It's a once in a lifetime opportunity. We're being given. We get to front run a wall of money this month. Bitcoin is back on the world stage after surging by over 40 percent. The main cryptocurrency almost touched its all-time high before a major correction interrupted the rally traditional financial media and wall street analysts have been skeptical of bitcoin's performance too many.
This market movement reminded of the 2017 bitcoin bubble and the following crash. This time, though, the outcome may be very different, twenty thousand here is not the same as twenty thousand back then back.
Then it had gone up a hundred fold when it got to twenty thousand. I don't even started this. Yet was the latest bitcoin rally just the start of a bull market and what is the bigger picture? Investors should pay attention to find out.
We talk to raul, paul, ceo and founder at global macro investor and real vision. I'm giovanni. Your host welcome to another exclusive coin telegraph interview thanks for being with us today, raul always great to be here.
We have been witnessing a massive bitcoin rally which reminds everyone of what we saw in 2017., so we also know what happened in 2017 when bitcoin eventually reached almost 20 000, and then it crashed uh by 50, one month after so um.
What do you think is this rally different from back then, and if so, how is that different? It's. It's incredibly different. If you remember going back, then the only investors were retail. There was almost nobody else involved and all i'm hearing every day from every content is institutional money and what's? Fascinating is once you look at the supply of bitcoin.
There's about 900, a day come on to the market, for the mining, most of that is being absorbed between grayscale paypal and square. Now, at the rate, paypal and square are growing. They're, going to take the entire new supply out of the market.
Against that you then look at what is happening to the coins that are in the market. Well, they're coming off exchange people are putting them into cold storage. So there is no supply. I have literally never seen a situation like this before, where there is no supply coming into the market and demand is going up every day because institutions are coming in.
So i think we've got we're at the early stage of something that's potentially much bigger than any of us actually think um, and that is almost a little bit terrifying. I've. Never seen a market with this supply and demand imbalance before so.
As you like to say, this is an ideal moment to go irresponsibly long on bitcoin, because bitcoin has been doing great for the whole 2020. It has been doing better than gold. It has been doing better than stocks still ethereum has performed even better than bitcoin on a year-to-date basis.
So what do you think why shouldn't people go irresponsibly long on ethereum instead of on bitcoin, because the institutional wall of money is not going into ethereum. Yet ethereum has a whole bunch of other things and the ethereum 2.
0 and the staking and taking coins off the market there. There's, a lot of positives and the amount of developments going on the d5 space. But the easy trade is follow. The money we get to front run a wall of money now with ethereum.
We don't know that that's coming. It has other things that will drive the economics and the bitcoin price. Rising is one of them, so bitcoin itself is, and i've been talking about. This is basically eating every other asset class for lunch.
It is outperforming everything it's even out performing amazon. Now so the anybody who's running a portfolio that's, discretionary or even personal investors, high net worth family offices. They're all looking at themselves.
Thinking. Why do i even own anything else and that's? The conclusion i got to almost is why didn't bother um, you know because bitcoin itself, yes, it's, a very volatile asset. Yes, we're. Going to have to have 30 or 40 pullbacks, but you get compensated so well for the risk in terms of the reward you're, getting from it that it seems to be worth the risk, which is why i'm irresponsibly long.
Okay, but uh still, we saw that this year, ethereum was the protagonist of this defy explosion that we saw during the summer. So we saw that ethereum has several use cases. Why do you think that ethereum is such a like a second choice after bitcoin, because i mean i own ethereum too, but i owe much less of it, because the institutions don't know how to even think about ethereum.
Yet they're just starting and when you say digital gold, they kind of get it. But when you say a platform for programming, smart contracts and decentralized finance. And you know, and by the way they're, going to change the algorithm and it's a you know: it's done in a different way to bitcoin.
They're like hold on. I haven't. I can't understand bitcoin. Yet i need to get this past my trustees. So yes, it's, a very important part of the ecosystem. I even believe it may end up with a larger market cap than bitcoin.
It's possible, but right now we have to focus on what's actually happening and ethereum may well outperform, but the easier trade with the less volatility and the highest probability of success is bitcoin.
