Bitcoin is like a call option to the emergence of cryptocurrencies in the world, said Raoul Pal, CEO of Real Vision. "I've never seen anything like what is going on right now. You have a limited supply asset that now is a globally recognized brand that everybody knows, but not everybody understands. What's happening now is institutions are coming into the space," Pal said. More information about cryptocurrencies from Raoul Pal can be accessed at Real Vision Crypto: https://www.realvision.com/crypto.
Now, uh, in the second segment of orange, a few, I like to talk a little bit about your background first and foremost, and then a lead into what you like to invest in. And, uh, I know that you have an institutional background. You've worked at Goldman in the late nineties, and then you worked at a macro hedge funds, and then you started real vision.
So I'm curious as to. Why you decided to leave corporate investment banking and then, and then macro investing and start and start a will newsletter premium newsletter. And also one of the more popular finance channels on, on the internet. What, what made you switch from being a participant to interviewing participants?
I've been very lucky. I've been at the heart of the global financial system. I started and co-run the hedge fund sales business and equities and equity derivatives at Goldman. My clients are the world's most famous hedge fund managers. The big names that we all know, um, I got to speak to them every day.
I learned a lot and I dealt with hedge funds, my entire career. I, then one of my clients said, come and run a hedge fund for us. And I started and ran the global macro hedge fund for GLG partners, which was the largest hedge fund firm in Europe at the time. Uh, I then realized that that game was changing as pension assets audit.
And insurance assets important and they wanted to turn hedge funds into bonds. They wanted 8% returns and 5% volatility. And the macro world was actually a very different world of higher volatility and higher returns. Um, and so I thought, well, the only people are going to win in this game, asset gatherers.
Um, you won't get rich out of performance. So I decided to leave. Um, and that was the right call. I mean, that was the rise of the massive hedge fund platforms. So the people who got rich for the people who have the platforms, it never came to the people who were the old store school, Sandra and Druckenmiller, Julian, Julian Robinson, George Soros, that kind of thing.
Uh, I then started writing macroeconomic research and investment strategy because I was one of the more experienced people in entire hedge fund industry. So I can share my experience, my macro framework, and to this day, most of the world's or many of the world's biggest hedge funds, both macro special situations, events, long, short.
Subscribed to real, uh, to global macro investor, family offices, sovereign wealth funds, governments, all sorts of people. So it's really amazing network, but writing, I was living in Spain in 2008 and all the way through it up until a couple of a few years ago, six years ago. Um, we had the financial crisis, which I kind of knew was coming.
You know, a lot of the people who were in the film, the big short were clients of mine. We all kinda knew what was going on. Then the European crisis came along and I was right at the epicenter of it or predicted a lot of it. And we almost lost the entire banking system in Europe. And what was awkward is, you know, quite a few of us made money out of that.
But friends of my parents would say, But why didn't we know why didn't nobody tell us that our savings were at risk? Why did nobody tell us that our pensions were at risk and that did not sit well to me? Why was the rate difference in the value of information or the quality of information that ordinary people got?
And so I thought I had a moral duty to change that and the advent of video gave us that opportunity. So we started revision in 2014 with the. Passion and mission to democratize the very best financial information. And what we did was we reached out to the people who were impossible for anybody to have a call with, let alone speak to the world's most powerful and famous hedge fund managers, people in my Rolodex and said, listen, when you come on and speak for an hour, an hour and a half and tell us how you do things, what you do, the lessons you've learned and what you're thinking is going on right now, what are the opportunities?
What are the risks? And they said, yeah, And that was amazing. So they came on and that was the start of revision. We kind of changed everything about how financial media engage. We do analysis, not news. When, when you start a real vision, you must have realized that there was a hole that you could have filled that was left by mainstream media.
Uh, the financial news of the time, uh, what was this whole Raul. The hole was three minutes soundbites for average, age of 68 years old, and a focus on driving adrenaline through financial markets, flashing headlines, breaking news. What they weren't doing was taking a fiduciary responsibility for people's money.
They actually don't care. And that was the difference. We said, well, what's the best way we're not going to spoonfeed you. The best answer is to give you as much information as possible. Well, that's been curated. We won't give you a biased view. I may have a view, but religion doesn't have a view, but we're going to give you access to the kind of information that the world's best financial professionals get.
