How to get rich in crypto without relying on luck?

Question

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 a speech at the Dubai Sui Basecamp, Raoul Pal delved into how to accumulate wealth robustly in the Crypto Assets space, discussing topics such as Bitcoin, Ethereum, memes, AI, NFTs, the Sui ecosystem, strategy Bitcoin strategies, investment strategies, macro trends, and market directions.

Raoul Pal Dialogues Highlights from 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 a DCA (Dollar-Cost Averaging) strategy.

Beginners often fall into the trap of pursuing quick wealth, and this mindset is actually fraught with crises.

When you start to envy others for achieving 100 times returns, you have already stepped into a dangerous area. 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 numerous risks, such as DeFi attacks and wallet theft, which requires investors to remain vigilant and uphold rationality at all times.

2. About Meme

Speaking of Meme coins, Raoul Pal stated that he does not hold Fartcoin, but he does hold SCF (Smoking Chicken Fish) and DODE. Although SCF has dropped by 90%, it is currently showing a good rebound trend. He specifically reminds investors that whether holding Fartcoin, WIF, or BONK and other Meme coins, they must not let these coins occupy too large a proportion in their investment portfolios, as these types of 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 originally thought 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 it's better to return to life with peace of mind and stay away from trading screens. Those 5-minute candlestick charts and 1-hour candlestick charts are actually not of substantial help for investment decisions.

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

4. Beware of Crypto Yield Risks

Regarding Crypto Yield, for example, the method of earning returns through staking also carries risks. For ordinary investors, when faced with an opportunity that seems to offer a 20% return, it is essential to be aware of the risks involved.

How to view Michael Saylor's Bitcoin purchasing strategy?

The Strategy's Bitcoin strategy is creating leverage in the system. Strategy purchases Bitcoin by issuing convertible bonds, which essentially is selling options at a lower cost. These options are bought by arbitrageurs (options traders), who then hedge in the exchange to cope 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 engage in arbitrage, and conduct 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 like Citadel, Millennium, and Point72 are also engaging in arbitrage. These institutions have extensive experience in risk management and may receive systemic support, with reasonable position size control that makes them less susceptible to liquidation.

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

6. Raoul Pal's Capital Allocation

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

Seven, the value and potential of NFTs

NFT, as an innovative technology that can permanently store and trade non-transferable assets, has Pal optimistic about its prospects. From a macro perspective, the current Crypto industry is valued at 3 trillion dollars. Assuming it grows to 100 trillion dollars over the next 10 years, it will create a staggering 97 trillion dollars in wealth; even a conservative estimate of reaching 50 trillion dollars will still generate a wealth increment of 47 trillion dollars.

Wealth will flow to different people. Art is the upstream of everything, and digital art, as an emerging field, is expected to become an important destination for wealth. In the field of digital art, we have XCOPY and Beeple, which later gave rise to the generative art movement. I have spent a lot of time talking to some very famous people who are very interested in this field. After crypto OGs have made enough money, their desire to collect artworks is extremely strong. For example, CryptoPunk symbolizes your identity and allows you to meet a group of like-minded people. From institutions to super-rich individuals, and even ordinary people, they are gradually beginning to realize the importance of digital art. We are still in the early stages. I hold many artworks, and I believe this spans over a decade.

8. Advantages and Prospects of Ethereum

Regarding Ethereum, the network capacity of Ethereum has exceeded current system demands, and adjustments may be made to some mechanisms in the future, returning 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's almost impossible to remove it from the company because you don't want to change it, you don't want to take risks. From the Lindy effect (the longer something has been around, the more likely it is to continue to exist in the future), Ethereum has stood the test of time and is well positioned to meet the needs of the financial market. Will Goldman Sachs, JPMorgan Chase build on Solana? Unlikely. Ethereum may bring a new narrative to the market, and it is expected to outperform Bitcoin in the near term. Looking ahead to the next five years, unless they mess everything up, it's going to become even more important.

The concepts of Bitcoin Lightning Network, payments, and so on have a limited impact on price increases; the core value of Bitcoin lies in its function as a store of value; the same will happen with Ether.

9. About AI

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

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

I developed an AI Raoul that can read the news daily, with the news 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. Now, users of Real Vision can interact with this chatbot. Pal predicts that soon these two technologies will merge, and this transformation will have a profound impact on the podcast and media industries, with the media content that everyone encounters in the future becoming uniquely personal. Moreover, human memories and behaviors may ultimately become "nourishment" for AI, achieving a certain kind of "immortality."

Ten, Market Attention and Quality Project Selection

This is an attention game. People's focus on key tokens is scattered, and the duration of many narratives is relatively short. Pal emphasizes that holding Bitcoin is always a wiser 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, particularly those projects that can continuously enhance network adoption rates, as these projects often have higher investment value. According to Metcalfe's Law, the potential of a project can be assessed based on active user numbers, total transaction value, and user value.

The Bitcoin network has a large number of users, and sovereign countries are participating in its purchase, which is why Bitcoin is more valuable; Ethereum has a huge user base and a rich array of applications. Although the emergence of L2 has made the situation slightly more complex, it still possesses significant value. Investors should actively seek projects where both user numbers and valuable applications are growing, such as Solana, which saw its developer community continuously expanding and user numbers remaining stable at the bottom of the cycle. The emergence of Bonk further boosted market confidence in Solana (Note: The host mentioned that in a previous conversation with Toly, Toly indicated that Mad Lads is a turning point for Solana); Sui is similarly situated.

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

Macroeconomic Core Factors: Liquidity and Currency Depreciation. Crypto Assets and the economy show a four-year cycle, driven by the debt refinancing cycle. Since the high global debt in 2008, we have maintained economic operation by borrowing new to repay old.
Population Aging and Economic Growth: Population aging leads to a slowdown in economic growth, requiring 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 related charts.

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, and tools such as bank reserve adjustments were added later. Currently, total liquidity (including M2) is crucial, as it has an astonishing explanatory power regarding the trends of Bitcoin (90% correlation) and Nasdaq (97% correlation).

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. This explains why young people are flocking to the crypto space—traditional assets (real estate, stocks, etc.) are not providing sufficient returns, forcing them to choose high-risk assets in search of excess returns.
Wealth Disparity and Crypto Opportunities: The rich hold scarce assets, while the poor rely on labor income (which is decreasing in purchasing power year by year). The crypto system has disrupted this pattern—young people seek breakthroughs through high-risk assets.
Performance of Crypto Assets: Since 2012, an annualized 130% (including three major pullbacks), Ethereum 113%, Solana 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" that attracts capital.
The Sui ecosystem has immense potential. DEEP (DeepBook Liquidity Layer Protocol) has performed the best recently. The SOL/SUI ratio indicates that SUI is relatively strong.
Analysis of Current Market Misjudgment: People often interpret the current market narrative (such as tariff fears) using liquidity conditions from three months ago, but this is misleading. In fact, the tightening of financial conditions in the fourth quarter of 2024 (rising dollar interest rates, increasing oil prices) has a three-month lag effect. The Economic Surprise Index (comparing the U.S. with the global economy) 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 significantly higher.

Global M2 and Asset Relationships: 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, retracing, and then accelerating 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 substantial 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 for altcoins.

Business Cycles and Bitcoin Trends: The ISM Manufacturing Index is an important leading indicator. When this index breaks above 50, it signals a return to economic growth, increased corporate profits, and active reinvestment of funds, leading to an accelerated rise in Bitcoin prices. If the ISM index reaches 57, Bitcoin prices could even reach $450,000. As the business cycle warms up and household cash increases, risk appetite rises, and at this time, 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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