Raoul Pal’s 2026 Playbook: Dollar, Debt, and Crypto's Big Debasement Trade

0:00 [on-hold music] Welcome to another episode of 51 Insights. Today with Raoul Pal. Raoul, welcome to the show. Uh, great to be here. Looking forward to this. Yeah. Raoul, it's a pleasure to have you here.

0:17 You are an economist. You're the CEO and co-founder of financial media company, Real Vision. You're also the co-founder and CEO of ExponentialH Asset Management.

0:27 You've been in investing for over 30 years, including managing hedge funds at Goldman Sachs, and now you're very well-recognized global macro investor.

0:37 My first question to you is, Raoul, you retired from active fund management at 36. You re-entered the markets with full focus on digital assets. Why digital assets?

0:49 So this, my story of digital assets actually goes back to, I left the hedge fund industry because I thought that longer term investing drove superior returns, and the hedge fund industry was becoming monthly NAV, and that was not a way of capturing macro trends.

1:06 So I started a research service called Global Macro Investor, which I've been now writing for 20 years, and that's subscribed by the world's biggest hedge funds, family offices, sovereign wealth funds, high net worth individuals.

1:18 And within that journey, I was in Spain, and I forecast the financial crisis in 2008, and then we had the sovereign debt crisis in Europe in 2012, and I forecast that. We all made money out of it.

1:31 And people came up to me at the time, friends of mine went bankrupt because of what happened. My parents' friends lost money from the Spanish banking system. And people were like, "Why didn't we know about this?"

1:42 So I went on two paths at that point, realizing that nobody know- owned anything in the financial system and nobody understood it. So I thought, how do I solve this at scale?

1:53 One was starting Real Vision, which was the idea of democratize financial knowledge, and we invented the long form finance podcast. So something like this wouldn't have happened if it wasn't for Real Vision.

2:03 We invented all of that, and now we've built this whole financial platform for people to learn, understand, invest, meet, that kind of thing. But the other side of the equation was,

2:13 once I realized that nobody owned anything in the financial system, and we had unprecedented amounts of debts, which have only got worse since then, I thought, well, we, we need something safe.

2:24 So I tried to set up the world's safest bank, and the idea was a non-fractional reserve bank. You give me a dollar, I give the dollar directly to the Federal Reserve, and we just hold it like that, so you know it's safe.

2:39 We had the head of Texas Trust Bank that we were acquiring. We had the ex-chairman of the FDIC was gonna be the chairman of the bank. So it was a serious group of people, a bunch of family offices.

2:51 We went to the Dallas Fed and said, "Listen, we've got this idea. We wanna start this non-fractional reserve bank that holds deposits directly at the Fed."

2:58 They said, "This is a brilliant idea, obviously, because, you know, the banking system is fragile, all the debts out there." We said, "Oh, that's great." And he's like, "I'll never give you a license."

3:07 I said, "Well, why not?" He said, "Well, you'll take all the deposits from the banking system." Uh, that was shocking. So then I wrote about it in GMI and said, and told people the story.

3:18 And somebody, one of my clients came to me and said, "Have you looked at Bitcoin?" This is 2012.

3:23 And I had seen it, thought about it, but I went down the rabbit hole and wrote the first ever macro strategy piece on, on Bitcoin back in 2013, and have been an investor in the space since.

3:35 With Real Vision, I've been able to educate people about how this is the future of the new financial system, how it's gonna solve a lot of the problems, even before I understood how big it was gonna be for n-not just the financial system, but the Internet overall.

3:48 You know, it's the new operating rails of the Internet. So I realized how important it was, and over time, it was a small part of my portfolio. By the time we got to 2020,

4:01 I'd been invested, I'd sold out, and then I bought back in into the panic in 2020 into Bitcoin, and I really went down the rabbit hole, started developing the deepest set of analysis and tools that exists today in Global Macro Investor based on this.

4:18 And I realized that the central banks around the world were using a trick to manage the debt. That trick was the debasement of currency via liquidity.

4:28 Whether it was the use of the central bank balance sheets, or whether it was the FedNow liquidity measure using the Treasury general account, the reverse repo and the balance sheet, or using the banking system to absorb the bonds that they needed to sell.

4:43 I realized the entire system was based around refinancing of these massive debts.

4:49 And what that was doing is back in 2008, we had a debt jubilee, and as opposed to forgiving the debts, all the central banks forgave interest payments on the debts. That's what zero interest r-rates were.

5:00 And it allows everybody to restructure their debts, and over the next several years, everyone restructured their debts to three to five years.

5:07 That created a perfect four-year business cycle based around the refinancing of debts driven by liquidity. But when you look at it overall,

5:18 the liquidity injections that come keep growing over time because the debt that needs servicing keeps growing. That was correlated 97 and a half percent with the returns of the Nasdaq and 90% to the returns of crypto.

5:34 And I suddenly realized that we've now got the most single most powerful factor in all of investing that's ever existed, that everything is tied to this debasement of currency, where they print excess currency and it optically changes the denominator, so the value of the assets goes optically higher.

