How to get rich in Crypto without relying on luck? The macro insights and investment strategies of financial Crypto Veterans Raoul Pal.

Organizer: KarenZ, Foresight News

Raoul Pal, a 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 Dubai Sui Basecamp, Raoul Pal delved into how to accumulate wealth steadily in the cryptocurrency space, discussing topics such as Bitcoin, Ethereum, Meme, AI, NFT, the Sui ecosystem, Strategy Bitcoin strategies, investment strategies, macro trends, and market directions.

Raoul Pal Dialogue Highlights from When Shift Happens

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

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

Novices often fall into the trap of pursuing quick riches, and this mindset is fraught with danger.

When you start envying others for achieving 100 times the returns, you have already stepped into a dangerous zone. At this point, if you lose your rationality and greed takes over, it's very easy to ruin your entire investment.

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

2. About Meme

Speaking of Meme coins, Raoul Pal stated that he does not hold Fartcoin, but 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 Meme coins like Fartcoin, WIF, or BONK, they should not let them occupy too large a proportion in their portfolio, as these types of coins have an 85% chance of going to zero. He was even surprised that LUNA did not evolve into a Meme coin, thinking that 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 should calmly return to their lives 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, those who can truly accumulate wealth are the investors who persist in buying and holding for the long term.

4. Be Aware of Crypto Yield Risks

Regarding Crypto Yield, such as earning returns through staking, there are risks involved. For ordinary investors, when faced with an opportunity that seems to offer a 20% return, it is essential to be aware of the risks that come with it.

5. How to view Michael Saylor's Bitcoin purchasing strategy?

The Strategy's Bitcoin 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 on the exchange to cope with Bitcoin price fluctuations 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 price of Bitcoin to carry out arbitrage, using market tools such as the price difference between perpetual contracts and spot, as well as the price difference between futures and spot to conduct trading.

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

In stark contrast, those traders who excessively use high leverage face enormous risks, and cases of trading failures due to excessive leverage are not uncommon in the market.

6. Raoul Pal's Capital Allocation

Regarding capital allocation, Raoul Pal stated that Sui accounts for 70%, now far surpassing Solana. The adoption of Sui and developer activity are performing 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 that can permanently store and trade non-transferable assets, has Pal filled with expectations for its prospects. From a macro perspective, the current scale of the Crypto industry is 3 trillion dollars. Assuming it grows to 100 trillion dollars in the next 10 years, it would create a massive wealth of 97 trillion dollars; even a conservative estimate of reaching 50 trillion dollars would still generate a wealth increment of 47 trillion dollars.

Wealth will flow to different people. Art is 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 then gave rise to the generative art movement. I spent a lot of time talking to some very famous people, and these high-end individuals are very interested in this field. After crypto OGs have made enough money, their desire to collect artworks is extremely strong. For example, CryptoPunk symbolizes your identity and allows you to meet like-minded people. From institutions to super wealthy individuals, and even ordinary people, are gradually beginning to realize the importance of digital art. We are still in the early stages. I hold many artworks, and I believe this spans over a decade.

8. The Advantages and Prospects of Ethereum

Regarding Ethereum, the network capacity of Ethereum has surpassed the current system demands, and there may be adjustments to some mechanisms in the future, returning to Layer 1. The status of EVM is akin to that of Microsoft, as many 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 is almost impossible to remove it from the company because you don't want to change it, and you don't want to take risks. From the perspective of the Lindy effect (the longer something has existed, the greater the likelihood it will continue to exist in the future), Ethereum has stood the test of time and is well-suited to meet the demands of the financial market. Will Goldman Sachs and JP Morgan build on Solana? Unlikely. Ethereum may bring a whole new narrative to the market and is expected to outperform Bitcoin in the short term. Looking ahead to the next five years, unless they mess everything up, its importance will only become more pronounced.

The Bitcoin Lightning Network, payment concepts, and the like have limited effects on price increases; 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 thought, Pal believes that the rise of AI has sparked profound questions about consciousness and the future role of humanity. He suggests that people engage actively, gain a deep understanding, and become proficient in using AI technology.

