「Macro Master」 Raoul Pal on 30x Growth Under Indexation: Bitcoin Will Eventually Surpass Gold

Original Title: Raoul Pal: How to make it in Crypto in 2026 (without getting lucky) | E152

Original Source: When Shift Happens

Original Translation: Deep Tide TechFlow

Guest: Raoul Pal, Founder and CEO of @RealVision

Host: Kevin Follonier

Podcast Sources: When Shift Happens and Raoul Pal The Journey Man

Key Points Summary

Raoul Pal shared his investment framework on how to succeed in the cryptocurrency space in 2026 without relying on luck: choose the right assets, hold them long-term, and maintain patience. He believes that while many are intimidated by short-term market fluctuations, the overall development of cryptocurrency is just beginning, with only 3% of the path towards its $100 trillion market target completed.

“When more people are scared off by short-term volatility, the real opportunity lies in long-term liquidity and network effects.” In a recent interview, Raoul Pal provided a non-lucky 2026 crypto investment framework: extending the cycle from four to five years, seizing the window of true liquidity arrival, holding quality assets driven by adoption, and managing the portfolio based on the “minimum regret” principle.

Highlights Summary

· The market has already bottomed.

· Bitcoin will become a better store of value than gold.

· Liquidity is currently the dominant macro factor.

· Genuine liquidity demand will emerge in 2026.

· Crypto investment is actually a long-term battle, but many wish to see immediate results.

· I used to think the cycle of the crypto market was four years, but now I've extended it to five years.

· People's anger often stems from their time expectations not aligning with reality.

· I haven't heard anyone at Coinbase think the market is over, quite the opposite, they all think it's just getting started.

· There's a classic saying in brokerage accounts: the best-performing clients are often those who have passed away.

· Putting all your hopes and dreams into cryptocurrency is not realistic, but for many people, it may be their only way out.

· I've learned not to dwell on who made me unhappy anymore, or what issues arose at work today. Most things don't really matter; what matters is whether you are moving towards your own set goals.

· Long-term trends are easier to predict, whereas short-term trends are challenging.

· Humans learn through experience and lessons. Now, we are welcoming a new generation of investors. They need to make mistakes to learn, gradually grow, and overcome challenges.

· The key to success in the crypto space in 2026 is holding the right assets and sticking to your beliefs, rather than relying on others' views.

· Even with increased liquidity, some tokens still cause investors to lose money because they are inherently bad investments.

· The "Minimum Regret Investment Portfolio" ensures that when reviewing your investments, you won't regret your hasty actions and avoid making foolish investment decisions.

· Most people, however, never do research. They just say, "You tell me this project will succeed." But the question is, how much do they really know about this project themselves?

· Many people invest with "borrowed belief," such as "So-and-so guru said this project is good, so I bought it." However, this reflexivity often leads to incorrect decisions.

· Zcash is the last true privacy coin and the last opportunity in the cryptocurrency space that could potentially offer a 1000x return.

· After Bitcoin, only two protocols truly broke the traditional mold, one being Ethereum, which achieved programmability; the other is Zcash, which focuses on privacy protection.

· I might choose to buy in during the next downtrend cycle, which I expect to occur in 2027, at which point Zcash may become one of my investment targets.

· Cryptocurrency is now a $3.5 trillion asset class, and we may reach a $100 trillion market cap in 10 years, meaning we have only covered about 3% of the journey so far.

· All in-game assets are essentially NFTs or non-fungible tokens, meaning that all future in-game assets will exist in the form of NFTs.

· You need to understand that you can't get everyone on the lifeboat; some people don't want to be helped.

· If I believe the total market value of the crypto market will reach $100 trillion in the future, then I would focus on this long-term goal rather than worrying about Bitcoin dropping 30% last week.

· Quality assets like Solana, even if the price drops, I would still hold steadfast because I value its long-term potential.

From "God" to "Idiot" Every 6 Months

Host: On the Internet, your evaluation is always polarized. Every six months, you may be praised as a "god," and then cursed as an "idiot." How do you deal with this situation?

Raoul Pal: Those who criticize me often do not understand all of my work; they only focus on certain specific points. I have tried to filter out the verified accounts in the comments section to distinguish between which are verified and which are unverified accounts, and the difference is significant. I think much of the criticism is actually deliberate, and there may even be some state actors involved, spreading dissent through the comments section. They will attack anyone and any topic for various reasons.

Host: Can you elaborate on that? Could this be behind-the-scenes bot manipulation? Or is someone controlling it?

Raoul Pal: I think it could be both. Some accounts in the comments section are very suspicious, such as having a registration time of only three to six months, following only me, and specifically attacking some of my viewpoints. When you further look into the activity of these accounts, you will find that they have hardly posted any original content, simply repost some information, and then suddenly launch intense criticism. Some state actors may have realized that by attacking different people and events in this way, they can effectively spread dissent. Ordinary users, after seeing these comments, also get angry, further amplifying this negative sentiment.

Of course, I also acknowledge that some criticism comes from genuine users who may mistakenly attribute blame to others due to misunderstanding or their own mistakes. However, there are still many comments made with ulterior motives. Now, Twitter has introduced some features to display account origin information, but even so, those behind-the-scenes manipulators may use VPNs to disguise their location, such as showing that they are from the US or other countries, making this issue not easy to solve.

FUD on the Internet and State Actors

Host: Why do you think state actors would deliberately attack anyone?

Raoul Pal: Because it creates a sense of anxiety at a societal level. When no one knows what is true, what is certain, everyone is suspected of being a fraud, everything is considered wrong, this sense of chaos can lead society into a state of collapse, and this situation is often intentionally created.

In fact, Russia realized a long time ago that the most effective way to undermine a social system is to blur the truth. They would support both anti-government and pro-government activities, creating contradictions and opposition. They would also spread a mix of true and false information, making it impossible for people to distinguish truth from falsehood. The result is that society loses its trust in the truth, and once trust collapses, society becomes easily manipulable.

For example, the U.S. political system is now extremely polarized. Behind this phenomenon is the shadow of state actors, who do not merely support one side but, through inflaming conflicts, make people's positions more extreme. They create conflict on both sides, resulting in mutual hostility, each side thinking the other is utterly bad. But in reality, most people's views are not that extreme. This artificially created division has caused society to lose consensus on anything, making it increasingly difficult for the country to make political decisions.

Host: What do they gain from this?

Raoul Pal: State actors will generate a large amount of discontent and conspiracy theories to make people skeptical of everything. When major events occur in the world, such as in the U.S., Europe, or countries like the U.K., France, they usually intervene. However, if the media is filled with distrust and contradictory information, the public will lose trust in everything, thus not supporting any action. This public consensus is crucial for driving international affairs, even in a politically divided world, this consensus is needed to accomplish important things. However, the goal of state actors is to disrupt this consensus, leading to societal chaos and ungovernability. The more difficult society is to govern, the stronger people's discontent will be because they feel attacked by other groups. If this hatred continues to deepen, society cannot reach a consensus on any issue, which is a very serious problem.

This phenomenon is widespread and has been going on for a long time. For example, during the Brexit period in the U.K., this situation was very apparent. Many thought these attacks were aimed at one side, but in reality, both sides were attacked. In the U.S. elections, this phenomenon was particularly evident, and it is ubiquitous throughout the entire internet.

Some people think these attacks are coming from opposing factions, but when you look closely at some extreme MAGA accounts and some radical left-wing accounts, you'll find they are actually controlled by foreign powers. In some international events, you'll find information filled with contradictions, and almost no one can discern the truth.