So now the playing field is level. Now you have a chance and the media was doing the opposite. Yeah. Real vision. Crypto is something new that you're launching. Tell us about that. Yes. I have been involved in the cryptocurrency space since the European crisis. Again, we almost lost all of our banking system in the whole of Europe.
It made me think that we needed to find solutions. And I spent some time with some others trying to set up the world's safest bank. And one of my clients from global macro investor said, you need to take a look at Bitcoin. I looked at Bitcoin. I suddenly realized that maybe this was the answer I started investing back then.
And I've been writing about it for a long time. I knew that the macro world and the crypto world were going to collide at the next recession and they're all going to be come part of the same thing. So we launched rovers and crypto because it's going to be the big part of the financial markets, the new financial markets that everybody needs to understand.
This is not only the biggest investment opportunity I've ever seen, but also is going to change everybody's lives. I wonder what may, what inspired you to look into crypto more? Because looking at your background, you had a very traditional finance background when you were at Goldman Bitcoin wasn't even born yet.
And so when a client of yours presented you with this completely new asset class, you know, you, and like a lot of people didn't dismiss it. Why I'm a macro guy? My job is to look for opportunity and then assess it. A lot of people go from the don't. Tell me what to do, approach, which is more traditional.
You know, I know what I know. Macro is all about what you don't know, where is the opportunity? You know, that's why I talk about it wrong because nobody else is investing there. That's where alpha is generated. That's where you make money. So when somebody said, listen, I think there's a perfect asset here that really has this unique property of limited supply.
I then looked at it and said, it looks like gold to me. So I wrote the first paper back in 2013, 12, uh, of okay. If it's got the same attributes as gold, I look at it stock to flow ratio in a very crude way. And I said, this thing's probably worth a million bucks with gold at 1300 at the time. And that became quite famous article, uh, in Silicon Valley animal's street.
Um, and so. It made me think, okay, here's something different and it answers a lot of the problems. Yeah. I, this question a lot from people that I know and, uh, and, uh, investors who watch our show is whether or not blockchain is the way of the future. And I think, uh, there was some confusion as to whether or not blockchain should even exist in the same sentence as gold, something with an established history of $5,000.
What is your view here? They all exist together. Gold was the only answer for a parallel financial system and it has always survived for that. So it's always been the denominator of which we can price things. So, you know, people who've been involved in golden a long time, know basically the price of a cow or suit or anything else has basically held its value against guns.
So gold is the asset of value. But we're in a digital age. Now, the world has changed entirely. You and I are in different countries talking digitally, like we're in the same place together. Everything has changed when something like Bitcoin comes, it offers a different solution that compliments gold doesn't take it away.
They don't have to be one or the other. They just both work for different people in different times and blockchain technology. Well forget all of the, you know, should it be Bitcoin? Blockchain itself is a amazing technology to verify trust. If you think of the financial markets, when a company like Lehman brothers goes bust, nobody knows who owns what, there's not enough trust in financial markets, blockchain, souls.
All of this. Um, it also solves everything from custody to payments, less to settlement, and you can build these amazing applications, like decentralized finance on top. So there's two revolutions going on. One is the revolution of money, which is Bitcoin. And one is the revolution of the entire internet of value.
Which is all of these blockchains from Ethereum to whatever you choose, whichever blockchain you're looking at in 2017. Uh, the popular comparison, uh, in media was that Bitcoin was like the tulip mania. Now, when you read these headlines, what went through your head where you still did it, did it cause concern for you?
Where did you dismiss them? So I was long, most of 2017 sold into the rally too early, but I, but I didn't. Yeah, I did great. I make 10 times my money in that period and yes, it was an exhibiting a public phase now. Chips, as far as I know, still exist, they just don't trade for those prices. And gold has been through bubbles and, you know, speculative mania is a normal.
Is the asset worthless or not? That's the question clearly. It's not now it's lost in the test of time. That there is a perceived value in trust in the asset. So when it goes through speculative manias, all assets, then maybe equities are in that male and that's normal. That's just human behavior. But at the time I was nervous because it was going up so fast and I didn't yet understand as much as I do now.
I'm given retrospectively I would have sold out again, maybe not as low as I did. You know, I think I sold out a two and a half thousand and went up to 20,000. Um, I would probably do the same again. Yeah. Because you don't need to have all the peaks and troughs. Um, you can try and time some of that cycle.