Secondly, we don't know what this means for employment, or 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, and the news is also written by AI. Additionally, I built a chatbot trained on its own voice, with training data covering all of its X content, YouTube content, and 100 books. Now, Real Vision users can interact with the chatbot. Pal predicts that soon these two technologies will merge, 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 behavior may ultimately become "nourishment" for AI, achieving a certain sense of "immortality."

10. Market Attention and Quality Project Selection

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

Investors should focus their attention on the top 10 or top 20 tokens, with an emphasis on projects that can continuously enhance network adoption. Such projects often have greater investment value. According to Metcalfe's Law, the potential of a project can be evaluated from the aspects of active user count, total transaction value, and user value.

The Bitcoin network has a large number of users, and sovereign countries are involved in purchasing it, which is why Bitcoin is more valuable; Ethereum has a vast user base and rich applications. Although the emergence of L2 has made the situation somewhat complicated, it still holds significant value. Investors should actively seek projects where both user numbers and valuable applications are growing, such as Solana, which has seen its developer community continually expanding and user numbers remaining stable at the bottom of the cycle. The emergence of Bonk further boosted market confidence in Solana (Note: The host mentioned that in a previous conversation with toly, toly stated that Mad Lads is a turning point for Solana); the same is true for Sui.

Highlights of Raoul Pal's speech at the 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 high global debt levels in 2008, we have been maintaining economic operations through refinancing.

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 common 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 net liquidity of the Federal Reserve is a core indicator. From 2009 to 2014, liquidity was primarily provided through balance sheet expansion, followed by the addition of tools such as bank reserve adjustments. Currently, total liquidity (including M2) is crucial, as it has an astonishing explanatory power regarding the trends of Bitcoin (90% correlation) and Nasdaq (97% correlation).

4. Currency Devaluation Mechanism: Currency devaluation is akin to a global tax, with an implicit inflation tax of 8% globally each year, plus 3% of 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 underperforming, forcing them to choose high-risk assets in search of excess returns.

5. Wealth Inequality and Crypto Opportunities: The rich hold scarce assets, while the poor rely on labor income (with purchasing power declining year by year). The crypto system disrupts this pattern - young people seek breakthroughs through high-risk assets.

6. Performance of cryptocurrency assets: An annualized return of 130% since 2012 (including three major corrections), Ethereum 113%, Solana 142%. Bitcoin has achieved a cumulative increase of 2.75 million times, which is extremely rare in the investment field. Cryptocurrency assets are gradually becoming a "super black hole" for attracting funds.

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

8. Analysis of Current Market Misjudgment: People often interpret the current market narrative (such as tariff panic) using the liquidity conditions from three months ago, but this is misleading. In reality, the tightening of financial conditions in Q4 2024 (rising dollar interest rates, increasing oil prices) has a three-month lag effect. The Economic Surprise Index (comparing the U.S. and the global economy) indicates that the current economic weakness is only temporary. 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 Relationships: When global M2 hits a new high, asset prices should ideally rise in sync. Taking Bitcoin as an example, its price trend usually exhibits characteristics of breaking through, retesting, and then accelerating upward in the "banana zone." Compared to the 2017 cycle, Bitcoin's increase that year reached 23 times, and although the current market is somewhat different, a considerable increase is still expected. The market is currently in the correction phase after the breakout of the first part of the "banana zone," about to enter the second part, which typically heralds a rally for altcoins.

10. Business Cycle and Bitcoin Trends: The ISM Manufacturing Index is an important leading indicator; when this index breaks 50, it signals a return to economic growth, increased corporate earnings, and active capital reinvestment, which will accelerate the rise in Bitcoin prices. If the ISM index reaches 57, the price of Bitcoin could even reach $450,000. A warming business cycle and increased household cash lead to a rise in risk appetite; at this point, the investment logic for altcoins is similar to that of junk bonds and small-cap stocks.

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