Crypto Veteran Raoul Pal: How to Get Rich in Crypto Without Luck?

Raoul Pal, the former Goldman Sachs executive, author of "The Global Macro Investor," and founder of Real Vision, is well-known for successfully predicting the 2008 financial crisis. Recently, in a conversation with "When Shift Happens" and during his speech at the Sui Basecamp in Dubai, Raoul Pal delved into how to steadily accumulate wealth in the Crypto Assets space, discussing topics such as Bitcoin, Ether, memes, AI, NFTs, the Sui ecosystem, strategy Bitcoin strategies, investment strategies, macro trends, and market directions.

Raoul Pal Dialogue Highlights When Shift Happens

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

How to become wealthy through Crypto without relying on luck? Just buy Bitcoin and adopt the DCA (Dollar-Cost Averaging) strategy.

Beginners often fall into the trap of seeking quick riches, and this mindset is fraught with crises.

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

The Crypto space is filled with various risks, such as DeFi attacks and wallet thefts, which require investors to remain vigilant and adhere to rationality at all times.

2. About Meme

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

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

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

Many people fantasize about becoming successful traders and earning 100 times their investment, but the reality is that those who can truly accumulate wealth in this field are the investors who persistently buy and hold for the long term.

4. Beware of Crypto Yield Risks

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

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

The Bitcoin strategy of Strategy is creating leverage in the system. Strategy purchases Bitcoin by issuing convertible bonds, which essentially amounts to selling options at a lower cost. After these options are bought by arbitrageurs (option traders), they will hedge on exchanges to deal with Bitcoin price fluctuations and the risks associated with MicroStrategy stock options.

At the same time, arbitrageurs will also take advantage of the fluctuations in the ratio between MicroStrategy's NAV and the Bitcoin price to conduct arbitrage, and carry out trades using market tools such as the price difference between perpetual contracts and spot, as well as the price difference between futures and spot.

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

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

6. Raoul Pal's Capital Allocation

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

Seven, the Value and Potential of NFT

NFT, as an innovative technology that enables the permanent storage and trading of non-transferable assets, has Pal full of expectations for its prospects. From a macro perspective, the current Crypto Assets industry is valued at 3 trillion dollars. If it grows to 100 trillion dollars in the next 10 years, it will create a massive wealth of 97 trillion dollars; even a conservative estimate of reaching 50 trillion dollars would still generate a wealth increment of 47 trillion dollars.

These fortunes will flow to different people. Art is upstream of everything, and digital art, as an emerging field, is expected to become an important direction for wealth. In the field of digital art, we have XCOPY and Beeple, followed by the emergence of the generative art movement. I spent a lot of time talking to some very famous people who are very interested in this field. After cryptocurrency OGs have made enough money, their willingness to collect artworks is extremely strong. For example, CryptoPunk symbolizes your identity and allows you to meet like-minded people. From institutions to super-rich individuals to ordinary people, everyone is gradually starting to recognize the importance of digital art. We are still in the early stages. I hold many artworks, and I believe this spans over a decade.

8. Advantages and Prospects of Ethereum

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

Once you have a business sales model, it is almost impossible to remove it from the company, as you do not want to change it and do not want to take risks. From the perspective of the Lindy effect (the longer certain things exist, the higher the likelihood that they will continue to exist in the future), Ethereum has stood the test of time and is able to meet the demands of the financial market well. Will Goldman Sachs and JPMorgan build on Solana? Unlikely. Ethereum may bring a new narrative to the market and is expected to outperform Bitcoin in the short term. Looking ahead to the next five years, unless they mess everything up, its importance will become even more pronounced.

The concepts of the Bitcoin Lightning Network, payments, and others have a limited effect on price increase; the core value of Bitcoin lies in its function as a means of value storage; the same will happen with Ether.

9. About AI

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

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

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

10. Market Attention and Quality Project Selection

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

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

The Bitcoin network has a large number of users, and sovereign countries are involved in purchasing, which is why Bitcoin is more valuable; Ethereum has a vast user base and a wealth of applications, although the emergence of L2 has made the situation somewhat complex, it still possesses significant value. Investors should actively seek projects where both the user count and the number of valuable applications are growing, such as Solana at the bottom of the cycle, where the developer community continues to expand and the user count remains stable, and the emergence of Bonk further enhanced market confidence in Solana (Note: The host mentioned that in a previous conversation with toly, toly stated that Mad Lads was a turning point for Solana); Sui is also similar.

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

1. Macroeconomic Core Factors: Liquidity and currency depreciation. Crypto Assets and the economy exhibit a four-year cycle, driven by the debt refinancing cycle. Since the high global debt in 2008, we have been maintaining economic operations through borrowing new to pay off old debts.

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

3. Liquidity Drives Everything: The net liquidity of the Federal Reserve is a core indicator. From 2009 to 2014, liquidity was mainly provided through balance sheet expansion, after which new tools such as bank reserve adjustments were added. Currently, total liquidity (including M2) is crucial, as it has an astonishing explanatory power regarding the trends of Bitcoin (90% correlation) and the Nasdaq (97% correlation).

4. Currency Depreciation Mechanism: Currency depreciation is equivalent to a global tax, with a hidden inflation tax of 8% globally each year, plus 3% of explicit inflation, meaning you need an annual return rate of 11% to maintain your wealth without shrinkage. This explains why young people are flocking to the crypto space – traditional assets (real estate, stocks, etc.) are underperforming, forcing them to choose high-risk assets in search of excess returns.

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

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

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

8. Current Market Misjudgment Analysis: People often interpret the current market narrative (such as tariff panic) using liquidity conditions from three months ago, but this is biased. In fact, the tightening of financial conditions in Q4 2024 (rising USD interest rates, increasing oil prices) has a lagging effect of three months. The economic surprise index (comparing the U.S. to the global situation) indicates that the current economic weakness is only a temporary phenomenon. Looking back at the Trump tariff cycle in 2017, the dollar rose then fell, followed by liquidity driving asset prices up significantly.

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

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

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