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

Raoul Pal, co-founder of Real Vision and macro investor, discusses the complexities of crypto investment, emphasizing Bitcoin as a foundational asset. He highlights the importance of self-custody in securing digital assets and warns against the allure of high-risk ventures. Pal explores the transformative potential of AI and crypto, suggesting that behavioral incentives of tokens could drive future growth. He underscores the significance of community and human experiences amidst technological advancements. Pal also shares insights on portfolio management, advocating for strategic asset allocation and cautioning against complacency in volatile markets.

• Discusses the anxiety and fear of making wrong decisions in the financial world.
• Emphasizes the importance of understanding the potential in financial markets despite the fear.

"It's terrifying for me. Will I get it right? Will I end up with egg on my face? Will everybody hate me again? I don't know."

• Highlights the emotional challenge and fear of judgment when making financial decisions.

"It's pretty miserable doing that, but I know it's the right path because when you understand that, you realize how powerful it is to help people."

• Acknowledges the discomfort but reinforces the belief in the potential positive impact of making informed decisions.

• Advocates for a straightforward approach to investing in cryptocurrency.
• Highlights the historical performance of Bitcoin as a reliable investment.

"How to get rich in crypto without getting lucky and without falling for all the scams. It's the same advice to everybody comes into the space. Just buy Bitcoin."

• Suggests a simple strategy of investing in Bitcoin to avoid scams and complexities.

"Bitcoin on average does like 150% return since 2012."

• Provides a statistic to support the suggestion of investing in Bitcoin based on its historical returns.

• Discusses the growing influence of AI in outperforming traditional financial analysts.
• Suggests that AI has some level of sentience in its analysis capabilities.

"AI is becoming super super tangible. One thing I do know is crypto has a superpower. Behavioral incentives of tokens."

• Highlights the tangible impact of AI and its role in enhancing the evaluation of crypto assets.

"The crazy thing is AI is doing better than 99% of all analysts."

• Emphasizes the superiority of AI in financial analysis compared to human analysts.

• Warns about the high-risk nature of the crypto market.
• Advises maintaining a cautious and paranoid approach to investment.

"This space is so full of risks. You have to be paranoid at all moment."

• Stresses the importance of being vigilant and aware of the risks involved in crypto investments.

"People lose their minds. They sell their houses and buy crypto."

• Illustrates the extreme behavior and risk-taking tendencies of some investors in the crypto market.

• Discusses the tendency of investors to create narratives to explain market trends.
• Highlights the importance of focusing on long-term trends rather than short-term fluctuations.

"The hardest thing to do is not lose your mind. Every newbie who comes in loses their mind."

• Points out the common emotional reactions of new investors to market volatility.

"What I'm trying to do is get people to relax and understand there are ways to do this."

• Encourages a calm and strategic approach to investing, emphasizing long-term thinking.

• Stresses the necessity of self-custody to secure crypto assets.
• Recommends using hardware wallets for secure storage.

"If you're serious about your crypto investing journey, please take some time to learn how to self-custody your assets to make sure that nobody can take your coins away ever."

• Advises investors to take control of their crypto assets through self-custody to prevent loss.

"The safest way to hold your crypto is in a cold storage that we also call hardware wallet."

• Emphasizes the security benefits of using hardware wallets for storing cryptocurrencies.

• Explains the application of Metcalfe's Law in valuing crypto networks.
• Discusses the factors influencing the valuation of networks such as user growth and transaction value.

"What you're looking for is projects that are seeing growing user growth and growing applications that have value."

• Suggests focusing on projects with increasing user adoption and valuable applications for investment.

"Metcalfe's law is how to value networks. It's how Amazon was valued, Google's valued all of these things."

• Describes Metcalfe's Law as a method for valuing networks based on user and transaction metrics.

• Highlights Solana's recovery and growth due to its strong developer community and user base.
• Identifies key moments and projects that contributed to Solana's resurgence.