Actually not. Everyone is so optimistic about this rally. Um some analysts told bloomberg that actually bitcoin is not getting nearly as much attention as it used to in 2017, uh katy jones chief, fixed income strategist for schwab center for financial research, said the fascination with it has worn off.
You have the hardcore - i am a cryptocurrency investor group, but it hasn't really expanded. What do you think about this statement from what i know, and i know a lot of people in the industry? They are all on boarding institutional clients, family offices endowments at an enormous pace, but twenty thousand here is not the same as twenty thousand back then back.
Then it had gone up a hundred fold when it got to twenty thousand. We haven't even started this yet so later on. When things get speculative, we will see something similar potentially play out, but the difference is again and where these guys are getting it wrong.
They're, saying well, people aren't as interested yeah, but the real money is interested and that's, a game changer. So not long ago we saw positive news coming up regarding the coronavirus pandemic. We see the light at the end of the tunnel.
Finally, there is a vaccine being developed soon and it will be launched in the next few months. So, according to some analysts, these news are actually negative for bitcoin, for example, bryce doty portfolio manager at sit fixed income advisors said that bitcoin gets attention when it looks like the world is coming to an end.
It is the anti-vaccine trade. What do you think about this statement? He doesn't, understand bitcoin, so bitcoin again, regardless of what's going on that money is coming, but let's. Look at the the reasons, so i have a feeling that the vaccine takes until q3 next year before it's really rolled out.
We look at the european economy, it is falling fast. I don't know how they're, going to deal with christmas in new year. The u.s economy & # 39. S got the same problems. I think it goes into lockdown in january february, once the bidet administration comes in, because the virus over thanksgiving new year and christmas is going to grow substantially.
I think we & # 39. Ve got problems in india after diwali, where you & # 39. Ve got hundreds of millions of people together celebrating and i think we're, going to get a big second wave in india. So we've got problems.
The vaccine takes time to take out. Even the fisa vaccine needs to be minus 77 degrees. There's, impossible logistics to get it out fast enough. So this is not an instant fix there's, not enough doses.
For everybody. There's, going to be a geopolitical fight over who gets what so. I think we can write off until the summer. Basically, so the economy is weak. So in that scenario, considering we didn't in the u.
s, get a stimulus package and europe's been slow to get a stimulus package, the central banks step in first and eventually they pass some stimulus, but it won'T be enough: if i'm right and the economy is worse than expected, we'll, get a much bigger stimulus package and the central banks will underwrite that too.
Then, after that, we have me being wrong me being wrong. Is the vaccine gets rolled out in one quarter and we've, add more stimulus and the central banks keep stimulating? They've all got inflation targets that they want to overshoot and we get inflation.
Well, bitcoin is going to do well in that too, so we've got both scenarios. Almost i've literally, never seen a setup like this, where you have almost both scenarios playing out that it doesn't matter, whether you get the macro call right or not, because both amounts are the same thing and that's really interesting.
Not long ago, we saw that these positive news about the chronovirus pandemic are actually marking a shift in investors. Behavior, more and more investors are interested in value stocks, which are the stocks that usually mark a positive period for the economy.
While, during the coronavirus pandemic this year, we saw much more preference towards growth stocks which are like, for example, tech stocks that are very, very successful during periods of crisis, so don't.
You think that this shift of behavior is actually negative for bitcoin. So what i'm noticing is that the the predominant narrative is reflation, the narrative that you're talking about. So how does that manifest itself in markets? If that's correct that bitcoin goes up because it's, the doom trade.
Well, then, you wouldn't, have the biggest ever short position in the history of u.s bond markets. Going on in the 30-year bond everybody's, betting on reflations, four standard deviations short that's, a massive position.
We see similar positioning all across the reflation trades. If we look at the us dollar, the market is almost record short. The us dollar and it's, not gone down, and the bond market bond yields haven't gone up.
It's, telling you that the narrative is possibly wrong. Now the equity market does its own thing. It's, much more driven by behavior hopes and dreams and all of that stuff. The bond market is the truth.
