Original Title: Raoul Pal: How to Get Rich in Crypto (without getting lucky) | E120

Original Source: When Shift Happens

Original Translation: KarenZ, Foresight News

Raoul Pal, the former Goldman Sachs executive, author of the book "Global Macro Investor," and the founder of Real Vision, is renowned for his accurate prediction of the 2008 financial crisis. Recently, in a conversation with "When Shift Happens" and a speech at the Dubai Sui Basecamp, Raoul Pal delved into how to accumulate wealth steadily in the cryptocurrency field. He discussed topics such as Bitcoin, Ethereum, Meme coins, AI, NFTs, the Sui ecosystem, Strategy Bitcoin Strategy, investment strategies, macro trends, and market developments.

Raoul Pal's Insights from When Shift Happens

1. How to Get Rich in Crypto without Relying on Luck?

How can one get rich in Crypto without relying on luck? Simply buy Bitcoin and adopt the DCA (Dollar-Cost Averaging) strategy. Newcomers often fall into the trap of seeking fast wealth, which is actually full of risks. When one starts to envy others' 100x returns, they have already entered a dangerous territory. At this point, if they lose rationality and succumb to greed, they are very likely to mess up their investments. The Crypto space is full of risks, such as DeFi attacks and wallet thefts, which require investors to remain vigilant and stay rational.

2. About Meme Coins

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

3. Stay Away from Market Panic, Embrace Value Investing

If investors feel panicked about the market, Pal suggests calmly returning to life and staying away from the trading screen. Those 5-minute candlestick charts, 1-hour candlestick charts actually do not provide substantial help for investment decisions. Many people fantasize about becoming successful traders, earning 100x returns, but the reality is, those who truly accumulate wealth in this field are the investors who persist in buying and holding long term.

4. Beware of Crypto Yield Risk

Regarding Crypto Yield, such as earning rewards through staking, there is also risk involved. For ordinary investors, when faced with an opportunity that seems to offer a 20% return, they must be acutely aware of the risks involved.

5. How to View Michael Saylor's Bitcoin Purchase Strategy?

Strategy's Bitcoin strategy is creating leverage in the system. Strategy acquires Bitcoin by issuing convertible bonds, which is essentially selling options at a lower cost. After arbitrageurs (option traders) purchase these options, they hedge on the trading platform to deal with Bitcoin price volatility and the risk of MicroStrategy stock options. At the same time, arbitrageurs also take advantage of the fluctuation in the ratio between MicroStrategy's NAV and Bitcoin price for arbitrage, and engage in trading using market tools such as perpetual contracts and spot price differentials, futures and spot differentials.

Currently, the buyers of Strategy's convertible bonds are mostly TradFi hedge funds and other institutions; sovereign wealth funds like Norway's central bank may only value the Bitcoin element in them. Large hedge funds like Citadel, Millennium, Point72 are also engaged in arbitrage. These institutions are experienced in risk management, may receive systemic support, control position size reasonably, and are less likely to be liquidated. In sharp contrast, those traders who use excessive leverage face enormous risks, and cases of trading failures due to excessive leverage in the market are common.

6. Raoul Pal's Capital Allocation

Regarding capital allocation, Raoul Pal states that Sui accounts for 70%, far surpassing Solana now. Sui's adoption and developer activity have been impressive. In addition, he also owns some DEEP (DeepBook), which is a liquidity layer protocol in the Sui ecosystem.

Seven, The Value and Potential of NFTs

As an innovative technology that allows for the permanent storage and trading of non-fungible assets, Pal is optimistic about the future of NFTs. Taking a macro perspective, the current size of the Crypto industry is $3 trillion. Assuming it grows to $100 trillion in the next 10 years, it will create $97 trillion in massive wealth. Even with a conservative estimate of reaching $50 trillion, it will still generate an incremental wealth of $47 trillion.

This wealth will flow to different people. Art is the upstream of everything, and digital art as an emerging field is poised to become a significant destination for wealth. In the realm of digital art, we have XCOPY and Beeple, which have sparked the generative art movement. I have spent a lot of time talking to some very famous individuals who are very interested in this field. After earning enough money, Crypto OGs have a strong desire to collect art. For example, owning a CryptoPunk symbolizes your identity and can connect you with like-minded individuals. From institutions to ultra-high-net-worth individuals, to ordinary people, everyone is starting to realize the importance of digital art. We are still in the early stages. I hold a lot of art, and I think this is a span of over 10 years.

Eight, Ethereum's Advantages and Prospects

Regarding Ethereum, the network capacity of Ethereum has surpassed the current system requirements and may adjust some mechanisms in the future, returning to Layer1. The position of EVM is like Microsoft, where many banks, insurance companies, and large enterprises around the world rely on Microsoft, not Apple or Google.