5:56 I also realized that that also meant that our hurdle rate for our investing, we have to offset that debasement plus inflation. So we get to, like, this 11% hurdle rate for our investing.

6:09 And then I realized when I put all assets together and looked at them, since two thousand twelve, there are only two assets that really outperformed. Technology, because every day is more digital

6:22 than yesterday, or tomorrow is more digital than today. And that was doing about eighteen percent a year in returns. So yes, it was compounding wealth.

6:32 The S&P and gold and all of these things were basically in line with debasement, i.e. you weren't getting richer by owning them. And then there was crypto.

6:41 And crypto was the fastest adoption of any technology the world had ever seen prior to AI.

6:46 It was growing at twice the speed the internet grew at, and it was producing a hundred and forty-five percent returns over the same period per year, including three eighty percent drawdowns. Mm-hmm.

6:58 And so, okay, if everything's driven by one macro factor, we have this urgent pressing need in a highly indebted economy for new rails to operate within. Then

7:14 you only have two bets, which is the technology and crypto. And when you divide the Nasdaq by Bitcoin, it's down ninety-nine point nine seven percent. Mm-hmm. So you have the single most powerful macro trade of all time

7:30 that offsets the debasement, that is an adoption of a technology for the new internet. And so I'm like, well, this-- if there's any time to be all in, this is it. And so- Mm-hmm...

7:43 I went from being a diversified investor in global macro currencies, interest rates, commodities, to being highly focused on technology and crypto, with crypto being the single most important bet of all time. Mm-hmm.

7:57 And, you know, where we are today in that journey is we're a four trillion dollar asset class. That's pretty good for a new asset class.

8:06 But if we extrapolate the trend rate of network adoption, we get to a hundred trillion dollars within eight years. So we're only four percent of the way there. This is the biggest trade we- Only four percent.

8:17 So it's the biggest macro trade of all time. Yeah. You mentioned you wrote the first, uh, macro paper on Bitcoin in twenty thirteen. How has your thesis changed from then to how it is now? I didn't understand

8:33 the debasement of currency at that time. We understood something was going on with the central bank balance sheets, that it was driving markets. We didn't really understand any of that.

8:43 But my thought process was, at the time, Bitcoin was two hundred dollars. And I said, "Listen, it's either worth zero, or this is the future of the entire financial system, and everything will get recorded on blockchain,

8:55 and then we know who owns what." That was the-- my simple thesis. And I said, "Listen, if I just use gold,

9:03 um, as the basis of understanding, I can impute it like a stock-to-flow, how much gold is above ground versus known r- supply, uh, reserves of gold, and do the same for Bitcoin."

9:16 And I got, well, Bitcoin's probably worth a million dollars. And that was when gold was, like, two and a half thousand dollars or so. And I said, "Okay, well, let's discount me by ninety percent because I don't know."

9:31 So Bitcoin's at least worth a hundred thousand dollars, and it's only two hundred dollars now. I said, "This is the greatest trade the world's ever seen." And it proved to be so. Mm-hmm.

9:39 And it's the same thesis, is blockchain rails are the future of the financial system. I just didn't realize, 'cause smart contracts weren't around then.

9:47 But when smart contracts came out, well, it's the future of the internet as well. You also said that crypto is the biggest or best macro trade of all time.

9:56 You-- When you speak about crypto, do you mean, mean Bitcoin or is- No... Bitcoin a different asset class by now? No, Bitcoin is one of the elements of crypto. So crypto is the use of blockchain technology at scale,

10:10 uh, for the future of the internet and the financial system. Bitcoin is the collateral layer of the system.

10:17 And I, I-- It was I who coined the term pristine collateral back in twenty twenty to say, "Here's a, here's a collateral that can't be debased, that's globally accessible, that's fractionizable, um, and is immutable, and therefore this is a great form of collateral, except its volatility is very high.

10:34 But over time, as networks adopt, the volatility comes down, and it becomes more manageable as collateral." So that's Bitcoin's role in the system. But that's a small part of the overall space.

10:45 So if we're going to a hundred trillion, how big is Bitcoin in that? Twenty trillion? Twenty-five trillion? Well, there's seventy-five trillion of other value, and that's what crypto is.

10:57 It's the technology part of, of a blockchain. How else can you use blockchain? And it was smart contracts that really changed everything.

11:05 And if that crypto thesis plays out, how would you explain that to an institutional investor? How does that future financial system on the blockchain look like? Where do you see the biggest potential?

11:16 So in the financial markets, everything will go on-chain. So all equities will go on-chain, quicker settlement. We're seeing money going on-chain in terms of stable coins. We'll see

11:32 every derivative will end up being an NFT 'cause they're just individualized contracts that can be settled instantaneously. That's what prediction markets are. They're basically derivative markets.

11:42 So all of this is much more efficient way of ownership, monitoring flows, security, everything. So the financial system will en masse move entirely to this framework. It makes much more sense.