Yeah. Uh, you said that, uh, in 2017, you, you, you saw it as being a bit of a mania. What do you, what do you think now? 20. Well, we've reached all time highs already wildly different. I've never seen anything like what is going on right now. You have a limited supply asset that now is a globally recognized brand that everybody knows people.
Not everybody understands, but what's happening now is institutions are coming into the space. So first it was the hedge funds. The family offices. Soon are the pension funds and the investment advisors, and they're all coming in. And the more the market cap of Bitcoin comes it up. It's about 350 billion right now.
The more that they're forced to go in because it's such a ridiculously well-performing asset and they're so uncorrelated. It is. So we've got a massive wall of money that's coming into the space. And for the first time in our lifetimes, we, as ordinary people get to front, run the institutions, as opposed to them front run us.
And so w you know, my conversations of this is, I mean, this is real and meaningful and massive yesterday alone. I was speaking to, um, The founder of one of the largest investment advisor firms in America, investment advisors alone have 5 trillion in assets. And he's trying to get all of his advisors and advise all the others.
As soon as the ETF is launched to get up to 1% of assets. I mean that's 500 billion from the investment advisors alone. Um, it's incredible. Do you think this institutional money has anything to do with a shift in attitude towards blockchain technology? Let's say, let's say blockchain existed back in late 1990, you know, in the nineties, early two thousands, when you were still a Goldman, do you think the banks would have adopted blockchain then?
Yes, they adopted the incident. Then we've all seen these phases, these things where we're not going to use this. This is rubbish. Why do we need this? You know, I've got a fax machine. Why do I need email? Suddenly what's a fax machine. You know, look at all. These dot comes on their mania. Next minute. It's normal.
It's part of life. And Amazon's a trillion dollar company. The world goes through these phases and the more conservative people, the less risk takers tend to be later to the party. So I think the banks are late here because they're going to get disrupted somewhat. I I've heard a lot of different forecasts on our show for Bitcoin, 20,000, 30,000 by next year, a hundred thousand by next year, a million in a couple of years.
Can you, can you help us reconcile this? Look again, none of us knows none of us has a crystal ball. I use a number of measures. I use technical analysis, logarithmic charts. I use the stock to flow ratio from a guy called plan B. People can find them on Twitter. That's very well-constructed. Um, I use, um, a whole number of different yardsticks.
Somebody sent me a report today that had been written about, so Metcalf's law and applying that, um, the adoption of Bitcoin and putting it in price. They all basically come to the same thing. They basically come to, we're going to be somewhere between 500 and a million dollars within five years. And we should be somewhere between 103 hundred in the next 12 to 18 months.
Okay. Now is institutional money flows in? I I'm guessing that's a sign of maturity. If an asset were to mature. Uh, with that, correct me if I'm wrong, but would that not mean that they're in the end phases of their growth cycle? I think it'll come in cycles. So let's look at the world where most institutions have a 1% allocation, much likely due to commodity markets right now.
Maybe it's slightly bigger than that. Okay. So where do you go from there? Where do you go from the million dollar price target? It's now a lower volatility accepted asset. Well, that's about then what happens to the central banks and fair money? That gets very interesting because the end of a debt Supercycle, I may be some countries.
Maybe you start with the Latin American country. They suddenly put Bitcoin into their reserves. Maybe they start using Bitcoin as a currency. We don't know, but that next phase would be the next level from that, which is what people call, you know, the Bitcoin ization of, of the monetary system, whether it happens or not.
I don't know. But Bitcoin is basically a call option. All of that's a company. Yeah. It's a popular vehicle for day traders. Is that, is that, do you agree with that? Or should you have a longer time horizon for, for something like Bitcoin look, data, it's a popular vehicle for alpha. You can make money in this space.
So I've seen day traders who can't make money because there's so many machines. High-frequency trading firms, algorithmic firms in financial markets can make good money out of crypto markets. It's a place where it looks like financial markets, 20 or 30 years ago. Things move fast like commodity markets.
So yes, if you're a data I'm terrible at day trading. But as a long-term investor, the buy and hold opportunity is, is literally mind blowing. You know, we talked about some numbers, you know, let's say I'm an idiot. I'm wrong. It goes down 50%. Okay. So let's put a hundred thousand dollars into it. So I've lost 50 pounds, maybe.
