Insights and investment strategies of former Goldman Sachs executive Raoul Pal: How to get rich in the encryption field without relying on luck?

Organizer: KarenZ, Foresight News

Raoul Pal, the former Goldman Sachs executive, author of "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 during a speech at the Sui Basecamp in Dubai, Raoul Pal delved into how to steadily accumulate wealth in the cryptocurrency space, discussing topics such as Bitcoin, Ethereum, Memes, AI, NFTs, the Sui ecosystem, Strategy Bitcoin strategies, investment strategies, macro trends, and market directions.

Raoul Pal Conversations When Shift Happens Highlights:

1. How to get rich in Crypto without relying on luck?

How to get rich through Crypto without relying on luck? Just buy Bitcoin and adopt a DCA (Dollar Cost Averaging) strategy.

Beginners often easily fall into the trap of pursuing quick riches, and this mindset is actually fraught with risks.

When you start to envy others for making 100 times the profit, you have already entered a dangerous zone. At this point, if you lose your rationality and let greed take over, it is very easy to ruin your entire investment.

The crypto space is fraught with various risks, such as DeFi attacks and wallet theft, which requires investors to remain vigilant and maintain rationality at all times.

2. About Meme

Regarding Meme coins, Raoul Pal stated that he does not hold Fartcoin, but he holds SCF (Smoking Chicken Fish) and DODE. Although SCF has dropped 90%, it is currently showing a good rebound trend. He specifically reminds investors that whether holding Fartcoin, WIF, or BONK and other Meme coins, they should not let these occupy too large a proportion in their investment portfolio, as these types of coins have up to an 85% chance of going to zero. He was even surprised that LUNA did not evolve into a Meme coin, as he originally thought people would go crazy buying it.

3. Stay away from market panic and return to value investing

If investors feel panic about the market, Pal suggests that they might as well return to their lives with peace of mind and stay away from trading screens. Those 5-minute candlestick charts and 1-hour candlestick charts do not actually provide substantial help for investment decisions.

Many people fantasize about becoming successful traders and earning 100 times their investment, but the reality is that in this field, it is those who persist in buying and holding long-term who can truly accumulate wealth.

4. Be Aware of Crypto Yield Risks

Regarding Crypto Yield, for example, the method of earning income through staking also carries risks. For ordinary investors, when faced with an opportunity that seems to bring a 20% return, it is essential to be clearly aware of the risks involved.

How to view Michael Saylor's Bitcoin buying strategy?

The Bitcoin strategy of Strategy is creating leverage in the system. Strategy purchases Bitcoin by issuing convertible bonds, which essentially amounts to selling options at a lower cost. These options are bought by arbitrageurs (options traders), who then hedge in the exchange to manage the price volatility of Bitcoin and the risks associated with MicroStrategy stock options.

At the same time, arbitrageurs will also exploit the fluctuations in the ratio between MicroStrategy's NAV and the Bitcoin price for arbitrage, and engage in trading using market tools such as the price differences between perpetual contracts and spot, as well as between futures and spot.

Currently, the buyers of Strategy convertible bonds are mostly TradFi hedge funds and other institutions. Sovereign wealth funds like the Norwegian Bank may only value the Bitcoin elements, while large hedge funds such as Citadel, Millennium, and Point72 also engage in arbitrage. These institutions are experienced in risk management and may receive systemic support, with reasonable position size control, making them less prone to liquidation.

In stark contrast, traders who excessively use high leverage face enormous risks, and cases of trading failures due to over-leverage are common in the market.

6. Raoul Pal's Capital Allocation

Regarding capital allocation, Raoul Pal stated that Sui accounts for 70%, which now far exceeds Solana. The adoption of Sui and developer activity have both performed well. In addition, he also holds some DEEP (DeepBook), which is a liquidity layer protocol in the Sui ecosystem.

7. The Value and Potential of NFTs

NFT, as an innovative technology capable of permanently storing and trading non-transferable assets, has Pal full of expectations for its prospects. From a macro perspective, the current scale of the Crypto industry reaches $3 trillion. If it is assumed to grow to $100 trillion in the next 10 years, it will create a massive wealth of $97 trillion; even a conservative estimate of $50 trillion will generate a wealth increment of $47 trillion.

Wealth will flow to different people. Art is the upstream of everything, and digital art, as an emerging field, is expected to become an important destination for wealth. In the field of digital art, we have XCOPY and Beeple, which subsequently gave rise to the generative art movement. I spent a lot of time talking with some very famous people, and these high-end individuals are very interested in this field. After crypto OGs have earned enough money, their willingness to collect artworks is extremely strong. For example, CryptoPunk symbolizes your identity and allows you to meet a group of like-minded people. From institutions to super-rich individuals, ordinary people are gradually starting to realize the importance of digital art. We are still in the early stages. I hold many artworks, and I think this spans over a decade.

8. Advantages and Prospects of Ethereum

Regarding Ethereum, the network capacity of Ethereum has surpassed the current system demand, and adjustments may be made to some mechanisms in the future, returning to Layer 1. The status of the EVM is akin to that of Microsoft, as numerous banks, insurance companies, and large enterprises around the world rely on Microsoft rather than Apple or Google.

Once you have a business sales model, it's almost impossible to remove it from the company because you don't want to change it, you don't want to take risks. From the Lindy effect (the longer something has been around, the more likely it is to continue to exist in the future), Ethereum has stood the test of time and is well positioned to meet the needs of the financial market. Will Goldman Sachs, JPMorgan Chase build on Solana? Unlikely. Ethereum may bring a new narrative to the market, and it is expected to outperform Bitcoin in the near term. Looking ahead to the next five years, unless they mess everything up, it's going to become even more important.