11:57 So but that is only part of the equation. The financial system is just some of this. But we've got a world where we're now about to compete with AI in the world that we live in, so we're gonna need digital ID.

12:09 We're gonna need proof of who we are. Okay, well, that's an eight-billion-person problem to b- get solved fast. With zero knowledge proof technology and blockchain, we can do that at scale, and we need it.

12:22 Then we've got the rise of AI agents, and agents are... It's like hiring somebody off Fiverr to build a website for you, do a PowerPoint presentation, all of this stuff.

12:33 You ask agents to do it, but agents still need to get paid because they cost in terms of compute and electricity. So how do they get paid instantaneously at the speed that AI and the internet operates?

12:44 The only way is blockchain rails. So it becomes the system by which all value is cleared and stored. We're seeing things like the rise of digital art, NFTs, showing that blockchain can store a single

13:00 piece of information worth $70 million in the case of a Beeple. So it's very secure. And so what can we do with that? Well, tokenization of logistics changes- chains is another way.

13:13 The commodity chains, the shipping chains, all of that stuff, 'cause it's a fast way of settling everything and proving who owns what within that chain. And that's just still the start. Think about the gaming market.

13:26 Billions of people game. They earn assets in the game, but those assets, once you leave that game, have no value.

13:33 Well, once you create a system of value, you create further network effects, so people can be in Minecraft, earn actual money.

13:39 In a world of AI where we don't know where our jobs are gonna lie, you have plenty of opportunities to do this. That's the rise of social tokens. Can you be paid as a sports fan to be a super fan? What does that mean?

13:52 What does that mean for the music industry? Does it create new opportunities for us as humanity to create purpose, meaning, and, and assets? Yeah. So that's the scale of this thing.

14:03 It's like, yeah, the financial system is an easy story to tell, but it's actually the future of humanity's operation, the coordination layer of humanity on the internet. Yeah.

14:15 And I would love to talk with you later as well a little bit more about NFTs. NFTs is something we've covered extensively here at 51 as well. But before we do that, let's go back to what you mentioned at the beginning.

14:27 So we have a big debasement trade, and I think that has also caught up with Wall Street in recent weeks. Goldman Sachs is talking about, uh, the debasement trade r- right now as well.

14:39 Can you explain that a little bit more? What's the debasement trade? Uh, what's the play here? And also, what's happening right now with gold? How does that fit all together? So the debasement trade.

14:51 We talked about we're printing, creating excess money to service the debt. That comes with a cost. What is that cost? It's like people don't really see it. They don't feel it. You don't know what it is.

15:06 What it is, is you are lowering the purchasing power of fiat versus scarce assets. So $1 today buys you... A million dollars today buys you less of the S&P 500

15:23 every year because the debasement of the, the fiat currency. Real estate, gold, crypto, art, classic cars, anything that is scarce value holds value.

15:36 This is exactly the same that happened for the Venezuelan stock market. In bolivar terms, it was up 1000% or whatever stupid number it was. When you look at in dollar terms, it was down 99%. Why?

15:50 Because they debased the currency to zero. And so that's currency debasement. It's happening about 8% a year on a globalized level because all the major central banks and governments are doing this.

16:00 So the debasement trade is, if this is the most powerful macro factor of all time, what are the things that offset it? Now, Wall Street is very slow on the uptake, so their first thing is gold.

16:15 But measurably over time, gold has not meaningfully outperformed debasement because its job is to actually just be stable money and have a stable store of value.

16:26 So therefore, you're not getting richer owning gold, you're protecting yourself from the debasement. Fine.

16:33 But if you're gonna lock up money in long term by buying an asset, you need to get rewarded for locking your money up. So to be rewarded, you need an asset that outperforms that debasement.

16:45 So Wall Street's finally caught on to this.

16:47 It's something I've been writing about extensively, probably have done more research on this than anybody else in the world, and now finally Wall Street's starting to understand the game, which is that scarce assets outperform.

17:00 Okay. Now, they've all gone to gold, but gold, as I said, is a store of value, but is not a compounder of wealth. But why has gold been outperforming recently?

17:13 Because there is a, what we call the Global Macro Investor, the GMI dominoes, where things affect... There's a, there's a chain in terms of time of what works. At the front end of it all is financial conditions.

17:28 How we measure financial conditions is interest rates, the dollar, and commodity prices. You kind of put a regression analysis around those, you create an index.

17:41 That leads the ISM by about, which is the business cycle, by about nine months. So that's the most forward-looking thing that we have.

17:52 Then we've got global liquidity that lags by about three months or six months, I can't remember the exact number, and then we've got the business cycle.

18:00 Assets fall somewhere within those, and then there's some assets that are lagged. But the business cycle is the main driver of assets in cyclical basis. On a secular basis, it's debasement.

18:12 And financial conditions lead all of that. What we found is that gold has shifted its correlation from being about Real interest rates to now being about financial conditions.

18:24 So think of gold leading Bitcoin by six months. That's the work that we've done that we think it a- now actually leads because Bitcoin is liquidity. That's the key driver.