It trades the economy much better, so watch the bond market. If yields start falling, which i think they're going to do, then it is going to give a signal to the equity market that things aren't right, and i think that's to come, and i call it The winter of discontent, this period of no stimulus, central banks having to buy more bonds and um.
You know no change of government. Yet in the us, until biden, administration comes in nobody's, stopping the virus, people taking evasive, action staying at home and governments in europe shutting down so we & # 39.
Ve got a very dangerous situation here. According to some investors, bitcoin is still experiencing an identity crisis. According to derivative trader, countering clark um. Some investors is still bitcoin as a higher beta play on equities.
Other investors see it as a perfect store of value. Do you think that these two identities can co-exist within that single asset and uh? If not, which one of these two identities is gonna stay? I think bitcoin has more identities and that's, part of the unique feature it has.
The identity of the future of the financial system, too, it has the future of the accessibility of the central bank digital currencies, that's embedded in that there's, a lot of different narratives that apply to bitcoin and people will find Their own narratives, however, the correlation narrative, i think, is a wrong one, and i've, been pointing this out for a while.
You know it was correlated to gold and then it wasn't. It was correlated to the dollar and then it wasn't and i think it's correlated to equity market and then it's. Not i just don't think it's correlated.
I think these are passing correlations that happen from time to time. Okay, so you think that, like the identity of bitcoin as the ultimate store value can peacefully coexist with the identity of bitcoin as a speculative, highly risky asset, that's, the beauty of it that's.
Why this thing is worth so much money. You have a call option on the future of the financial system and the network effects and a store of value. At the same time, there's, never been anything like this before no asset has existed.
That looks like this: you are a strong proponent of plans b stock to flow model, which uh predicts bitcoin will reach 280 000 dollars by 2022. uh. We had byte3 cio charlie morris on our show not long ago, who claimed to have debunked this stock to flow model.
Well, i suppose that you've summoned up by it's too good. To be true, i mean it would be really nice if that model was true. According to him, the assumption that diminishing supply will be driving bitcoin's.
Price up is false, because supply does not create value, demand does and if bitcoin becomes too expensive demand for it will decrease accordingly, which in turn will drive down its price. So what do you think of this argument? I think it's.
Nonsense and the reason being is the price of bitcoin is not like the price of an equity, which is a p e ratio and stuff. It's, just a monetary number, so there is no excessively expensive excessively cheap.
It doesn't work that way it's driven by flow and its future potential. So none of that is true. Now, plan b stocks a flow model and him - and i have spoken to the about this reasonable amount - is there is no perfect model.
So anybody who thinks there's, some amazing engineer or mathematics guy who can disprove this, but it's. Nonsense. What it is is a hypothesis that needs testing, but let's. Assume plan b is the is an idiot.
Everything was wrong and it only goes to 140 000.. Was he wrong, or did you make a ton of money? Demand is based in bitcoin on the network effect gold doesn't have that bitcoin is a very, very different beast.
It's, a distributed asset with a network effect, so that network effect means increasing demand over time. That's, essentially, why all networks have exponential curves? That is not gold. Wait, but are you saying that gold doesn't have a network effect? Why is it that it doesn't have an exponent because it's been around for 10, 000 years.
Its network is pretty established right. You're, not bringing new adoption. You bring some people back in some people out, but generally my guess is gold. Adoption was higher 100 years ago than it is now so can that mean that people come into gold yeah? Sure i'm bullish gold? Does it have the network effect of bitcoin, which has a potential future in the financial system itself, whether it's, collateral or payment system, or whatever ends up developing? Nothing else.
Has that single equities have it, but you you've, never seen an asset with this before just didn't exist. Ever we've, never had an asset based around technology for sure the market around bitcoin has matured a lot since 2017.
, uh still bitcoin's. Essence, hasn't changed uh. Its price has gone up. Essentially, thanks to the growing network effect of people who have faith in its future, which is the definition of a speculative asset, don't, you know the opposite.
Anything that has trust is the opposite of a speculative asset. A speculative asset is one that you buy and you want to sell to make money. A trust-based system is something that has intrinsic value. What is the intrinsic value? Human trust? Gold has zero value outside of trust.