I'm right. And it goes up 25 times. Well, I'm risking 50,000 to make, turn off a million. 25 million. So, I mean, these numbers are crazy. I started off 20, about two and a half million. So there is no asset class on earth that has a risk reward. It looks anything like that. So Bell's straight distribution here.
We've got a very, very fast time. Got the, uh, central bank digital currency that are rolling out where rumor to be rolling out across the world. Uh, do you think that's going to significantly change anything at all? Yes. Um, in terms of the Bitcoin world, it creates digital original friends. So therefore from my phone, I can instantly switch from my bank account to Bitcoin back again, send you money.
Um, send somebody else money in a different country. It'll work seamlessly. They are coming. Every single central bank has said it's coming. Uh, the fed are dragging their heels the most because they have the most to lose money. They need to get it right. Cause they're the world's reserve currency, but it is coming very fast.
They also change monetary policy and fiscal policy. So we've seen in this crisis, monetary policy doesn't work any longer, but you need to get money into different people's hands. When you go to central bank, digital currency, I can give you money directly. I can also give you a different rates of insurance, because I want to encourage you to save a me to disabled.
You can give me negative interest rates, you positive interest rates. So we can use behavioral economics to run monetary policy and fiscal policy, which is a gigantic change to the world. We've been using very blunt insurance compared to what we can do. One central bank, digital currencies com. However, these are still peer constants.
It doesn't get away. The fact the central banks will use them to continually print more money that may challenge you. Cause you know, I've heard that talk about a new Bretton woods and one of those ways that could work is. You agree, everybody in the new currency basket called well currency imprints, 50% of GDP, only one gun now, devalued against anybody at that point.
Sure. Called a Bitcoin, go to the moon. And then that gives everybody the money for this fiscal stimulus they need. And then after that, maybe you can anybody in that basket at 2% money supply growth. Well, then it kind of looks like Goldwell Bitcoin. So there's a number of things can happen, but that that's not going away.
You know, we've still got problems here, but there's a lot of ways this game can play out and it's going to be fascinating. And we have to not think of the world as it was and think of the world how it could be. Okay, let's talk about, uh, your asset allocation for cryptocurrencies, because you told me offline, uh, 80% was in Bitcoin and 20% of Ethereum.
I've read that a Ethereum might catch up to Bitcoin as the largest market cap coin in the world. Is that something that you subscribe to it? Could you believe in that? I think it's possible, you know, it's platform over an asset. Bitcoin has this beautiful, pristine collateral asset quality. But that doesn't mean it needs to be the biggest, I mean, gold is not the biggest asset and gold has many of these attributes.
Most of them impact. So gold is about $11 trillion asset. Maybe Bitcoin should be $11 trillion asset, that kind of spine. But what's the global equity market wellness. What's, you know, all of those other things. That's how I think of a theory. It's like the rest of the space. Now. It's not only going to be a theorem, it's going to be everything.
So I do see a world where Theo, it could be much larger. Then then, um, the Bitcoin in market cap, but it won't, maybe it trades differently. I don't know how this all works, but all I know is it's interesting enough to have some of it. Final question. I noticed that gold is not part of your liquid portfolio.
Uh, why is that? Um, I sold it yesterday, um, reasonably, even though I think it goes up. Um, I sold my goal yesterday because Bitcoin is eating the world. It is literally, I run all the chance of Bitcoin versus every asset. And it's broken out versus every single asset on earth. And to such an extent. But it's become such a dominant, such a superior trade in the portfolio that almost diversification doesn't work.
It doesn't matter. And for me, how I construct my portfolio, I've very aggressive brisk in this, but I don't use leverage. And, you know, I have other assets and I have income that I'm able to take this bed, but it is literally the most dominant asset I've ever seen. Well, I want to thank you so much for coming on the show today.
You, uh, It ran through a lot. So, uh, it was very informative. Thank you for your time. No, that's all. And if people want to find more about crept, so just go to rail, vision.com forward slash crypto. It's a free channel and you can learn a lot about this exciting new world. Cause it's super exciting. Yeah. Um, I'm happy you shared that with us.
Thank you for watching Kitco news. I'm David Linde. Stay tuned.