"Salana at the bottom of the cycle, it was being priced as if it was going to go to zero. Yet you could see the developer community was actually growing and the number of users was stable."

• Describes Solana's undervaluation and the factors that indicated its potential for recovery.

"And that's probably that's I didn't understand Madlads until I talked to him. I was like, what is this? I mean, it's an NFT, right?"

• Discusses the significance of the Madlads launch in contributing to Solana's comeback.

• Crypto networks are being stress-tested by new projects and memes, proving their resilience.
• The disappearance of DGODs from Solana and the emergence of Mad Lads and Bonk are examples of test cases for network robustness.

"Memes, what they're really doing is massively stress testing these networks and they've proven that these networks can take it."

• Memes play a critical role in testing the limits and capabilities of crypto networks.

• The fundamental strategy for building wealth in crypto is to buy Bitcoin and dollar cost average.
• Newcomers must understand the volatility of the market and the importance of research and education.

"Simply it's the same advice that everybody comes into the space just buy Bitcoin and dollar cost average."

• Consistent investment in Bitcoin is advised as a foundational strategy for wealth accumulation in crypto.

• The high returns in crypto can entice investors to take on excessive risk.
• It's crucial to limit speculative investments to a small portion of one's portfolio to mitigate potential losses.

"I try and explain to them is you have to go down that learning journey. Do that with 10% of your portfolio because then you can [ __ ] it up."

• Keeping speculative investments to a minimum can protect investors from significant losses.

• Meme coins like Fartcoin and Smoking Chicken Fish illustrate the speculative nature of the crypto market.
• The volatility and unpredictability of meme coins make them a risky investment.

"I don't have an edge in memes. As you know, all you end up doing is switching from one narrative to the other at narrative peak."

• Investing in meme coins requires understanding market narratives and timing, which can be challenging.

• Proper portfolio allocation and risk management are crucial to surviving market crashes.
• Learning from past mistakes can lead to more resilient investment strategies.

"For me, the main thing I learned from you and from getting very wrecked is portfolio allocation."

• Effective portfolio allocation helps mitigate risks and protects investments during market downturns.

• The crypto space is fraught with risks, including hacking, scams, and protocol failures.
• Investors must maintain vigilance and practice good security hygiene to protect their assets.

"You have to be paranoid at all points. That's very true. I would say even in life in general when you have businesses, right?"

• Constant vigilance and security practices are essential to safeguarding investments in crypto.

• The pursuit of yield in crypto can expose investors to significant risks.
• Capital gains should be the primary focus rather than chasing high yields.

"I'm not in crypto for yield. I'm in crypto for capital gains. Any yield that I can get is not worth the risk."

• Prioritizing capital gains over yield can help investors avoid unnecessary risks.

• Institutional participation in crypto can introduce systemic risks due to leverage and complex financial products.
• The actions of major players like MicroStrategy can influence market dynamics and risk levels.

"What I do know is by him doing what he's doing, he's creating leverage in the system."

• Institutional strategies can have widespread effects on market stability and risk exposure.

• Solana remains a significant part of many portfolios due to its strong performance and potential.
• The Sui ecosystem is gaining attention for its innovative projects and ambitious goals.

"I'm massively overweight. Over soul? Massively."

• Solana's strong market position and the promising developments in the Sui ecosystem highlight their potential for growth.

"Christian who's the head of the foundation his opening question now to projects that want to work with Sui is like well show me the path to a billion users."

• Sui's focus on scalability and reaching a large user base is central to its strategic vision.

• The importance of evaluating how a team manages a bear market, focusing on cash reserves, investment, and development.
• Solana is highlighted as an example of a project that successfully navigated a bear market.
• The concept of the Lindy effect, where enduring projects gain credibility and strength over time.

"It'll go down a lot because low free float goes down a lot. Like it goes up a lot. Um, and then you need to see how well does the team manage a bear market. Do they have cash? Are they investing? Are they building?"