Host: This has caused division. So what should we do?

Raoul Pal: I believe we need to introduce digital identity and zero-knowledge proof technology to address this issue. We need a way to verify the authenticity of users, such as confirming they are real people and their location, not masked by VPN but through passport information. Of course, this information doesn't need to be publicly displayed. This is the advantage of zero-knowledge proof: it can verify information's authenticity while protecting privacy. We must find a way to achieve this because as artificial intelligence becomes more widespread, we are creating a machine that can generate content infinitely. AI can quickly generate content, such as making a 10-minute interview, and it's hard for ordinary people to distinguish between truth and falsehood.

Is It Realistic to Pin All Hopes and Dreams on Cryptocurrency?

Host: For those who are real, emotionally charged, even angry, they are indeed human, and this emotion is normal. After all, you often say that everyone has some hopes and dreams in their investment portfolio, especially in a cryptocurrency investment portfolio.

But is it realistic to pin all hopes and dreams on cryptocurrency?

Raoul Pal: It's not realistic, but for many, it may be their only way out. Some may suggest they get a part-time job or take on another job, but in fact, some are already doing three jobs at the same time. The issue is, we can't change the existing political system, nor can we prevent currency devaluation to repay debt. So, what opportunities can we give these people? Is it to directly subsidize them? However, more often, they may see cryptocurrency as a "casino-style" opportunity, especially those in more desperate situations. As you mentioned in your post, cryptocurrency investment is actually a long game, but many people want to see results immediately. If you tell them that their funds may grow 20 times in ten years, they would find it appealing. But most people don't want to wait that long; they want to achieve a 20x return within a month or even a year. As a result, they often deceive themselves, thinking that as long as they catch this cycle, this quarter, or this trade, they can achieve their dreams. But when things don't go as expected, they become angry because this approach never works.

We have discussed before that people's anger often stems from their expectations of time not aligning with reality. You can tell them that the adoption of technology and the expansion of the market are unstoppable. For example, the current size of the cryptocurrency market is 30 trillion dollars, and in the future, it may grow to 100 trillion dollars. In other words, we are only at 3% of this journey. But when you tell them that this might take ten years, their reaction is, "What about today? What do we do when the market is down?"

Host: I saw someone say that when the market is underperforming, you always use "look to the long term" to evade. How do you view this statement? How should we respond to those who are hostile towards you?

Raoul Pal: Short-term market fluctuations are often influenced by noise and short-term factors, while the long term is more determined by two core driving factors: the speed of technology adoption and currency debasement. From a probabilistic perspective, long-term trends are easier to predict, while the short term is challenging.

Of course, in the short term, market performance often deviates from long-term trends, which is very common, but many people are unwilling to accept this fact. They place all their hope on certain economic indicators, such as M2, believing that it will perfectly predict market trends, but in reality, the market always shows deviations. As a macro analyst, my job is to understand the reasons behind these deviations. Understanding these reasons can help us better adjust our judgment of long-term trends. In the short term, noise often obscures signals, while the long term is more conducive to seeing the true trend, which is a key point that investors need to understand.

Buy and Hold

Host: The crypto market is gradually maturing, with increasing participation from institutional investors and more professional traders, yet the alpha in the crypto market has almost been squeezed out, leaving the only opportunity for long-term investment. What ordinary investors can do is "buy and hold" or bet on the long-term trend you mentioned. I tend to agree with this.

Raoul Pal: I have seen similar situations, which is also why I left the hedge fund industry in 2004. At that time, I mainly engaged in macro trading, a strategy that relies on macroeconomic data. We would analyze the long-term trends of this economic data, and usually, a trade would last for six months to three years, or even longer; that is the essence of macro trading.

However, as more and more new investors entered the hedge fund industry, they began demanding monthly evaluations of the fund's performance. As a result, even if a trade is profitable in the long run, if there is a brief pullback in a month, a fund manager might choose to close the position early. This short-sighted behavior not only compresses market volatility but also reduces overall investment returns.

Today, the cryptocurrency market is also facing similar issues. With changes in the macroeconomic environment, the rise of systematic funds and high-frequency traders, the space for short-term trading has been further compressed, and macro trading has lost its advantage in the short term.

Many people are too hasty, always wanting to do something, always wanting to participate in trading. But in reality, if you want to seek excitement, you can easily do something else; the timespan is the most valuable asset for an investor.

Liquidity is Key to the Game

Host: In 2025, it was a tough year for cryptocurrency investors. If you didn't choose the right coin, you basically didn't make much money. Many people's investment performance was actually not ideal, and there is no longer a market where it only goes up. Why is that?

Raoul Pal: I have always tried to explain to people that all of this is related to liquidity; liquidity is the predominant macro factor. The entire market is like a game, and the core rule of this game is how liquidity flows. In the cryptocurrency market, there is an additional "game rule," which is the actual adoption of the tokens. Whether it's layer-two networks, layer-one chains, or application layers, the key is the speed of adoption of these technologies and the degree of token devaluation. These two factors together determine the market's performance.

However, the operation of liquidity is quite complex. In traditional finance, liquidity is usually linked to quantitative easing (QE), which is increasing market funds by "printing money," but now this process has stopped. We also need to consider the Fed's net liquidity, which involves the Treasury General Account (TGA) and reverse repo (RRP). The Treasury's general account can be seen as the government's checking account, with funds constantly flowing in and out, while reverse repos are another tool that affects market fund flows. The combined effect of these factors determines the level of liquidity in the market.

One reason is that the liquidity growth rate has been consistently low, and the other reason is the extension of the debt cycle. People often say that the crypto market has a four-year cycle pattern, but this is actually closely related to the economic cycle. Since the 2008 financial crisis, countries have lowered interest rates to zero and set the term of debt at 3 to 5 years, so every four years, there is a wave of debt maturing that needs to be refinanced.

However, I found that the recent business cycle does not seem to be recovering as expected. I started to reexamine the data and found that in 2021 and 2022, many countries extended the term of their debt to five years or longer. This means that the liquidity surge that was supposed to occur in the fourth year is now delayed to the fifth year, which is 2026. This is why the current liquidity has not seen a significant increase. The real liquidity demand will appear in 2026 because by then, $100 trillion of debt will need to be refinanced.

Furthermore, the number of tokens in the market has also increased significantly. It has become increasingly difficult to find those tokens that truly hold value. Filtering through the thousands of tokens is very complex, so we recommend that investors try to simplify their investment strategy. Focus on holding mainstream large-cap tokens and avoid taking on too much risk. If you want to try out some small projects, you can operate with a small amount of funds. We have discussed this point many times.

Many people ask me, "Why has my portfolio lost 90% during this cycle?" I would then ask them, "Who told you to invest in these tokens?"

Host: So liquidity is divided into two levels, inflow and outflow. However, in the long run, liquidity is generally increasing, right? Nevertheless, there are now too many tokens in the market. Even with increased liquidity, not all tokens can benefit. I think this is a very crucial piece of information. Some tokens still cause investors to lose money even with increased liquidity because they are simply bad investments.

Raoul Pal: Exactly, these tokens lack real-world utility. Of course, some tokens may briefly attract attention due to becoming memes, but this kind of hype is hard to sustain. People need to understand that even among mainstream tokens, there are significant risk differences, and the magnitude of the downturn depends on the token's maturity, user base, and market depth.