18:37 Gold is being driven by this future thing, which is financial conditions. So they're all part of the same thing, but just different phasing. And do you think Bitcoin is different than any other hard assets?

18:52 You just said it's different than gold because it's been outperforming gold, and gold is a store of value. It's not a value multiplier. But how is Bitcoin different from any other hard asset?

19:05 Because it's, it's networked. So it's built for the internet. It's a networked asset. You don't know who owns what gold, but you know every single thing that happens with blockchains. You've got an asset where

19:21 you're-- the more you talk about it, the more you onboard people, the more the value goes up. So you have behavioral incentives built in to bootstrap this network.

19:33 So Meltem Demirors, an investor in the space, one of the OGs, has said, "We memed a two trillion dollar asset into e-existence," and we did. Because we decided it has value, it had value. We built social consensus.

19:48 That's never happened outside of gold. We've built social consensus around some code and said, "This is a better form of value." And so it's been a very different journey because once you look at how networks are valued,

20:06 they're valued by something called Metcalfe's law. And Metcalfe's law is based on the number of users on a network, and then the total value transacted on that network.

20:16 That is what-- why Amazon stock has been so good and Microsoft and Tesla and Google and Facebook. They're all Metcalfe's law, the adoption of a technology. And Bitcoin is the adoption of technology.

20:29 It's driven by Metcalfe's law, and Metcalfe's law is much faster than a standard cash flow analysis model. It's m- more valuable.

20:38 And because the number goes up, it keeps bringing more people into the network, which secures the network and creates a bigger network and more opportunity sets. We've literally not had anything like this before.

20:48 If you think of social media as an asset, that's kind of where you've got to within this.

20:53 If you had to talk to an institutional investor now who doesn't know anything about crypto, and I know, like, we've been in crypto for a very long time, and for us, it's evident that an asset like Bitcoin or most of the other crypto assets need to have some kind of inherent value.

21:11 Beyond what you just said, social consensus, do you think there's a way to attach inherent value to Bitcoin, the asset? Yes. I mean, I can measure it. It's Metcalfe's law. Yeah.

21:23 So if anybody underst- This is just a technology, right? All of the noise around pressing collateral, you know, all of the stuff Michael Saylor says, that becomes very complicated for people.

21:36 This is the adoption of a technology that's more suited for the internet age. Simple as that. Technology adoption that is networked uses Metcalfe's law as its model.

21:48 So how we model it is very simple, the number of active users and the total value transacted. Those are the two big dials.

21:55 When you map that out for every crypto and you get lots of different values, it's not the value itself, it's the chart of that multiply. Put it against the actual underlying asset, it's the same.

22:07 So it is exactly this, Metcalfe's law. And so therefore, the value transacted in a number of people means the network is valuable. That's what people have to understand.

22:18 You can do DCF analysis, discounted cash flow analysis on these th- It doesn't work. It's why it didn't work on Amazon. It's why nobody gets Tesla. These are network stocks. These are not classic cash flow stocks.

22:33 But you have to be a technology investor to understand these things, and once you are, it makes total sense. So the intrinsic value is the use of the network. It's not in the cash flows of the network itself.

22:47 And the more use of the network and more value of the network that's being used, the more valuable the token is because the token is the share of the network.

22:56 Or s- or, or you can think of it as a, the value of a slot on the network. So that's how they need to think about it. Yeah, makes sense.

23:04 Raoul, you started your career in traditional macro investing, uh, at Goldman Sachs. If you look back at that time, what is still relevant out of that old world today?

23:17 So the framework I developed as an investor was based around debt, demographics, and deflation. The issue, the largest macro factor on a secular basis that drives everything is actually demographics, an aging population.

23:33 An aging population slows growth, and what you do to offset the growth is you tend to build up debt. And so if you think of GDP, trend rate of GDP is driven by population growth plus productivity growth plus debt growth.

23:49 So understanding that, an aging population tends to be deflationary because they have less demand as they get older.

23:56 Look at anybody's parents who've retired, they spend less than they did when they were in the peak of their career. It's deflationary. And then deflationary with debt means the debt explodes in real terms,

24:08 and this aging population drives everything. That whole thesis has remained with me today, and it has always worked. There are periods of times where it goes the opposite.

24:17 You get an inflationary impulse because of post-COVID, whatever. But generally stre- speaking, that structure provably so works. The other structure I developed back then was the business cycle.

24:27 How does the business cycle drive assets?

24:29 Basically, if you look at the year-on-year return of the S&P five hundred copper, the Korean stock market, oil, Bitcoin, bonds, they're all driven by the business cycle, because that's the, when the economy accelerates or decelerates.

24:45 Kind of makes sense. Demand, supply. So that is the same. But then, since then, how the government's dealt with it changed. Firstly, back in the early days of my career, we saw the issue of debt.

25:03 First, we had the Asian crisis. The Asian crisis was a deflationary debt crisis in Asia, and it told us that the debt was now becoming fragile.

25:17 George Soros wrote a book called The Crisis of Global Capitalism, where he said it's probably going to go from the periphery, the emerging markets, to the core, which are the main markets.