• Projects need to demonstrate resilience and strategic management during downturns to build long-term viability.

"That's when Lindy effects kick in. You know, Ty earns his stripes from that."

• The Lindy effect suggests that the longer something lasts, the more likely it is to continue, implying the importance of enduring through challenging market conditions.

• Discussion on personal investment strategies, including taking profits for lifestyle needs and asset allocation.
• The importance of having a cash buffer and not exiting the market entirely due to unpredictable market movements.
• The psychological aspect of taking profits too early and the long-term benefits of asset diversification.

"I will, as I've talked to you before, take some lifestyle chips off the things I want to do with my life."

• Emphasizes the need to balance investment gains with personal financial goals and lifestyle improvements.

"You want to derisk a bit earlier than you feel comfortable doing."

• Advises on the strategy of taking profits before feeling completely secure, to safeguard against potential market downturns.

• Real estate as a stable investment that provides security and peace of mind.
• The psychological benefits of owning a home, reducing stress, and improving decision-making.
• The pitfalls of over-reliance on volatile investments like crypto without a stable income or assets.

"You've done well. You buy a house. Nobody can take it away from you, right? That's an asset that you don't have the fear of somebody stealing your wallet."

• Highlights the security and permanence of real estate compared to digital assets.

"When I bought my first house, it was a house in Spain. It was a holiday home and I bought it in cash and I realized I won the game."

• Illustrates the sense of accomplishment and security that comes with owning property outright.

• The volatility and risk associated with crypto investments and the importance of diversification.
• The irrational behavior of selling stable assets to invest in high-risk cryptocurrencies.
• The importance of maintaining a stable income alongside crypto investments.

"People lose their [ __ ] minds. They sell their houses and buy crypto."

• Critiques the impulsive decision to liquidate stable assets for high-risk investments without considering long-term consequences.

"If you're working, you don't even need the yield, right? You just [ __ ] work. Just work and make money."

• Advocates for maintaining a stable income to mitigate the risks associated with volatile crypto markets.

• DeepBook as the liquidity layer for the Sui ecosystem, benefiting from increased usage and efficiency.
• The potential for DeepBook to outperform due to its integral role in the ecosystem.
• The complexity and innovation of Walrus as a decentralized data layer.

"DeepBook is the liquidity layer for all of the Sui ecosystem."

• Explains the fundamental role of DeepBook in providing liquidity within the Sui ecosystem.

"Walrus itself is this decentralized distributed data layer. It's groundbreaking technology."

• Highlights the innovative nature of Walrus and its potential impact on the Sui ecosystem.

• NFTs as a transformative technology for storing and trading non-fungible assets.
• The growing interest and investment in digital art as a cultural movement.
• The potential for significant wealth creation in the NFT space as the crypto market expands.

"NFTs themselves are just an amazing technology for non-fungible assets to be stored in perpetuity and traded."

• Emphasizes the technological innovation and potential of NFTs beyond their speculative value.

"We're in a $3 trillion industry right now. Crypto, if I extrapolate trend rates of growth, it goes to a hundred trillion within 10 years."

• Projects significant growth in the crypto industry, highlighting the potential for NFTs to contribute to this expansion.

• Discussion on Ethereum's current challenges and potential future as a key platform for financial markets.
• The overbuilt capacity of Ethereum and its implications for future scalability and adoption.
• The likelihood of Ethereum maintaining its position as a major player in the blockchain space.

"My narrative is they've overbuilt capacity for what the system needs right now."

• Suggests that Ethereum's current infrastructure may exceed current market demands but positions it for future growth.

"EVM is Microsoft. Every bank, every insurance company, every major company in the world uses Microsoft, not Apple, not Google."

• Compares Ethereum's entrenched position in the blockchain space to Microsoft's dominance in enterprise software.

• The evolving landscape of AI and its impact on the crypto industry.
• The movement of developers and investors between crypto and emerging technologies like AI and robotics.
• The potential convergence of AI and blockchain technologies in the future.