Minimum Regret Portfolio

Host: You mentioned before not to invest blindly. We can apply this advice to a more traditional investment framework, advocating for a more conscious investment approach. For young cryptocurrency investors, this approach may sound a bit boring. After all, many people's mentality when they first start investing is more like that of a gambler, especially for the easily distracted "ADHD generation." However, the actual goal of investment is not to get rich quickly but to avoid large losses and accumulate wealth through long-term compounding.

I feel that in this cycle, most cryptocurrencies have caused losses, so people are gradually becoming aware of these timeless investment principles. So, what does the "minimum regret portfolio" specifically mean?

Raoul Pal: The so-called "minimum regret portfolio" is one that, when reviewing your investments, will not make you regret your hasty actions. We have all experienced those seemingly absurd investment decisions, such as allocating 10% of the investment funds to high-risk projects. We have also mentioned some tokens with funny-sounding names that have basically gone to zero. Still, I have been holding onto them because I do not want to disappoint people or for some other ridiculous reasons. This is the so-called "shame wallet" — a small account full of failed investments. If the amount is small enough, the overall impact is minimal. However, if large sums are involved, it is indeed a disaster. Therefore, the core of the "minimum regret portfolio" is to avoid making these foolish investment decisions.

For example, investing in Layer 1 is a relatively simple choice. Compared to other types of tokens, they have a larger scale and higher adoption rate. In a market cycle, these assets will not go to zero. Even though their value may gradually decline over time, they won't collapse instantly like some high-risk projects. You won't experience situations like the "LUNA effect" or sudden rug pulls of certain DeFi protocols. The first layer of blockchain is relatively stable, which is its advantage.

Next, you need to ask yourself: Am I blindly following the market narrative? Now you can do some basic research on your own. For example, you can ask ChatGPT, "How is the on-chain data of this blockchain? What about user growth data?" This information can be found in just a few seconds, but most people never bother to look it up. They will just say, "You tell me this project will succeed." But the question is, how much do they actually know about this project themselves?

Chat GPT and On-Chain Data Metrics

Host: How does ChatGPT perform in analyzing on-chain data metrics?

Raoul Pal: It performs very well. Last weekend, I wrote an article on Metcalfe's Law in Global Macro Investor and discussed how to value it. I brainstormed with my AI and found a simple way to measure it: by observing the liquidity of stablecoins, the value transfer of stablecoins on Layer 1 blockchain, and the relationship with the number of active users, these metrics are actually proposed by ChatGPT. It suggests that we can refer to the five key metrics commonly used in DeFi and then rank different blockchains based on these metrics. This way, we can judge well which blockchains are overvalued and which are undervalued.

It also excels in technical chart analysis. You can directly upload a chart and ask it, "What do you think?" It will provide very insightful analysis. You just need to continuously communicate with ChatGPT, adjust your questions, until you find the right way to ask, and it will give you the answers you seek. At first, you might think, "It's not working, it can't answer my question." But in reality, the issue often lies with us because we're not asking the right questions. I myself learned through trial and error. It does take some time to master, but once you have the method down, it becomes a very powerful tool.

Does Raoul follow his own DTFU (Don't Fuck This Up) framework?

Host: I have to give a shoutout to your DTFU (Don't Fuck This Up) framework because it has indeed helped me a lot during this investment cycle. Do you yourself fully follow the "Don't Fuck This Up" framework?

Raoul Pal: The answer to this question is: yes and no. I do focus more on my own investment decisions, and whenever I say "focus," many people think they should also focus like me. However, the reason I can take on more risk is because I have built a valuation model based on multiple factors to help me determine when it's appropriate to increase my investment. I may adjust these strategies in the future, but for now, I am comfortable with my allocation. This strategy has higher volatility as it is designed for early-stage and early-network adoption. You need to understand that this pattern has higher volatility when the market is up and even more so when it is down, but not everyone can handle such fluctuations. So, do I fully follow my own framework? The answer is that I follow it in most cases, but I also make adjustments based on my research and risk tolerance.

In addition, I have other investments such as digital art and Ethereum-related projects. While these projects carry some risk, the cash flow they generate allows me to be more flexible in asset allocation. Of course, this does not mean that I am always right; I just do more research, so I am willing to take more risk. If I mess up, it's my responsibility, and others should not blindly follow my asset allocation. My advice is to follow some basic guidelines rather than directly replicate my investment portfolio.

Host: Never "borrow conviction." That is the most important point. Every time I have lost money, it's because I was "borrowing conviction."

Raoul Pal: I am the same every time too. Whenever I have not done my own in-depth research, the results are often not ideal. For example, I recently interviewed Mert, discussing the issue with Zcash. I noticed that while the market was bouncing back, Zcash was falling. I asked him, "Are we sure this is not a form of market rotation? Is someone trying to find a new hotspot in a sideways market?" Many people tend to "borrow conviction" when investing, such as "Some guru said this project is good, so I bought it." However, this reflexivity often leads to incorrect decisions.

I actually like the narrative of Zcash, but I do not hold it. I understand the importance of privacy coins, but choosing a privacy coin means being in opposition to governments, which is a tough battle. Since 2013, I have witnessed the complexity of this battle, and it is not easy.

We should have the right to use private currency. But the reality is that the United States exerts tremendous control globally through financial regulation, and the existence of privacy coins directly challenges this control, therefore facing strong opposition from banks and governments. In fact, many banks don't actually hate cryptocurrency; they are afraid of not being able to meet KYC and AML requirements, thus being prosecuted by the United States. So, regulation is the root cause of all this.

Naval and Balaji Bullish on Zcash: Is This the "God Signal"?

Host: I bought my first batch of Bitcoin in late 2018 to early 2019. At that time, I followed three highly insightful people online: Naval, Balaji, and Chamath. They have been very accurate in predicting the future of technology. Back then, the price of Bitcoin was around $3000, and all three of them believed that Bitcoin would eventually rise to $100,000, a consensus they reached back in 2012.

Each of them is much wiser than I am, so when their views aligned, I realized I should buy some Bitcoin. Seven years later, Bitcoin did indeed approach $100,000 as they predicted. Now, two of these three individuals, Naval and Balaji, have put forward another significant viewpoint — about the importance of privacy.

As you mentioned, the cryptocurrency space always has some hot topics in different phases, but I always remember that these individuals are the ones who made me pay attention to Bitcoin and prompted me to buy it several years ago. And now, two of them are stating: Naval believes Zcash is the last true privacy coin and the last opportunity in the cryptocurrency space that could potentially bring a 1000x return. Naval also compared Zcash's privacy feature to Bitcoin. Balaji's view is that after Bitcoin, only two protocols have truly broken the traditional mold, one being Ethereum, which achieved programmability; and the other is Zcash, which focuses on privacy protection. So, I think we need to focus on this direction.

When Will Raoul Buy Zcash?

Host: What conditions do you need to see to decide to buy Zcash?

Raoul Pal: I am currently unable to pinpoint the best time to buy Zcash unless the entire market shows a clear uptrend that can be sustained. From the current situation, the market seems to be validating the "rotation" theory (i.e., money flowing from one asset class to another). However, I think Zcash may already be overbought. What we need to observe next is whether it can find a stable price range and then begin a new uptrend.

Do I need to buy Zcash now? Not necessarily. My current investment in cryptocurrency is sufficient, and I don't need to prove myself as an early investor by holding Zcash. So, I am unsure if I want to buy at the current high price, but I may consider buying during the next downward cycle, which I expect to happen in 2027. By then, Zcash might become one of my investment targets as I anticipate a significant pullback. For me, buying at that time may be more cost-effective than now. I have already established my investment strategy and do not plan to adjust it unless there is a significant market change. However, I will continue to monitor its performance, and if the price drops to a more reasonable range, I will reconsider. My investment logic is that if an asset can prove its value and no longer experiences significant corrections after each massive price surge, it may become a better investment target. Of course, it is also possible that the price returns to its current level or even rises to $1000 or higher in the short term before correcting again.