Once you have an enterprise sales model, it is almost impossible to remove it from the company because you don't want to change it, and you don't want to take risks. From the Lindy effect (the longer something has existed, the more likely it is to continue to exist in the future), Ethereum has stood the test of time and can meet the needs of the financial market well. Will Goldman Sachs and JPMorgan build on Solana? Unlikely. Ethereum may bring a whole new narrative to the market and is expected to outperform Bitcoin in the short term. Looking ahead five years, unless they mess up everything, its importance will become more and more prominent.

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

Nine, About AI

The development trend of AI is rapid, and its performance has surpassed 99% of analysts. After deep consideration, Pal believes that the rise of AI has raised profound questions about consciousness and the future role of humans. He advises people to actively engage, deeply understand, and skillfully apply AI technology.

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

I have developed an AI, Raoul, that can read the news daily, which is also written by AI, and I have also 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 are already able to interact with this chatbot. Pal predicts that soon these two technologies will merge, bringing a transformation that will have a profound impact on the podcast and media industry, where every piece of media content individuals encounter will have a unique personality. Moreover, human memory and behavior may ultimately become the "fuel" for AI, achieving a kind of "immortality" in a sense.

10. Market Attention and Selection of Quality Projects

This is a game of attention. People's focus on key tokens is scattered, and the duration of many narratives is also relatively short. Pal emphasizes that holding Bitcoin has always been a wise choice. In addition, 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, with a particular focus on projects that can sustainably increase network adoption, as these projects often have higher investment value. According to Metcalfe's Law, project potential can be assessed based on active users, total transaction value, and user value.

The Bitcoin network has a large number of users and participation from sovereign nations, which is why Bitcoin is more valuable. Ethereum has a large user base and a rich ecosystem of applications. Although the emergence of Layer 2 has made the situation slightly more complex, it still holds significant value. Investors should actively look for projects with double-digit growth in user numbers and valuable applications, such as Solana during the bottom of the cycle, where the developer community continues to grow, the user base remains stable, and the emergence of Bonk further enhances market confidence in Solana (Note: The host mentioned in a previous conversation with Toly that Mad Lads was a turning point for Solana); Sui is similar.

Raoul Pal's Keynote Speech at Sui Basecamp in Dubai

1. Macro Core Factors: Liquidity and currency devaluation. Cryptocurrency and the economy follow a four-year cycle driven by the debt refinancing cycle. Since the global debt peaked in 2008, we have been maintaining economic operations by borrowing to pay off old debts.

2. Population Aging and Economic Growth: Population aging has led to a slowdown in economic growth, requiring more debt support to sustain GDP growth. This phenomenon is widespread globally, and the dynamic can be clearly observed through a debt-to-GDP correlation chart.

3. Liquidity Drives Everything: The Fed's net liquidity is a key indicator. From 2009 to 2014, liquidity was mainly provided through balance sheet expansion, and later tools like bank reserve adjustments were added. Currently, total liquidity (including M2) is crucial, with astonishing explanatory power for the trends of Bitcoin (90% correlation) and Nasdaq (97% correlation).

4. Currency Devaluation Mechanism: Currency devaluation is akin to a global tax, with a global 8% implicit inflation tax per year, plus 3% explicit inflation, meaning you need an 11% annual return to maintain wealth. This explains why young people are flocking to the crypto space—traditional assets (real estate, stocks, etc.) are providing insufficient returns, forcing them to choose high-risk assets for excess returns.

5. Wealth Disparity and Crypto Opportunity: The wealthy hold scarce assets, while the poor rely on labor income (which loses purchasing power annually). The crypto system has disrupted this pattern—young people are seeking breakthroughs through high-risk assets.

6. Crypto Asset Performance: Annualized at 130% since 2012 (including three major pullbacks), Ethereum at 113%, Solana at 142%. Bitcoin has seen a cumulative surge of 2.75 million times, a rarity in the investment field, with crypto assets gradually becoming an attractive "supermassive black hole" for funds.

7. Sui Ecosystem Holds Tremendous Potential. DEEP (DeepBook Liquidity Layer Protocol) has recently shown the best performance. The SOL/SUI ratio indicates SUI's relative strength.

8. Analysis of Current Market Misjudgments: People often interpret the current market narrative (such as tariff fears) based on liquidity conditions from three months ago, but this approach is biased. In reality, the financial conditions tightened in the fourth quarter of 2024 (with rising U.S. dollar rates and oil prices), resulting in a three-month lagging effect. The Economic Surprise Index (U.S. versus global comparison) indicates that the current economic weakness is only a temporary phenomenon. Looking back at the 2017 Trump tariff cycle, the dollar first rose and then fell, followed by liquidity driving a significant price surge in assets.

9. Global M2 and Asset Relationship: When global M2 hits a new high, asset prices should rise in tandem. Taking Bitcoin as an example, its price trend usually shows a breakthrough, a pullback, and then accelerates in the "Banana Zone." Compared to the 2017 cycle, Bitcoin saw a 23x increase in that year. Although the current market is different, a significant increase is still expected. The market is currently in the correction phase after the breakthrough of the first part of the "Banana Zone," about to enter the second part, which typically sees the rise of altcoins.

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

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

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