The concepts of the Bitcoin Lightning Network, payments, and others have a limited effect on price appreciation; the core value of Bitcoin lies in its role as a store of value; the same will happen with ETH.

9. About AI

The development of AI is rapid, and its performance has surpassed that of 99% of analysts. After deep reflection, Pal believes that the rise of AI has raised profound questions about consciousness and the future role of humanity. He suggests that people actively engage, deeply understand, and proficiently utilize AI technology.

Secondly, we don't know what this means for employment and how we create wealth, etc., but I know what humans are best at. What is something that humans can do that AI cannot? That is to be human.

I developed an AI Raoul that can read the news daily, with the news also written by AI. At the same time, I built a chatbot trained on its own voice, with training data covering all its X content, YouTube content, and 100 books. Now, Real Vision users can interact with this chatbot. Pal predicts that these two technologies will merge soon, and this transformation will have a profound impact on the podcast and media industry, with media content that everyone encounters in the future becoming uniquely personalized. Moreover, human memory and actions may ultimately become "nutrients" for AI, achieving a form of "immortality."

10. Market Attention and Quality Project Selection

This is an attention game. People's focus on key tokens is fragmented, and the duration of various narratives is relatively short. Pal emphasizes that holding Bitcoin is always a wise choice, and buying Solana at the bottom of the cycle as well as buying SUI last year are also good strategies.

Investors should focus their attention on the top 10 or top 20 tokens, particularly those projects that can consistently enhance network adoption, as these projects often have higher investment value. According to Metcalfe's Law, project potential can be assessed from aspects such as the number of active users, total transaction value, and user value.

The Bitcoin network has a large number of users and sovereign countries participating in purchases, which is why Bitcoin is more valuable; Ethereum has a huge user base and rich applications. Although the emergence of L2 has made the situation somewhat complicated, it still possesses significant value. Investors should actively seek projects that experience simultaneous growth in user numbers and valuable applications, such as Solana, which saw its developer community continuously expand and user numbers remain stable at the bottom of the cycle. The emergence of Bonk further enhanced market confidence in Solana (Note: The host mentioned that in a previous conversation with toly, toly mentioned that Mad Lads is a turning point for Solana); the same is true for Sui.

Highlights of Raoul Pal's Speech at Sui Basecamp in Dubai

1. Macroeconomic Core Factors: Liquidity and currency depreciation. Cryptocurrencies and the economy exhibit a four-year cycle, driven by the debt refinancing cycle. Since the peak of global debt in 2008, we have been maintaining economic operation through borrowing new to repay old.

2. Population Aging and Economic Growth: Population aging leads to a slowdown in economic growth, necessitating more debt support to maintain GDP growth. This phenomenon is widespread in many parts of the world, and the correlation between debt and GDP can be clearly observed through relevant charts.

3. Liquidity Drives Everything: The Federal Reserve's net liquidity is a core indicator. From 2009 to 2014, it primarily relied on balance sheet expansion to provide liquidity, and later introduced tools such as bank reserve adjustments. Currently, total liquidity (including M2) is crucial, as it has an astonishing explanatory power in relation to the trends of Bitcoin (90% correlation) and NASDAQ (97% correlation).

4. Currency Devaluation Mechanism: Currency devaluation is equivalent to a global tax, with a hidden inflation tax of 8% per year globally, plus 3% explicit inflation, meaning you need an annual return rate of 11% to maintain your wealth's value. This explains why young people are flocking to the crypto space — traditional assets (real estate, stocks, etc.) are not yielding enough returns, forcing them to choose high-risk assets in search of excess returns.

5. Wealth Disparity and Crypto Opportunities: The wealthy hold scarce assets, while the poor rely on labor income (which declines in purchasing power year by year). The crypto system disrupts this pattern—young people seek breakthroughs through high-risk assets.

6. Performance of Crypto Assets: Since 2012, an annualized return of 130% (including three major corrections), Ethereum 113%, Solana 142%. Bitcoin's cumulative increase is 2.75 million times, which is extremely rare in the investment field, and crypto assets are gradually becoming a "super black hole" for attracting funds.

7. The potential of the Sui ecosystem is enormous. DEEP (DeepBook Liquidity Layer Protocol) has recently performed the best. The SOL/SUI ratio indicates that SUI is relatively strong.

8. Current Market Misjudgment Analysis: People often interpret the current market narrative (such as tariff panic) using liquidity conditions from three months ago, but this is misleading. In reality, the tightening of financial conditions in Q4 2024 (rising dollar rates and increasing oil prices) has a lag effect of three months. The economic surprise index (comparing the U.S. with the global economy) indicates that the current economic weakness is merely a temporary phenomenon. Looking back at the Trump tariff cycle in 2017, the dollar rose and then fell, followed by a significant increase in asset prices driven by liquidity.

9. Global M2 and Asset Relationship: When global M2 hits a new high, asset prices should ideally rise in sync. Taking Bitcoin as an example, its price movement typically shows characteristics of a breakout, a retest, and then an accelerated rise in the "banana zone." Compared to the 2017 cycle, Bitcoin's price increased by 23 times that year; while the current market is somewhat different, a significant increase is still expected. The market is currently in the correction phase after breaking through the first part of the "banana zone," and is about to enter the second part, which usually heralds an altcoin rally.

10. Business Cycle and Bitcoin Trends: The ISM Manufacturing Index is an important leading indicator. When the index breaks above 50, it signifies a return to economic growth, increased corporate earnings, and active reinvestment of funds, leading to an accelerated rise in Bitcoin prices. If the ISM index reaches 57, Bitcoin prices could even reach $450,000. As the business cycle warms up and household cash increases, risk appetite rises, making the investment logic for altcoins similar to that of junk bonds and small-cap stocks.

Note: Raoul Pal is also a board member of the Sui Foundation.