Is DCA (Dollar-Cost Averaging) Bitcoin the Only Truly Proven Way to Make Money?

Host: I saw a tweet saying a boy's girlfriend started dollar-cost averaging into Ethereum and Bitcoin since 2019, completely ignoring the noise on cryptocurrency Twitter, and her investment performance far exceeded her boyfriend's.

Raoul Pal: That's actually quite interesting. In the brokerage world, there's a classic saying: the best-performing clients are often the ones who are already deceased.

Host: Dollar-cost averaging seems to be the only proven way to make money in cryptocurrency, similar to investing in the S&P 500 index, but with potentially higher returns.

Raoul Pal: Yes. However, I believe there is a more optimized way, which is to scale up your dollar-cost averaging when the market experiences a significant decline. For example, when the market drops by 30% or more, you can triple your usual DCA amount. This way, your compounding returns will be higher, and this strategy is actually not difficult to implement today.

Host: It's psychologically challenging though. Like me, I DCA into Bitcoin every month, but I always feel like it will rise before falling, and I end up buying at local highs.

I'm basically a novice version of Michael Saylor. Just a few weeks ago, I was thinking, "Bitcoin is going to $106,000, right?" So, at the end of the month, I bought as usual. Five days later, it dropped significantly, and I adjusted my position. I thought maybe it would continue to rise. Instead, it fell, even below my purchase price, all within three weeks. But in the end, I didn't care. Because when you stay in the market long enough, you'll realize you don't really care about specific entry prices. You won't remember if you bought at the lowest point unless there was a significant market crash. And impulse buying at local highs doesn't matter. When you look back at the chart, you'll just think, "What does it matter?"

But do you remember when you bought Bitcoin at $10,000, and then it collapsed to $35,000, dropping to $3.5 million? Even so, you still made 10 times your investment.

Raoul Pal: In that situation, you might have cursed the people you followed in trading, called them scammers, said they ruined your life, right? But now, you have made 10 times your initial buy-in price. That is the crux of the matter. People who truly understand cryptocurrency know that time is the key.

What you need to know is, does the investment align with your risk tolerance? Do you understand what you are buying? For example, are you aware of the risks early-stage tokens may face in terms of lack of widespread adoption? Assets like Bitcoin and Ethereum have the advantage of network effects. Even with Ethereum, just a few months ago, some were saying it would drop below $1,000, and it would be all over. But these people were merely blindly following the market narrative without truly paying attention to reality.

Kevin's Silicon Valley Learnings and Raoul's Insights

Host: As I mentioned before, I went to Silicon Valley, met with top investors and entrepreneurs there, learned some concepts about exponential growth. I will share some insights I gathered from the podcast and seek your advice.

The first point is, I noticed that many early cryptocurrency believers, by "early," I mean those from 2017, 2018, 2020, 2021, some of them are transitioning to other industries, especially the field of artificial intelligence.

Now we see some Wall Street ETFs and stablecoins, but I am disappointed with the outcome of cryptocurrency, so I left. If I read between the lines carefully, I think the real reason they left is that they couldn't make easy money over the past few years. Or, in other words, this market has become more challenging, they may not have lost money in this cycle, but they also didn't make money.

Essentially, they feel they have lost their edge, right? So they say the era of high returns in cryptocurrency is over. But when I went to Silicon Valley and talked to those who invested in Notion and Figma, their views were completely different. These people are building ETFs, watching market liquidity and narrative shifts, they have a deep understanding of the market's current state. They believe the high returns of cryptocurrency are still ahead.

Cryptocurrency is fluid, and most people tend to think, "Yes, everything will rise, right?" But the reality is, the vast majority of investments will eventually go to zero. They will actually fail. Over the past few years, we have witnessed this in the cryptocurrency market. But at the same time, there will also be some outstanding investments that will amaze you. The mistake most people make is that they do not hold onto these assets long term because once these index type investments succeed, their growth will far exceed your imagination.

Raoul Pal: Yes, but I have a slightly different view. As a venture capitalist, you typically invest before the token generation event, giving your valuation more cushion. However, the law of the jungle doesn't always apply when the token starts trading in the open market. The law of the jungle refers to a distribution pattern where 5% of investments bring all the returns, while most investments either perform averagely or fail.

Indeed, your entry price is a crucial factor. I've tried both approaches. In the previous cycle of 2020, I bought into a very broad portfolio. In the end, most of the returns came from Ethereum and Bitcoin, along with some Solana at the time. I think in this cycle, even though some trades performed well, most assets didn't. So I'm not sure if it's an easy investment approach, but it's much easier if you can buy at a very low price.

Host: I think the point here is that even though today Bitcoin, Ethereum, or Solana are not considered cheap, if they succeed eventually, they will still bring tremendous returns.

Raoul Pal: My view is that cryptocurrency is now a $3.5 trillion asset class. If you look at the trend growth rate of the market cap and make a logarithmic regression channel prediction, even assuming a slowdown in the growth rate, we could reach a $100 trillion market cap in 10 years. So, even with a slower growth rate, we can still reach that target. This means we've only traveled about 3% of the road so far.

Furthermore, Bitcoin's market dominance may gradually decline over time, while smart contracts' dominance will rise gradually. This is because smart contracts have more use cases compared to Bitcoin as the economic system's collateral layer. This is not a denial of Bitcoin but because the value at the application layer far exceeds the value at the base collateral layer. You can think of Bitcoin as the "US Treasury bonds" of the economic system, and all the financial leverage and applications built on top of it will be much larger. Therefore, in the long run, smart contracts might perform better. So, make sure you have enough smart contract assets in your portfolio to capture the growth from $3 trillion to $100 trillion because not all growth will come from Bitcoin.

However, this is indeed challenging. Just buying alone doesn't guarantee success. But undoubtedly, there is still 30 times growth potential in the market's total valuation. 30 times is a huge number. So, what does this mean for some successful tokens? Of course, not all tokens can achieve a 1000x return.

The Cryptocurrency Framework: Silicon Valley vs. Wall Street

Host: This is the technical knowledge I've learned from Silicon Valley, these concepts are applicable, but Wall Street doesn't get it. Because their thinking is linear, they are more focused on sequentiality.

Raoul Pal: The mindset of Wall Street is linear growth and mean reversion. These are their two characteristics. So when they look at cryptocurrency, every time the market goes through a boom and bust cycle, they always think the market will mean-revert. But we all know that if you put the price chart of cryptocurrency into a log chart, you will find that it is actually a fairly smooth growth trend. You can look at companies like Amazon, Google, Tesla. Their network adoption models are the same. In the early stages, they are very volatile, but as they mature, the volatility decreases. This is exactly the same logic, and Silicon Valley has an intuitive understanding of this pattern, which is the foundation of their entire business model.

Host: And this volatility may fluctuate up and down over five years, right, like Ethereum? But if you extend the timeline to 20 years or 25 years, you will find that it's not just a potential issue; real growth will emerge later on.

Raoul Pal: I have a good friend who is an investor at Ribbit Capital and one of the early seed investors in Robinhood. I think he is one of the greatest fintech investors of all time. Look at the development of Robinhood; initially, there wasn't anything particularly groundbreaking, they didn't attract young people at first, and millennials weren't interested in stock trading. Then the pandemic hit, and their growth started to become exponential.