25:26 It took a while to get there, but it happened in two thousand and eight. We had the day of reckoning of the entire system. So we kind of saw that coming. What changed is the, is how it was managed,

25:41 because interest rates had gone to zero, so we couldn't use interest rates. The old days of Alan Greenspan had gone, and this became the age of printing of money.

25:50 And it took me a while, and everybody a while to understand how that was affecting everything. So it has become a learning process.

25:58 Back then, as I said, I would be much more focused on interest rates because that was an easy trade. You just had to understand the reaction function of central banks. You could make a lot of money.

26:08 Currencies you could use, you could use leverage, and it was related to the interest rate trade, that kind of stuff.

26:15 But then this has all been abstracted away now because of the debasement trade, where it's become one trade. I mean, most of the great macro people of my time d-don't even trade macro stuff anymore.

26:28 Hardly any of them trade currencies and rates and... Even Stan Druckenmiller. Yeah, a bit from here to there. Really? Where does he make his money? Equities, bizarrely, as does many of the greats. Why?

26:40 Because equities are, are outperforming over time, and it's easier because you've got the secular trend, secular trend of technology. They're all technology investors now. They're not value investors.

26:50 They're all tech investors because tomorrow's more digital than today. So you've got this mega force, and then you've got the force of debasement and other stuff, and the management of interest rates affects rates.

27:03 Everything by central banks to stop things blowing up means you go out to the, the element that creates the best returns.

27:10 Many of those people have now gone into the crypto world, and as soon as they go there, they never come back. Mm-hmm.

27:15 And, you know, one by one, all these macro guys move to crypto land because the returns are so amazing once you learn how to deal with the volatility. And how do you think this is gonna play out?

27:24 Every currency is being debased right now. The dollar is very weak. Is this just gonna continue? And is it that simple as just investing in hard assets like Bitcoin or, or is, is there more? Okay, so

27:39 we've lived through this before, and it was the nineteen fifties. We had massive debts after World War II, and what they did was financial repression, which is you keep interest rates below trend rate of growth or CPI,

27:53 and you try and inflate away the debt. In the meantime, try and increase productivity, i.e. grow GDP and lower the debt burden.

28:01 And then what happened over time is they managed to get rid of debt to GDP from being a hundred percent of, um, debt to GDP to down to like twenty percent.

28:09 That pro-- And they had a perfect four-year cycle within that one, too, and that process took until the nineteen seventies. What changed? What changed was go back to that GDP formula.

28:22 Population growth, productivity growth, debt growth. They got productivity growth higher from technology. Debt growth, they'd been shrinking. But the big change was the baby boomers. Population doubled

28:39 and then doubled again almost in the world. And those people basically drove economic growth. Okay, so this time around, we're in the same set of circumstances. We have massive debts. Trend rate of GDP is too slow.

28:56 How do we pick it up? Well, productivity growth, that's probably gonna come from AI and technology. Use of crypto rails makes the financial system much more efficient. We can capture more value.

29:10 Debt growth, well, that's stopped, much like it had in the nineteen fifties. So it's population growth. Well, if you look at all the forward-looking population, they're all shrinking.

29:20 Every country is gonna shrink its population. And that's, you know, if we look at the births, deaths today, that tells you what the population's gonna be in twenty years' time or the working population. So we're fucked.

29:34 But this time around, we have synthetic humans, which is AI and the robots. And not only the s-synthetic humans, we can create billions of them, and they're smarter than us and better than us.

29:50 But how long does that take before it happens? Well, we're not there yet. People are using the technology, but it's not embedded in everything. But it will be.

30:00 So my guess is somewhere by around twenty thirty, twenty thirty-two, we completely transition to this new world I call the economic singularity, where GDP growth goes weird because we've got infinite population growth.

30:14 So that changes the whole formula. Productivity goes through the roof. But who captures it? Is it us as humans? Is it the machines? How does the system work? How does investing work when you've got AGI?

30:25 I don't know any of these answers, but I know that they have to continue the debasement trade until that happens. Until the trend rate of GDP picks up and they can lower debt to GDP.

30:36 And so I think we've got until twenty thirty, twenty thirty-two of this system operating, and what it's doing, it's causing a forced migration into the new system, which is blockchain.

30:50 So we're by, by continuing to debase, the knowledge of what is happening is increasing. That is forcing the adoption of the new system.

30:58 Because of how the new system works, the more people come onto the network, let's say Bitcoin, the more the number go up, the more people are rewarded by doing it, the more people move across.

31:09 And that's the good thing to do as well, and I think the governments understand this. I mean, having spoken to the Department of Defense about this years ago, they're like, "Yeah, this makes total sense."

31:19 Over time, they-- we need to migrate people across, and then it, it gets rid of a lot of the fragilities of the economic system. So that's the trade. That's what's happening. It's, it's a migration into a new world

31:32 that's being forced by the debasement of currency that won't stop until the rise of the AI and the robots. And then after that, we have no fucking clue how it's gonna work. Yeah.