"Some smart crypto devs are leaving crypto."

• Indicates a shift in focus among developers towards AI and other emerging technologies, reflecting the dynamic nature of tech innovation.

• Discussion on the potential of crypto to reach a valuation of $50 to $100 trillion, despite current challenges.
• Concerns about talent density shifting from crypto to AI, affecting growth in the crypto sector.
• Crypto's unique advantage lies in the behavioral incentives of tokens that accrue value quickly.
• AI's ability to break down probabilistic outcomes and its implications for understanding macroeconomic trends.

"Crypto has a superpower: behavioral incentives of tokens. In AI, you might get a nice job, but it's not clear whose equity is going to be worth anything."

• Explanation: Highlights the unique value proposition of crypto in comparison to AI, emphasizing the fast accrual of value through tokens.

"The crazy thing is at the simplest level is I ask it pretty simple macro questions and ask for its thoughts on it, and it's now breaking down probabilistic outcomes into the future."

• Explanation: Demonstrates AI's advanced capabilities in analyzing complex macroeconomic scenarios, surpassing traditional analysts.

• Exploration of AI as a potential form of artificial consciousness or sentience.
• The philosophical implications of AI as a super intelligence and its relationship with human consciousness.
• The concept of pansychism and the idea that everything, including AI, is a form of compute or storage.

"Are we creating an artificial consciousness? These things have some element of sentience or consciousness."

• Explanation: Raises questions about the nature of AI and its potential to possess qualities akin to consciousness.

"We're giving birth to something much bigger than anybody understands. It's currently got an IQ of 145. It's doubling every year in IQ."

• Explanation: Emphasizes the rapid advancement of AI intelligence and the unknown implications of such growth.

• The irreplaceable value of human experiences and interactions in an increasingly digital world.
• The importance of physical gatherings and community in spaces like crypto.
• Balancing online presence with real-world experiences and nature as a counterbalance to digital life.

"What do humans do better than anything else? What's the one thing humans can do that the AI can't do is be humans."

• Explanation: Highlights the unique qualities of human interaction that cannot be replicated by AI.

"It's exciting to be in this space. It's exciting to be in this moment in time, but are you yet truly living it all?"

• Explanation: Encourages reflection on the richness of life experiences beyond professional or technological achievements.

• The potential for personal data and digital footprints to contribute to a form of digital immortality.
• The shift in mindset towards embracing the sharing of personal data for future legacy.
• The role of AI in preserving and rendering personal memories and identities in a digital format.

"We can live forever because we can basically if it is consciousness, is that a way of accessing consciousness in perpetuity by allowing these models to be us?"

• Explanation: Explores the idea of digital immortality through AI's ability to preserve personal identities and memories.

"Take more photographs than you can ever imagine you ever want because it's important."

• Explanation: Encourages the documentation of life experiences as a means of contributing to one's digital legacy.

• The importance of stepping outside one's comfort zone to experience the magic of life.
• Competing with oneself rather than others as a path to personal growth and fulfillment.
• Manifesting one's destiny by envisioning future outcomes and working towards them.

"Your comfort zone and where the magic happens. They don't overlap, right?"

• Explanation: Advocates for embracing new experiences and challenges to enrich one's life.

"Manifest your destiny. If we live in a quantum world, you can create future outcomes."

• Explanation: Encourages proactive shaping of one's future through intentional actions and mindset.

• The perception of age and the desire to maintain youthful energy and perspective.
• The importance of continuous learning and adaptation throughout life.
• Balancing personal and professional life to ensure a fulfilling existence.

"I'm 57. I'm like, what the [__] The number's going up wrong. It's not That can't be the case."

• Explanation: Expresses the disconnect between chronological age and one's self-perception.

"Tell me something about your life that I can take with me for the next half of my life."

• Explanation: Seeks wisdom and insight from life experiences to guide future personal development.