Next, the GameStop event happened, and at that time, Robinhood almost collapsed. But if you look back now, you can hardly find traces of these ups and downs on the chart. This kind of success requires immense patience and a profound understanding of potential survival risks. If you can persevere and overcome challenges, over time, the value of the business as a network will become increasingly significant.

Exponential Growth

Host: Last year, we had a guest named Haseb who grew up in Silicon Valley and, like you, believes in the power of exponential growth. I personally believe in exponential growth because I have experienced it myself and witnessed its power many times. Perhaps you could say that the growth of stablecoins is exponential, the trading volume of DeFi is also exponential, but this growth does not seem to directly reflect the value of Ethereum, the on-chain value has not been fully captured.

So, you still don't believe in exponential growth? Because every time exponential growth is mentioned, the answer is always the same: no matter how we think about it, these things will eventually become much larger than today. When they reach a certain scale, economies of scale will bring even greater value. That is the essence of exponential growth in the technology field—no matter how big you think it will develop, it will eventually surpass your imagination.

This is also a point that Silicon Valley understands better than Wall Street. Silicon Valley's mindset is based on exponential growth, while Wall Street tends to lean towards linear thinking. Over the past few years, the center of gravity of cryptocurrency has gradually shifted from Silicon Valley to Wall Street, which may make some people uncomfortable. If you believe in exponential growth and have a long-term perspective, whether it's Ethereum or Solana, they still look very cheap right now. More importantly, I think we should be true believers, not just believers, but also persevere in the long term.

Raoul Pal: What many people don't understand is that there is currently a debate around this issue. On one side are those who support Metcalfe's Law and the network model; on the other side are those who try to pick undervalued assets using cash flow and traditional valuation methods, aiming to become the "Warren Buffett of cryptocurrency." But time and again, the power of the network model has proven to surpass traditional analytical methods. The network model is compounding, because the more valuable a network is, the more users it attracts, and more users bring more value, forming a continually rising cycle. This growth is exponential.

Some say we should evaluate Ethereum's value based on its fee revenue. But this completely ignores its essence. Ethereum is not a profit-making company based on revenue but a network that supports the operation of the entire business ecosystem. At the core of Metcalfe's Law is capturing the total value and driving the number of users of that value. Therefore, you can calculate the unit value per user. The current math shows that adding a new user to Ethereum adds value of around $313,000. On Solana, this number is approximately $65,000. Of course, this data may have some deviation as Layer 2 solutions are also attracting users. But the general logic is that each new user's addition significantly boosts the network's value. As more people and businesses join, this value will further increase. People often forget that this is a compounding effect, not linear growth like traditional cash flow.

Host: Perhaps there is another perspective that can help people better understand the potential of Bitcoin. For example, Bitcoin is basically zero-revenue, so we can't even measure it using traditional valuation methods. People can't even argue about this, right?

Our mutual friend and Bitcoin expert Matt Hougan has talked about Bitcoin. A few weeks ago, I asked him how much potential Bitcoin has. His answer was very simple: Bitcoin will become a better store of value than gold. Currently, the market value of gold is approximately 25 trillion to 30 trillion US dollars, while the current market value of Bitcoin is only 2 trillion US dollars. Twenty years ago, the market value of gold was about 3 trillion US dollars, and in the past 20 years, the value of gold has increased tenfold. If Bitcoin can catch up to the market value of gold, it would mean a growth of over 10 times. The price of Bitcoin could reach 1 million US dollars. Furthermore, considering that gold itself is also growing, if Bitcoin catches up to gold, the future growth potential could be even greater.

Another perspective is adoption. What will happen when Bitcoin, as "digital gold," appears on the smartphones of billions of people? This is the true power of exponential growth. Just like e-commerce, in the past people thought e-commerce was a strange thing and considered Amazon to be a niche phenomenon. But when e-commerce not only became Amazon but the entire industry became widespread on smartphones, it became immense, far beyond anyone's imagination.

Similarly, when Bitcoin, as digital gold, appears on everyone's smartphone, what will happen? Once Bitcoin touches everyone's life, its growth will exponentially exceed everyone's expectations.

Raoul Pal: Exactly, it all comes down to Metcalfe's Law and the relationship between the number of users and the total transaction value (the core of this law is network effects, the larger the user base, the stronger the network's utility and attractiveness, for example, the more phones, the more people each user can contact, and the higher the value). Now, if we want to use Bitcoin, we need to open a Coinbase account and go through various operations, which invisibly limits the number of users. People say there are approximately 6.5 billion crypto wallets globally, which is good. But if Bitcoin could be embedded in every phone in a simple way, such as through Apple Wallet or similar tools, then the number of users could instantly reach 5 billion people. If these people each transact the same value, the network's value will show explosive growth. That is the power of exponential growth, once you understand it, it seems very simple.

Many people are always short-sighted; they will say "it's all over" or "this time it's really over," this short-sighted mentality happens almost every day. People forget that these things grow with compounding over time because they lack the concept of time.

Similarities Between the Internet and Bitcoin

Host: Back in the early 2000s, I was only 10 years old. When I later came across cryptocurrency, I found myself too young to truly understand its significance. I wondered if there would be a wave similar to the internet boom by the time I was old enough to invest. However, I missed that opportunity, and now it seems a similar situation is arising. But upon further reflection, not everyone can succeed in such a wave. If everyone could succeed, then no one would have failed in the internet era. If someone had held onto some stocks back then, they might have made a fortune. The reason I am doing this podcast is to ensure that people, 20 years from now, won't look back and say, "I gave up back then, I missed the opportunity, even though I heard this information and tried to invest, I still missed out."

Raoul Pal: To illustrate the difficulty of investing, we can take Amazon as an example. Amazon originally started as a company selling books using an internet platform. Initially, its stock was hyped up by the market due to the concept of the "internet," as people believed it could not only sell books but potentially other items in the future. However, Amazon's stock price later plummeted by 95%, and many thought it was the end. Yet, as the market gradually recovered, Amazon rose again. Even though it was not profitable at the time, its P/E ratio soared. Between 2014 and 2017, Amazon's P/E ratio even reached 850. Almost all hedge funds were shorting it because they couldn't see how Amazon could transform from a book-selling company into the world's largest online marketplace. Amazon not only profited from product sales but, more importantly, it became a platform supporting numerous businesses to grow on it. This model is a demonstration of Metcalfe's Law—where the network's value exponentially grows with the increase in users and affiliated services.

For example, Amazon needed to handle a large amount of computing demand, so it developed the AWS cloud computing service. Then, they built a complete logistics supply chain to support business expansion. Eventually, this network created significant value. If we evaluate Amazon's overall value based solely on its profit margin from sales, it is far from sufficient. In fact, Amazon's scale has exceeded people's imagination, becoming a behemoth. However, seeing this from the beginning and holding onto its stock was very challenging, illustrating the difficulty of investing. In comparison, Microsoft's success seems more straightforward, as almost everyone could see its potential.

Host: However, now we have the experience and framework of technology and Silicon Valley to help us understand the investment logic of cryptocurrency. So compared to the past, it may not be as difficult. Yet, investing in cryptocurrency is still not easy; the market is filled with various noises, and the volatility is extremely high. This volatility is not just short-term; sometimes it may last for a year or even longer. This fluctuation is indeed very distressing, especially because cryptocurrency is a highly liquid asset, right?