Yes, you can use gold for certain things, but there's, plenty of other metals you can use in its place. There's very few single use cases for gold, but it has human trust. Human trust is the most valuable thing of all all right.
I guess that you answered already the question without letting me finish, i think it was. It was fair enough. You previously claimed that 50 of your liquid assets are in bitcoin and the rest is distributed among gold, cash and equities.
If i'm, not mistaken right, no equities, it's, basically um opportunistic trading, okay, all right so uh. You said that you are ready to have a 50 downturn in bitcoin, so that's, a huge blow for someone who has 50 percent of its liquid assets in that specific asset, don't don't, you think so.
Now i'm about 75 now, so you you're, saying that it's. You have 75 percent of your liquid assets in bitcoin, correct um, and the reason why is i'm very lucky? I've had a good career, i don't, have any debts to service and i have an income.
So if i lose 50 of my net worth, do i think bitcoins goes down and stays down. I doubt it, but let's say i'm. I'm wrong that i'm, the idiot it goes down, stays down. It then messes around at 5000 for the next 10 years.
Can i recoup my money from earning an income running a business? Does it put me under financial pressure? No, so i can afford to take the risk. So, even though i tag it as irresponsibly long it's, not very irresponsible.
It's actually responsibly long. You know, i've been running portfolios for a long time, and you know all i'm. Trying to get expressed within this view is. This is the biggest best single bet i've ever seen in my career of every asset.
I've ever looked at, so are you saying that it's not necessary to move to the kaiman island to make a bet like this? It's, not necessarily in fact it's a well. It's good because i don't pay tax, but bad because it's expensive to live here.
So if your bet goes wrong and you're living here, you lose a lot of money because it's, bloody, expensive right right. I can imagine so talking about an average person. Then someone who doesn't live in the cayman islands who lives? Maybe let's say in the us in a middle-sized town, has like regular income um and has like 100k of money that can invest in something.
So what would be your advice in terms of portfolio location in that case? Well, i can't give advice, because i don't know their their where they are in their lives, their their risk abilities what they need their past history.
What their fears are, let's say let's, say a middle-aged man, 30s 100k of 100k of spare money that can invest regular income uh. I would go 50, so you lose 50 grand okay, worse, worse! Well, you don't.
You would lose 25 000.. So we're. Assuming the market falls. 50 doesn't recover, so you lose 25 000.. How recoverable is that for that middle person who's generated, and it's? Probably recoverable? Okay, so it's not going to change their life because they've already still got 75 000 in savings.
It's a hindrance, but if that 50, if that, if that 50 000 you put in goes up 50 fold or 10 fold 50 fold, two and a half million fifty um tenfold, half a million it's life-changing no other asset Has an upside of 5x 10x 20x in a short space of time, nothing! It's, a once-in-a-lifetime opportunity.
We're being given so that 50 percent in bitcoin and the remaining 50 percent in what? If you're? Taking a risk like that, put it in cash, i would like to ask you: what is your outlook for bitcoin price for the one year from now? Look up, i am you know, i think it's.
If i was a conservative, i'd, say 150. 000. If i'm to be realistic, knowing what i know about the flow of funds, i think i have a feeling that plan b's model is going to underprice. The upside - i know everybody thinks on this cycle.
The price will be lower. I just don't, see it because the amount of money coming into the space um, so i actually have a feeling it might be above his target of about 250 000, but but i don't know, but i like that optionality, You know worst case 150 best case north of 250.
I mean finally another trade in the world that looks like this so not long ago. Real vision launched its own dedicated platform for crypto content. Can you tell us a little bit more about this project yeah? So real vision itself, you know we've interviewed we, we kind of pioneered the business model of interviewing the smartest people in the industry.
Peer-To-Peer interviews, hedge famous hedge fund managers that nobody else could get um the best most in-depth analysis. You know hour-long interviews and we realized that we had been driving the narrative in the crypto space for a long time since our very first video - and it was time to help democratize - that intelligence too.