31:40 And, and, and until then, we continue in those business cycles as like you mentioned. We also know that in crypto, we've always been operating at four-year cycles.

31:51 Do you think we will continue to do that, or is this the cycle where it's gonna be different? The question is, really, is what drives the four-year cycle? It was a long...

32:04 For a long while, people in crypto thought it was to do with the Bitcoin halving that happens every four years, and therefore there's a supply shock. But each year now, the supply shock is less each time.

32:16 So it can't be the predominant driver. But then when you look at all assets, they're all driven by a four-year cycle, and that was the d- cycle of the rolling or refinancing of the debts.

32:30 So then if the structure of the debts is most important, what could have changed? Well, back in twenty twenty-one and twenty-two, interest rates fell to zero again. So they extended the duration out by a year

32:45 and got it to about five years. So if debt maturity and the refinancing of it is the dominant factor, then if they've moved out from four years to five years, the cycle should elongate.

33:00 And that seems to be what is playing out by all the forward-looking indicators that we use. It says that the cycle doesn't finish until maybe this time next year. Mm-hmm.

33:10 So that's a brave call, but it's a probabilistic analysis. And when people say, yeah, but the famous words are, "This time is different," I'm saying it's not different. It's just based on the debt. It always was.

33:23 So if it's based on the debt, nothing's changed. The debt maturity has been extended to five years, end of story. Is there anything about that cycle that we're in right now that has surprised you?

33:36 Yes, the business cycle hasn't picked up yet, and the business cycle is the strongest cyclical driver.

33:44 So we've got the debasement, the printing of money, but really, the business cycle has been subdued because interest rates have held high and other factors. So that is what surprised us, but this is really...

33:59 it's a way of representing the elongated cycle. Normally, the ISM would have picked straight up, and we would be now with the ISM at, let's say, fifty-seven or something, looking for the peak. But we're not.

34:10 We're below fifty. But the forward-looking indicators suggest that it still continues as normal.

34:16 So what we've done is taken a business cycle that's this long and stretched it out a bit longer, and what we've seen is this year was that, the extra year in the middle. Okay. So we, we talked a lot about macro.

34:28 We talked about Bitcoin. I think we understand now what's happening at a global scale.

34:34 If we dive a bit deeper into crypto assets and different layer ones, Bitcoin, Ethereum, Solana, Sui, how do you look at those layer ones? And what's one of the layer ones that, that's most interesting to you and why?

34:51 So much like the Mag Seven, we will have a group of layer ones that will be the f- foundational layer for this new internet. Bitcoin is not that because it's, it's not a smart contract platform.

35:06 So it's its own asset that you alluded to before, which plays a very specific and important role. So then you've got the smart contract platforms,

35:16 and they're driven by Lindy effects, which is how long have they been around and did they fail? Ethereum is the oldest. Now, Ethereum stores more value than anybody else.

35:29 It has more active users than anybody else because so much is built on Ethereum. Even with the layer twos abstracting away some of that, the Ethereum ecosystem is gigantic. Also,

35:44 because it's been around so long and there's so many validators of the network, it is the most secure. And therefore, things with the highest value will tend to gravitate towards Ethereum.

35:59 That's why NFTs have mainly remained on Ethereum. Why? Because NFTs have been the most valuable single pieces of block space ever created, and they will continue to be so. Like the single piece, most expensive piece of

36:15 canvas, cotton ever created will be the Salvador Mundi painting by Leonardo da Vinci. Right. So- Mm-hmm. Or the most expensive real estate, and whether it's Central Park in Manhattan or whatever it is, right?

36:34 So that's Ethereum's role. Ethereum's role is probably a large part of the financial system because they need security. They need something that is less risky.

36:45 It's been adopted for a while, been tested, has a large number of developers. But then Solana comes in, it's faster and cheaper. Well, that has a whole bunch of use cases.

36:58 And what we've seen is the rise of speculation, but what that is is the battle testing of simple stuff like could equities go on-chain, should it be on Ethereum or Solana?

37:07 Well, you could build a layer two, but Solana's probably a more efficient way of doing it.

37:11 So Solana, I think for the transactional layer as opposed to the storage layer, becomes pretty interesting, and that's probably where its strengths lie, the transaction layer.

37:23 Then we've got the only other kind of really groundbreaking new technology of layer one, which was Siri, based on the Move protocol that came out of Meta. Siri goes one stage further. It's faster, cheaper than Solana is,

37:39 but it, it, it, it has a different elements of how it uses smart contracts, things called objects, that gives the chain the ability to do a lot more.

37:52 And for me, where Siri fits within all of this is, yes, you can do transactions, great. But really what it is is the scale of the internet. Things like if you se-- decentralize a social media at scale, like Twitter, X,

38:10 the only blockchain that could handle that throughput is Siri. And it works perfectly because each post would be a object within the chain, everything else.

38:21 So things like digital ID, things like gaming, things like social media, things like coordination of agents, feels like that's probably a Siri strength.