Raoul Pal: This is the issue - unlike regular investors, venture capitalists face much less pressure in this regard. They usually only need to assess their investments once a year, and often, these assessments are really just guesses. Therefore, they can to some extent ignore the short-term volatility of assets. But for entrepreneurs, the situation is completely different. Each day feels like an emotional rollercoaster between "we're doomed" and "we're going to succeed." The entrepreneurial journey is filled with alternating moments of crisis and hope, a state that occurs almost every day.

Host: Some say that the compounding of wealth over time is actually a very boring process, so does this mean that this generation, especially those young people who are easily attracted by short-term stimulus, may ultimately fail to accumulate long-term wealth? Because they are always pursuing short-term pleasure, which may eventually lead to financial failure?

Raoul Pal: Do you remember falling off your bike when you were learning to ride it? I think the answer is yes. When you ride over a gravel road and brake hard, the wheels may slip, and you fall. Through such experiences, you learn how to better control the bike; that's how humans learn through experience and lessons.

Now, we are welcoming a new generation of investors. They need to learn through mistakes to gradually mature and overcome challenges. Every one of us has made mistakes on the investment path, so we cannot assume that they will not become adept at using compounding just because of their speculative behavior today. I understand their situation: their funds are relatively small, they lack long-term job security, and may not even have time to engage in long-term investments. Therefore, to some extent, their investment behavior is more like placing bets in a casino. But I believe that over time, they will gradually learn how to invest more rationally. Yes, compounding is indeed a patient process, which may seem a bit "boring." But once people go through the process of making and losing money, they will be more cautious the next time. In fact, you are a great example.

Time itself is a form of leverage. I have used leverage in assets with volatility as high as 70% to 90%, and even in assets with even higher volatility. Eventually, there was always a problem every time.

Raoul's Investment Portfolio for 2026

Host: Last time we talked about investment portfolios, you mentioned that some people tend to concentrate their investments to an extreme degree. So, now that it's December 2025, what does your investment portfolio look like?

Raoul Pal: To be honest, apart from the correction three weeks ago, I have hardly made any trades. I did buy some NFTs, but other than that, I have not made any other moves. I have not reallocated assets or made any significant changes. I share my investment allocation because it is my choice. I will also share my confidence in certain things, but I want everyone to understand that you should not directly replicate my investment approach. My risk tolerance is different from yours. I just want to share my strategy as authentically as possible. This is not to tell you what to do, but to hope that you can make decisions based on your own situation. So, to those who clip podcasts, please do not take things out of context and do not use my words to create misleading content.

Raoul's Genuine View on SUI by the End of 2025

Host: Please tell me your genuine view on SUI by the end of 2025, what exactly has made you still hold a strong belief in SUI by the end of 2025 despite such intense market fluctuations?

Raoul Pal: SUI's performance is not significantly different from other tokens; it remains at the high end of the risk curve, which is an important signal in itself. We note that its overall performance has been ahead of Ethereum and Solana in terms of time, although recent performance has lagged slightly, the overall trend is still upward, and performance is gradually improving.

The core issue with SUI is whether it can demonstrate the practical application value of its excellent technology. The technology itself is undoubtedly outstanding, but the key is whether it can be widely adopted. This is the core issue that concerns all of us. So, how is the adoption of SUI going? We need to see the growth in the number of users. Currently, their user growth rate has exceeded Solana's performance in the last bull market cycle and is faster than most Layer 1 blockchains. Although SUI started later and has a smaller user base, precisely because of this, its growth potential is also greater.

The next key is value creation on the network. We need to focus on the total value of transactions. We can see that SUI is exploring some new directions, with some projects possibly failing, but there are also some successful cases, such as their significant Bitcoin holdings on-chain. This is a very important value-driving factor because Bitcoin, as a large-scale asset, adds value to the entire network through its transfer.

In addition, the stablecoin ecosystem on SUI is performing well and growing rapidly. The performance in the DeFi space is somewhat intermediate and still appears somewhat scattered. This is because SUI is still in the early stages of development. They have only been promoting to the general public for three years, of which maybe only two and a half years, the market has truly started to take notice of them. Therefore, from a business development perspective, SUI is still a very young project.

After breaking down this data and inputting it into ChatGPT and my other analytics tools, while conducting comparative analysis with Real Vision's Chief Crypto Analyst Jamie Coutts, we arrived at similar conclusions. When utilizing Metcalfe's Law and a user adoption model, and avoiding being misled by surface-level active users, the results are quite clear. I found that Sui's valuation is approximately 80% lower than Solana's. Although Sui has not yet reached Solana's level of users, this also indicates its significant growth potential. Therefore, we need to see an overall market uptrend and drive Sui to break through to higher price levels.

Next, we need to observe whether Sui will indeed gain the expected adoption and higher activity. This remains to be seen, but the indicators so far show that as an L1 chain, Sui's growth rate is faster than any other project, and each active, validated user is contributing quite substantial value to the network.

Where Do SUI Network Users Come From?

Host: Where do you think these SUI users primarily come from?

Raoul Pal: I'm not entirely clear on the specific source of users, but generally, these users predominantly come from the Web3 community. Additionally, whenever a breakthrough application can attract Web2 users to transition to Web3, such as through blockchain games, these users become new active users. They may be using blockchain technology, but since these activities typically involve small transactions, their relative contribution to the network's value is limited. To truly create value, what is needed is a large volume of small transactions rather than relying on the contribution of a single user.

Those who can truly bring tremendous value to the network are user bases similar to the Bitcoin network. These users are not only numerous but also engage in large-scale value transactions. Especially when you attract institutional investors like sovereign wealth funds, who can hold significant assets, or super investors like Michael Saylor, who personally hold billions of dollars worth of Bitcoin assets. It is this scale of user base that is the core strength the network truly needs.

How to Ensure On-Chain Data Integrity?

Host: In the cryptocurrency field, how do you ensure the integrity and accuracy of on-chain data? This issue is not limited to Sui but pertains to the entire cryptocurrency ecosystem. How do you verify and ensure that the data used is reliable?

Raoul Pal: You cannot be entirely sure, so all you can do is maintain consistency in your analysis. When measuring Sui's active users, the standards and methods we use should be consistent with those used to measure Solana, Ethereum, or Bitcoin. This consistency can help us minimize errors as much as possible, ensuring the relative reliability of the data.

From existing analysis, blockchain networks like Avalanche, Near, and Sui appear to have relatively low valuations. This situation is actually understandable because these networks are currently experiencing significant user activity growth, as well as emerging many new use cases, and to some extent have already achieved a certain scale. From this perspective, their valuation does make some sense.

Stay Cautious with Cryptocurrency Data

Host: Last time we discussed this topic, you mentioned the need to always stay cautious in the cryptocurrency space, and I fully agree with that. Clearly, some people haven't experienced events like the Luna crash. Now, regardless of asset prices, I always remain skeptical of any data in the cryptocurrency field; everything seems to be gamified.

Raoul Pal: One factor I use to filter is the persistence of active users. There are usually some gaming activities on Telegram that seem to attract many users, but they are actually manipulated by the developers of these games. They attract people to participate once, and then those users disappear, so they are not true active users. Although the data may look good, this activity doesn't have real value.

Host: Are you saying that some blockchain protocols may have incentives to falsify data, such as for fundraising? I also wonder if there are some foundations that have similar incentive mechanisms because all of this seems like a game.

Raoul Pal: Yes, they want the data to look better to drive price increases, which is the problem; we cannot fully trust these numbers. Therefore, we need to look for some comparable metrics, observe the persistence of the data, and whether it has a reasonable explanatory power. This is the so-called "smell test": Can these user data be reasonably explained? Then, verify it with charts.

