to have only one Bitcoin. The Real Vision and global macro investor CEO made his first Bitcoin purchase in November 2013. He sold for a 10x profit three years later, shortly before he could have made over 20x had he started buying back in 2019 through 2020.
In a recent interview with Bitcoin archive, Pal he speaks extensively about why he decided to make the switch from Bitcoin to Ethereum. According to the macro guru, he didn’t actually drop Bitcoin because of the community or because he stopped believing in the asset quality. He just found a greater asset. We will now take you to Raoul Pal’s interview, and he has one more surprise for you.
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“It’s basically about volume, or dollars transacted in volume. On a monthly basis versus the number of active addresses, ETH has been outperforming for a significant period of time in terms of the vibrancy of its network, and I looked at the chart of the cross rate of ETH versus Bitcoin. It looked like it was going to break out.
So I started dipping my toes in as soon as it broke. The ETH chart itself looked great. So I started thinking, ‘Well, if I want to get allocation, I believe in Bitcoin, I believe in blockchain, I believe that Bitcoin has a massive role in the future of the global monetary system as a global store of value over time. I think the technology is revolutionary, but Ether is another technology that’s built on top of the same kinds of ideas. It was going to outperform’ simply because it had nothing to do with philosophy, and you know, what happened obviously was more use cases were occurring for ether now. Can that change over time? Sure, I don’t have a problem with it.
So it’s nothing to do with philosophy, it’s to do with trying to maximize the returns on what is probably the greatest opportunity for investment and wealth generation we’ve ever been given. You know, I maintain that view. So my view maintains that I will adapt if I see opportunities for creating excess profits, so things like NFTs become interesting because I actually call options on each because, over time, if the ecosystem does well, more money piles into NFTs and NFT’s, which outperform ETH itself. Therefore, you’ve got the basis of ETH going up and the basis of NFT going up now. I also think ETH is flawed and ether is flawed because they are too slow. It’s too expensive at times, etc.
So that drives people, as I talked about before, same with commodity markets, to start looking at the opportunity set and saying, ‘We can develop something different.’ That something different ended up being things like Solana and Avalanche. They’re cheaper and faster, but they trade off decentralization. So everything is a trade-off versus Bitcoin’s decentralization. Some people require the decentralization above all things, while others require utility above all things. So what that did was drive different parts of the space as blockchain technology became almost ubiquitous in the future of technology. The opportunity for me now is, I’m not a stock picker, I’m a macro guy. I’ll never have a ton of I don’t trade really. I just buy this stuff and hold it, and occasionally I’ll switch my allocation from one thing to the other.
So, recently I bought some. I sold some of my Ethan and some other tokens, and bought more Solana’s. And that’s my second biggest bet right now, and could that change over time? Could it be wrong? Sure, but I’m not a big trader of alts. I just bought a basket of equally weighted baskets because I said I think the whole space is going from a market cap of a trillion to 200 trillion or so. So if I just hold a basket of stuff like Ave, Uniswap, just stuff. That is on a macro tactical allocation basis on a BIT of DeFi. I want a bit of layer one, a BIT of layer2, blah, blah. And let’s see how it goes in the overall cycle.
I remember you were saying something about this: absolutely, there’s no reason to own Bitcoin because olds have a higher beta and during the bear markets you want to own stable coins. Yeah, do you still abide by that? How do you think that’s held up so far in the bear market?
But I think that’s been pretty much the right assumption, because if it’s a bull market, then you want to own the correct beta. The hard thing is that it’s easy to make as a flip and comment. What beta do you want to own? Right, that’s the stock picking part that I’m not particularly good at, hence why a basket. My current view is that each outperforms Bitcoin over a period of time. I kind of stick with that because it’s a deep ecosystem. So it’s a macro bet as opposed to a micro bet, but some people are amazing at micro betting. It’s just not my game, but I observe stuff and I’m very interested in learning about new technologies and new opportunities to see if this is a place you could allocate capital to or not.”
Not only did Pal switch to Ethereum, but he’s now stacking up on Solana. Does this show that he is not really about philosophy but the trade? Or does it show that Raoul Pal is a fickle investor? In his interview, Powell also talks about the current state of the markets, from bonds to oil, crypto and tech stocks.
“My view is that we are. I think bond yields were topped last month and the month before, so I think that was thing number one. I was looking for item number two. And I was looking for the oil market to stop going up and it fell significantly. It’s obviously having a rally now. My guess is not whether that creates another new high or not. My guess is that it is not, because demand is being destroyed.
So, therefore, we’ve got two big factors that have been weighing on technology and crypto. In cryptocurrency, we had the liquidation event. So normally, when we have a liquidity withdrawal by the Fed, you get a liquidation event. We had a big one in crypto. So that feels like okay that monetary tightening has now washed through the crypto market and is less prevalent, so could we get a further risk off? Will we break the lows and not clear again? I said it’s probably not, but it’s possible, and again, I said kind of give it 60-40 odds. So why are we seeing this in crypto? Why are we seeing it in stuff like Arc, which bottomed two months ago?
Because again, these are the most forward-looking of all the parts of the financial markets. They are doing their job. They are starting to say, ‘Hey, listen, maybe the euro-dollar market’s right and the Fed is going to change course and liquidity conditions will ease somewhat’. Therefore they can rally. And they don’t need a rate cutting cycle. They just need inflation to die down somewhat and also for inflation to diet down. Forward-looking growth should be going up, not down. And again, they discounted early in advance and waited for rates to stop rising. So I think that conditions are fine to find a base. Then if rates start coming lower and financial conditions start easing, then these things will be off to the races.”
We might not know how the declining macro environment will impact the crypto market in the short term, but we do know that the top crypto assets are putting up a very good fight. Now, that the shock from Tesla’s dump is over. The market is again making a quick recovery, almost as if a giant corporation didn’t announce it sold almost $1 billion worth of Bitcoin as a press time. Ethereum has also risen by over 32% and is now trading at $1,625. Other top cryptocurrencies are also seeing decent gains. An Avalanche, Shiba Inu, Polkadot, Dogecoin, Solana, Cardano, XRP, and Binance have all gained over 2% in the past 24 hours. With the overall crypto market cap still sitting above $1 trillion, many crypto exchanges are also recording a 100% in crypto trade volume.
What do you think about the latest trend in the market? Does this mean the bottom is in and we can expect to switch to a crypto bull market soon regardless of the economic decline?
[This article is a transcription of a video made by Savvy Finance]
[Original video: https://youtu.be/VAPRuTVAOfU]