38:35 So we will use different blockchains for different strengths, and over time it'll become interoperable. It's a word we use in crypto a lot. People don't really understand it. But simply speaking,

38:48 you are in the US, I'm in the Cayman Islands.

38:51 I have no idea what camera you're using, what microphone you're using, what operating system on your computer, what make of computer you're using, what internet connection you've got, what... Nothing.

39:01 I don't know anything because all of that technology is abstracted away. I click on Riverside Studio and you're there. That will happen in blockchain. You also mentioned Me-Metcalfe's law for Bitcoin.

39:16 Is that another way of measuring the value of a layer one? And how do you even measure the value of a layer one? Well, the value of a layer one is Metcalfe's law. It's-- works for all of them.

39:28 In fact, every crypto asset's driven by Metcalfe's law. There is no other way of valuing these things, and anybody who tries to do it will get it wrong. It's Me- only Metcalfe's law. So Lindy effect,

39:40 think of it as the probability that people will use that chain. The longer it's around, the more likely it's to be used, if it's already being used.

39:49 We've got a lot of assets out there, Cardano, that doesn't have any use. We've got a lot of holders, but no real use cases that people are using at scale.

39:57 The Lindy effect in Cardano is because people have made money out of owning it, so they continue to own it, and it brings new people into that space. That's their Lindy effect.

40:06 The Lindy effect of Ethereum is it's been around longer. It's gone down ninety-five percent twice, and yet the developers stayed. The network activity grew each cycle, so it now becomes de-risked.

40:22 If you're JPMorgan, are you gonna use Ethereum versus Solana? Probably. So that is Lindy effect. So Lindy effect compounds into Metcalfe's law because- Mm-hmm...

40:34 to show that you survive and thrive means that more people adopt it over time, which drives the metrics for Metcalfe's law. Mm-hmm. And that's all layer ones, all tokens are all driven the same way.

40:45 In fact, ninety-nine percent of technology stocks are driven the same way as well. Twenty-five was also the year where we saw a lot of corporate chains coming on the market or being announced.

40:55 The most prominent ones probably Ark by Circle and Tempo by Stripe. How do you look at those corporate chains? It was always gonna happen because they still want control.

41:09 Will they win versus open source decentralized networks? I doubt it. But we've seen this with all sorts of things. Some things are open source, others aren't open source.

41:22 So I think they will always try and maintain control over the net- networks, but at scale, they're less likely to do as well. So we'll wait and see. But it was obvious that we're gonna go and try this.

41:37 Obvious that they want their own closed network. Okay, so let's move on to another topic I would like to talk with you about, which is NFTs, and we've done a lot on NFTs.

41:47 We looked at almost all consumer brands two, three years ago, uh, and analyzed what they did with NFTs. There was a huge boom and almost a boom and bust cycle because NFTs are completely out of the narrative right now.

42:01 But help us understand this a little bit better. Why do you s- still think NFTs are so important? Why are you so bullish on NFTs? So there's two parts of NFTs. One is the art side of NFTs, and the other side is what does

42:19 non-fungible smart contracts enable? The art side is the leading side. It's showing what happens, is in a digital world, we as- we ascribe things, digital things as now having value.

42:36 Before blockchain, you can create infinite amounts of digital things. With blockchain, you can create scarcity, so digital things now have value. That's a huge breakthrough. We did that with money.

42:51 You create scarce money, it now has more value. That's Bitcoin. And with art, we've done the same thing. Digital art had zero value, and now suddenly it has immense value.

43:02 And we've seen artists experimenting with NFT technology, what they can do, how they can get it to transform, h- what they...

43:08 You know, and we've seen that that store of value has lasted, and we've battle tested the technology at scale via a massive NFT speculation boom last time around. But NFTs are so much bigger.

43:24 Humanity is organized by a system of contracts. For you and I to turn up to this interview today, it was an email, but it's a contract. "Hey, you'll do this, and I'll do that." Everything...

43:36 time you go into a shop, every relationship you have is basically a contract, including your marriage or whatever. Everything is a contract. An NFT is just a contract.

43:52 It's a contract for a piece of digital art that is stored on chain, that you own it. It can be the contract for a house, title deeds of your car, more importantly, your own ID, or every ticket that exists.

44:05 We will definitely use NFTs more than anybody has a comprehension of, and it will be the largest part of these crypto networks. And brands tried it to create loyalty and networks around brands,

44:22 and many of them walked away because they don't have the long-term mindset and how to do it. And it's not easy. Everyone's experimenting. It was early. But let's say you're a ticket-- a company that has tickets.

44:33 Let's call you Eventbrite. You've got ninety million users have no connection with each other. You can't give value back to the network. You can't create an easy loyalty system.

44:48 You can't have people building on your network because it's not a network. It's a SaaS model of, "Hey, I just use your website, and I can invite a bunch of people to a party or an event."

44:58 Now, if you tokenize that, each one of those events becomes an NFT. We can see who's got what in their wallet. We can see, hey, Mark likes art events and music, and he also likes to go to these kind of bars.