So, how do you interpret the charts? First, you need to analyze the charts separately, look at the long-term and short-term trends. For the short term, you can observe the daily chart, while for the long term, you should focus on weekly or monthly charts, and use logarithmic charts to better understand data changes. Next, compare the asset to other assets to see if it shows any abnormal trends. In general, this kind of comparison will signal if some data is off. It may just be noise, but it could also indicate deeper issues.

Overall, there is a lot of work to be done, but these analyses are necessary. Because you can never be completely sure of your exact position on the risk curve. As an investor, your task is to remain vigilant at all times, ensuring that your asset allocation does not expose you to excessive risk or underperformance. You need to constantly reflect and ask yourself: Have I misjudged?

How Does Raoul Handle His Monthly Income?

Host: What do you do with the money you earn from your business every month?

Raoul Pal: Before I answer your question, I'd like to take a step back to talk. In fact, we often fail to realize how lucky we are. Whether it's you or me, we are both able to invest time in work and get a return, which is in itself a great thing, all work is essentially like this. But more importantly, through this work, we have built a network of relationships, and that may be one of the most valuable things a human can do.

Through this network, you can communicate with people like Hunter Horsley, reach out to Haseb at any time, and even find Brian Armstrong. That is where the greatest value lies. What really matters is not how much money you make from your business, but what this network can bring to you, or more importantly, what you can contribute to this network. Because only when you continuously provide value to the network will the network continue to create returns for you. If you only take without giving back, all of this will come to a halt sooner or later.

Host: After receiving your income each month, what do you usually do with that money?

Raoul Pal: My cash flow is mainly used for investments and daily living expenses, which is actually similar to what most people do, in terms of investments, mostly in digital art and collectibles.

As assets grow, you will want to make some upgrades to your life. For example, you might buy some new things, like upgrading your stereo system, replacing a car, and so on. These updates are not only for enjoying life but also for maintaining the quality of your assets. Because without maintenance and upgrades, the value of your property will decline over time. For instance, a car will age, deteriorate, and eventually require frequent repairs, which can be quite bothersome. So, I regularly do things like this to ensure that my asset foundation remains of high quality.

The Current State of NFTs

Host: Has everything turned into a liability now? You mentioned digital art just now, namely NFTs. We briefly touched on this topic before. What is the current situation with NFTs?

Raoul Pal: Right now, Art Basel is taking place, with half of the digital art market being there. Although most of the art I personally invest in is not digital art. The current situation is, once the price of Ethereum or Solana reaches a certain high point, NFT sales will surge again because people start converting their wealth into other forms, but when the price drops to a low point, people no longer have excess funds to buy NFTs because the opportunity cost of converting liquid assets into illiquid assets becomes lower. In theory, every time the price reaches a high point, the art market becomes the focus.

We are starting to see some big investors enter this field. For example, Micky Malka of Ribbit Capital purchased the intellectual property of CryptoPunks and built a large art collection. He also created a permanent exhibition space called "Node" in Palo Alto, California, to showcase these artworks for everyone visiting Stanford University and Silicon Valley. There are also investors like Alan Howard who have put a significant amount of money into this field. We see more and more large investors joining in, establishing large-scale collection systems.

Although the value of NFTs still fluctuates with cryptocurrency prices, overall, the value of art is rising. Even during Ethereum's price weakness, the market may temporarily decline, but over time, it will gradually recover. Many people's impressions of NFTs still focus on surface phenomena like "APE" and "JPEG," thinking they have depreciated and viewing it as a foolish speculative activity. What they fail to realize is that cryptocurrency has actually accelerated the process of validating a new idea through speculation.

Speculation has indeed demonstrated that digital assets can have value beyond being a medium of exchange. Take CryptoPunks, for example; as a collection, its total market value has reached $10 billion. This is the most valuable single art collection in history, with a total value of $10 billion. However, what people fail to realize is that we are using NFTs to validate other possibilities. For example, the intellectual property (IP) of Pudgy Penguins is proof that IP can be put on the blockchain. Furthermore, in the case of CryptoPunks, Jay-Z's social avatar is a CryptoPunk. I know many people who own Punks, as they have become a symbol of social signaling and identity in the digital world.

In addition, all in-game assets are essentially NFTs or non-fungible tokens, which means that all future in-game assets will exist in the form of NFTs. The gaming industry is massive, and while it has not fully taken off yet, it is clear that players want to own the actual value of in-game assets.

Furthermore, in the future, every contract could potentially be digitized and transformed into an NFT. This means that every option in the entire financial industry could be an NFT. For example, every ticket we currently hold, whether for a sports event or a concert, is essentially a form of contract. If these tickets were to become NFTs, they could accrue value based on factors like loyalty. Subsequently, the holders could choose to sell these NFTs, transfer the value to others, or use that value for other purposes.

Therefore, we have options in the financial industry, relationships between consumers and brands, culture and interaction between artists or teams and fans, in-game virtual assets, and of course, the art market itself. All of these can be facilitated through NFTs. More broadly, the concept of digital identity can also be achieved through NFTs, where everyone's digital identity can become a non-fungible token or contract of zero-knowledge proof.

Host: I'm thinking, all of this sounds like it will take a long time to achieve, right? If we consider long-term trends, it may require further development at the underlying chain level, such as Ethereum or Solana. But on the other hand, if you truly believe in these prospects, it means that these NFTs will bring tremendous value to the underlying blockchain, which is evident for the underlying chain, right?

Raoul Pal: The issue is that people often don't understand these things because they always want to hear a simple narrative. In reality, like the NFT artwork by Beeple (Mike Winkelmann, American digital artist) that sold for $69 million, it represents one of the most valuable blocks of space on the blockchain. This block space stores not ordinary property transactions but unique digital assets like ownership certificates. Many ownership certificates are currently stored on centralized servers like AWS, but without NFTs, these assets cannot truly exist.

More importantly, this also demonstrates how digital scarcity maintains value in an increasingly digital world. In the future, artificial intelligence may lead to the cost of knowledge becoming zero, robots may make labor costs zero, but in such a "zeroed" world, digital scarcity will become the most important embodiment of value.

When discussing the flow of wealth, we will find that the ultimate source of all wealth points to art. This was true in the past and will be in the future. Many people may not understand this. They think that NFT is just a token, but the signal within is very clear. You can see the value of these transactions and the crowd that collects these artworks, which is not merely speculation. On the contrary, it is a well-thought-out collection. Those who start building their collections now may one day own artworks worth billions of dollars, with their current investment far below that figure.

Bottom Fishing?

Host: In early November, you posted a very long tweet. At that time, you mentioned that no one wants to hear bullish views now, everyone is in panic, even attacking each other, but you mentioned that the path to a bright future is approaching. You also explained the issue of liquidity, suggesting bottom fishing where possible. You mentioned the Total Liquidity Index back then. Now it's December 2025, do you still recommend bottom fishing?

Raoul Pal: I think the market has bottomed out. In October, we experienced a liquidity crisis, with the U.S. government drawing a large amount of liquidity through the Treasury General Account (TGA), causing a liquidity crunch in the market. The government even temporarily shut down, further exacerbating the liquidity shortage as the TGA funds were unavailable for use.