45:12 And before I know it, I've got a social profile of you, so I can deliver things of value to you. Or you can then connect... Let's say you hold an event in New York City. Everybody has an NFT. You know who they are.

45:27 You're doing something different, or you've got a partner that, that wants to access that same group where there may be value. You can use the NFTs.

45:35 If you think of the music industry, you can now do a lot with an NFT to permission people like you're a super fan. "Hey, you've done this. You've gone to five concerts in a row. We're gonna give you a special NFT."

45:46 That NFT gives you right to early stage access to new music or front row seats. Well, now that has value, and you can either cash in the value yourself by using it, or you can sell it to somebody else.

46:01 So you've spent ten years being a Taylor Swift fan. Your NFT might be worth twenty-five, thirty thousand dollars because you've been a super fan.

46:08 But now you're kind of grown up and you don't like Taylor Swift anymore, y-you can sell it to somebody else, and they get those rights. So you create super brand loyalty. You create a much better cohesion layer of

46:22 so- of social graphs on the internet. So brands don't realize it yet, but this is where everything will go. And it's, it's surprised me how slow it's been, but it will happen at scale. Mm-hmm.

46:35 And that's where things like Sui come in again, 'cause the scale of which they can do this is almost unprecedented. Solana's pretty good for it as well, but Ethereum, terrible for it.

46:45 Ethereum is much better for really expensive NFTs, like your house. So that's how this is all gonna play out. Yeah, and, and Avalanche has also a, a lot of great applications in it. Um- Avalanche is great as well. Yeah.

47:00 Lots going on. And there's several. You know, just 'cause I use those, I mean, the, there's several blockchains, but not that many that are doing these kind of things at scale with great technology. Mm-hmm. Yeah.

47:13 Uh, Raul, I would love to keep that conversation going, but we're almost at the end of the show. We only have five minutes left, and we usually do a short lightning round. Very short questions, very brief answers. Okay.

47:23 Let's do it. And the first one is, what's one chart you think defines the next decade? Simply, I think it's gonna be the a-adoption of AI. Mm-hmm. That's the speed of adoption of AI, I think is already shocking,

47:42 and that will tell us everywhere about the w- where the world is going. Yeah. The next one, Bitcoin, Solana, Ethereum or Sui, higher upside this cycle. Which one? I still think Sui because it's a earlier stage.

47:56 Early stage networks tend to go through their bootstrapping phase, so they tend to outperform. But in the down cycle, they tend to underperform. So I, I think it's generally

48:06 Sui first, then Solana, then Eth, then Bitcoin, because more mature networks adopt slower. Sui has a lower free float because it's newer.

48:15 That means a dollar of assets that goes into-- a million dollars that goes into Ethereum moves it a lot less than a million dollars that goes into Sui. Same on the way out as well.

48:24 So I think the risk curve holds, and it generally always holds as long as people find value in Sui. Yeah. But, so where would I sit? If you wanna be a safe investor in that, how do you best capture this?

48:38 I think you can best capture it via, if you don't wanna take risk- I mean, you either buy all four or you buy the middle of the curve, which would be Ethereum and Solana, and you'll capture a large part.

48:52 If you could put your money into gold, Bitcoin, or Nvidia, which one would it be? I will still go with Bitcoin.

49:02 And then last one, for every investor that is watching this podcast right now and is just getting into crypto, what's one thing they should know? I spent four... Uh, I spent, how many years now?

49:17 11 years building Real Vision for people to learn how to do this and what it all means.

49:26 One thing you should know is that you have a place that will help you, where people learn together, that there's a network connected around the world.

49:35 You can spin our globe around the world and go, "Hey, who's in Zurich?" And you can find all the members in Zurich. You can meet them, organize events. You'll learn from their trade ideas, all of that.

49:44 It's a, such a powerful hack, but people on the internet are lazy. They want it delivered to them on X and think that somebody's gonna make them rich by reading a tweet thread. It's not.

49:54 It's the power of a community, a network, and overlaid with experts, um, that will help people the most. All right. Great ending word, Raoul. Again, thank you so much for coming on the show.

50:08 It was a pleasure to have you on. Where can people learn more about you and Real Vision? Yeah. The easiest place to find me is, um, on X, @Raoul, R-A-O-U-L, G-M-I.

50:19 Um, and Real Vision, just go realvision.com, um, and you'll find it from there. Um, and those things should help you. A lot of information I put out for free.

50:30 I've also got a YouTube channel, which is, um, The Journey Man, Raoul Pal, The Journey Man. Look for that. Um, I interview a lot of people at this nexus of crypto technology and macro,

50:42 and that will help a lot of people in their journey. So, I urge you to go there and subscribe to that as well. All right. So check that out. And again, Raoul, thanks for coming. All the best, and talk soon.

50:54 Actually, I've forgotten I've got a new website- Yeah... which is raoulpal.com. Even easier. Just go to raoulpal.com and everything's there. All right. Cool. Thanks, Raoul. Thanks so much. All the best.

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