Cryptocurrencies, as the most liquidity-sensitive asset class, exposed the fragility of leverage in the system during this crisis. This also triggered a reevaluation of how to measure and manage leverage. However, the market has now rebounded from the lows. Although some asset prices briefly fell below previous lows, the overall market has gradually stabilized at these levels. And today, the market suddenly saw a 20% to 30% surge, which could be a bottoming signal. Since November, a "bottom fishing zone" has been gradually forming. After the October liquidation, the market experienced a pullback in November and a final round of selling at the end of November. From the current perspective, this seems like a good buying opportunity.

If my liquidity analysis is correct, we may see a massive liquidity injection in the future. Currently, the liquidity in the banking system is constrained, causing fluctuations in the money markets and a shortage of funds. The Federal Reserve has taken note of this issue and has paused quantitative tightening (QT). Next, they need to address year-end funding pressures. As banks lack sufficient liquidity to meet debt rollovers, the Fed may inject more funds into the system through means like the repo market.

Recently, the Fed also announced a policy adjustment regarding the Enhanced Supplementary Leverage Ratio (eSLR). In simple terms, this policy relaxes the restrictions on banks holding U.S. Treasuries, allowing banks to consider Treasuries as a low-risk asset, thereby reducing capital costs. This adjustment is crucial because it not only releases more funds for banks but also provides a new buyer for government debt financing. Through this policy, banks will more actively purchase Treasuries, which is exactly what the government currently needs. This mechanism can not only increase market liquidity but also help the government better manage its debt.

Scott Bessent has mentioned that they hope funds will flow not only to Wall Street but also into the mainstream economy. His point is that they do not want central banks to continue supporting the market through Quantitative Easing (QE). While many on Twitter say that the Fed is tightening its policy and no longer injecting funds, in reality, the government is "printing money" through the Treasury Department and injecting these funds downstream into the banking system. Banks are very good at this and will use leverage to lend or provide liquidity. Thus, the current debt management mechanism is shifting from the Fed to the Treasury. In this way, the government is creating buyers for its own bonds, which is also a form of indirect currency devaluation.

The adjustment of the Enhanced Supplementary Leverage Ratio (eSLR) is a key policy change. Since the financial crisis, the financial system has become more complex, leading to reduced operational efficiency. Therefore, the speed of this policy adjustment is very fast. I thought they would announce it in January or February, but in fact, they went ahead directly and plan to implement it starting on January 1. This shows that decision-makers have recognized the urgency of the issue and acted swiftly. Steve Mirren, who is driving this policy, published an article on the day of the policy announcement, saying, "This is a significant development, but further action is needed. We need to eliminate all risks of government bonds."

This means that the government can purchase bonds unlimitedly when needed, significantly expanding the money supply. As credit flows to ordinary consumers, they will also buy more bonds, further pushing down long-term bond rates, mortgage rates, and government financing costs. This is a very important change. We may see a $3 to $5 trillion injection of new liquidity. In addition, the Fed may cut interest rates, with another $1.5 trillion in new stimulus funds directly injected into the banking system. These measures will release a significant amount of disposable income while driving the recovery of the business cycle.

Meanwhile, the "Clarity Act" is about to be introduced, possibly at the end of this year or in mid-January next year. This act will provide clear rules for the legal use of cryptocurrency, further driving the development of this field.

The coming year will be a very strong one. Although we are currently experiencing the difficulty of liquidity tightening, this lays the foundation for future growth. Next, we will see the rapid development of stablecoins. This development will allow the government to issue more bonds because stablecoin holders can come from around the world, and these people will indirectly hold U.S. Treasury bonds through stablecoins. Meanwhile, China is expanding the money supply, and its balance sheet is growing; Japan is also implementing large-scale fiscal stimulus. It can be said that the "game" of the global market has officially begun.

2026: Bull Market or Bear Market Insights

Host: I heard an internal message from Bitwise that Matt and Hunter are looking to renew sponsorship in 2026 and plan to increase their investment.

Raoul Pal: I've spoken with Coinbase's team and exchanged ideas with Bitwise's team. I haven't heard anyone among them think the market has ended; quite the contrary, they all believe this is just the beginning. Remember, if you work at Coinbase, you'll be clear on which institutions plan to use your platform for asset tokenization. And if you're at Bitwise, you'll know the trends of institutional investors such as endowment funds and pension funds. Although these institutions usually take a long time to prepare, they have high visibility into the future trends of the market. They know customer sensitivity to prices and when is the best time to act. Coinbase also has a similar capability.

Currently, the "Clear Law" has not yet passed, but once it does, it will open up a whole new phase of free development for the crypto industry. This is also why many institutions still have confidence in the future.

How to Succeed in the Crypto Space in 2026

Host: How can we succeed in the crypto space in 2026?

Raoul Pal: The key is to hold the right assets, stick to your beliefs, and not rely on others' views. Most importantly, you need to do your own research and find beliefs that truly resonate with you. Don't blindly chase just because an asset's price is low, and don't be influenced by the surrounding "echo chamber" (referring to an information environment where only views consistent with one's own are heard).

We have all made similar mistakes before. You need to ask yourself honestly: How much risk can I take? What is my goal? Do I want to accumulate wealth through long-term compounding, or do I want to quickly earn seed money to enter a higher-risk speculative field? A wiser approach is to set a realistic time frame, but don't limit yourself to the short term, as those timeframes are actually irrelevant. I believe the length of the cycle is what truly matters. I originally thought the cryptocurrency market cycle was four years, but as I observed the impact of debt issues, I have extended the cycle to five years. Therefore, five years is my core time frame, and other short-term fluctuations are just noise.

Host: Is there something you know you should let go of?

Raoul Pal: I have always stood by the idea of helping as many people as possible, but some people do not want to be helped. I see that you are also striving to do this in your tweets; I often see you trying to make people understand certain things, such as "I hope you can do this," but many people choose to ignore. I have also tried hard to communicate, but many times people do not listen to what you say, or are not even willing to take the time to watch those two-hour-long interviews or read the research material you publicly share. In the end, I can only accept this fact: some people do not want to be helped.

This can indeed be frustrating because you try your best to help others, but ultimately you will realize that you cannot help everyone. In the face of this situation, I think you can adjust your mindset with the 80/20 rule: help as many people as possible who are willing to accept help, while accepting the reality that some people do not want to be helped. But when you face negativity online, in the end, you will ask yourself: Why is this happening? Why are they angry? In fact, this is not directed at me personally, but because of their own lack of success.

You need to understand that you can't get everyone on the lifeboat. Although you wish you could, the reality is that it's not possible.

Raoul's Morning Thoughts Every Day

Host: When you wake up every morning, what is the first thought in your mind? What do you think about before going to bed every night?

Raoul Pal: My thought is "keep moving forward." My job is to constantly think about the future and envision the ideal path of life. So, every morning, I remind myself not to worry too much about trivial matters. I have learned not to dwell on who made me unhappy or what problems occurred at work today. Most things are actually not important; what matters is whether you are moving towards your set goals. Of course, as a crypto investor, we can't help but think every morning, "How much has the cryptocurrency price dropped today?"

But now, no one pays much attention to that anymore; everyone has become numb to price fluctuations. Almost no one mentions the price on Twitter anymore; everyone just smiles and says, "Well, that's the state of the market." We have gotten used to it and no longer care, but the key is to always stay focused, just like the logic of investing in cryptocurrency. If I believe that the total market capitalization of the crypto market will reach $100 trillion in the future, then I will focus on that long-term goal, rather than worrying about Bitcoin dropping 30% last week. Unless my asset allocation is off, short-term fluctuations are irrelevant. Quality assets like Solana, even if the price drops, I will still hold firmly because I value its long-term potential.

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