Your Guide to the Bull Run | Raoul Pal

the entire thesis is this Market is going from 2.7 trillion to call it 12 trillion this cycle to 100 trillion by maybe the end of the 3032 cycle wow wow so this is I think in front of us the largest fastest accumulation of wealth in all human history welcome to bank list where we explore the frontier of Internet money and internet Finance this is Ryan Sean Adams I'm here with David Hoffman and

we're here to help you become more bankless guys you know this the bull market is here the question on our minds in today's episode is what's going to happen next we brought these questions on crypto on macro and on investing to Ral Paul who's one of David and I's favorite guests I think on this subject particularly at this part of of the market and so we ask questions like where are we in the crypto cycle how long will this cycle last will it be different will it be similar to previous Cycles how high will it go which assets

will benefit and most importantly how to make sure you don't f it up if you're looking for an episode to guide you on what to expect next this is it I think the reason why we keep bringing R Paul on is that he has this very clear North Star he's got these thesis that he really loves we also love thesis and they keep Ral grounded uh and his his feet feet on the ground while the just chaos of a bull market warps around him uh and that's also that's always something I appreciate like navigating

through crypto without some sort of like North Star something to to keep your your boots on the ground uh without that is it's hard it's hard you kind of need to some level of something to keep you saying and uh we call this for us Ryan the bankless thesis r h r has his names for his thesis uh and every single bull market presents some new thing right how do nfts fit into what R calls his uh his everything uh code there's one of his thesis how does that fit how do nfts fit in the bankless thesis all these like

things that happen as bull markets present like new curveballs can all kind of be mapped into a frame of reference a frame of understanding this is what R does uh this is why we frequently uh talk to him about like all the new changes that are happening in the world and how it fits into the ideas that he has uh and so because he is so grounded he has come on the bankless podcast like six times now and I've enjoyed every single one all right we're getting right into our episode with r Paul if you want a debrief episode which is the episode that Dave and I record after this

podcast make sure you are dialed into the bank list premium feed that's where we'll publish that and uh David I'm excited to record that with you I want to hear your thoughts on what R Paul had to say about the bull run we're going to get right to the episode but before we do we want to thank the sponsors that made this possible including Bank list Nation we are excited to have Ral Paul back on the show he is the co-founder and CEO of real Vision which is a financial media and education platform it's focused on macro investing in crypto R himself is a fantastic uh investor I always learn a lot from him I

think in today's episode we're trying to get a sense of the 2024 bull market what the the shape of this will be what the Contours are I David and I have going into this episode R just listed a whole bunch of questions we want to uh ask you um anyway welcome back to bankless it's great to have you great to be here guys as always all right so we got to start with this though because this was breaking right before we jumped into we're already going off scpt we're already going off script and this seems to happen with r Paul episodes I remember like one time we recorded this

was back in 2022 it was the middle of uh Tera Luna breaking down that's right this also feels to me at least like it could be some pretty big news the SEC uh is now suing Unis swap uh so this is a like a fortune article that just came out um I'm not sure the details for the time of recording literally minutes ago yeah so I'm not sure if they're suing like the foundation or Labs or what the details of this are I haven't had a chance to to get caught up but this

feels very much like a shot across the bow for defi like a big one so not this like a shot into the hole of defi yes it's it's just like do we know what it do we know the substance of this we don't we don't because you know sometimes they do this and it's kind of a it ends up being a clarification issue is like we'll absolve you of your past sins move forwards you know we don't really know yet I haven't seen I haven't seen the details at all yeah I uh I may

actually pay for the fortune crypto paywall to just get this and uh actually read this entire article here um but I guess some context here Unis swap feels like the the poster child for defi uh it's not only that it's a us uh like developed project Hayden Adams US citizens lived here the team is based in in New York I believe and it's really been a flagship protocol like they have done the right things in order to decentralize the pieces that should be

decentralized and for the us as a regulator to go after uniswap bring them to court in this way rather than inviting Hayden Adams to the to the to the White House for you know like a celebration of him as an entrepreneur on that team and what they're doing in crypto this is akin to like taking Google uh to court or alav Vista or something like this in the 1990s like why why are we doing this and I know you're not living in the US R but like collectively I'm I'm just speaking on behalf of people in the US uh who are crypto users why are we doing this to

our best and brightest uh like American projects you know they they're all terrified of defi so we don't know what I mean you know we've only just heard about this so we don't know whether it's about the kyc elements which we understand has been an issue um for Defi and Industry because it didn't have it set up in the way that they wanted it we don't know whether it's to do with the token change you know I don't know anything yet so by the time people watch this we'll all sound stupid because everyone will know what the details were and we don't know anything but it's a pain in the ass but

I kind of figured they were going to come after defi anyway they just they're uncomfortable with it when you say what do you mean you can have a bank well the authorities put it that way you know what do you mean you can have a bank without Bankers what do you mean you can have you know you can have an exchange without people what you know you know to them this is alien concept because it it was really the antithesis of the existing system so they've never been comfortable and then they use the

ridiculous kyc AML thing which really all kyc AML is to increase tax takes so everyone has to declare everything that's really what that's about it wasn't really about terrorism financing and stuff like that it's really about they need to know where your money is at all times so you can't leave the system okay fine we live in their countries they want those rules it is what it is but they they just don't like this whole system yet so it sounds like Unis swap uh was prepared for this so they just

put out a tweet thread saying today Unis swap Labs received a Wells notice from the SEC and we are ready to fight this is the latest political effort to Target even the best actors in crypto like Unis Swap and coinbase and then they follow up saying all Unis swap products and the Unis swap protocol are unaffected uh and then they go on uh in a short little thread uh again sounds like the details are still um uncertain here but it also sounds like Unis swap I mean they' received a Wells notice so they were informed that the SEC intends to sue

them that's what a Wells notice is sounds like they got this Wells notice um at least at least a number of days ago if not a couple of weeks ago and hopefully they've got the resources to uh take the fight to the courts I mean because that seems to be the only way here and I think that's purposefully done I think it's to create speed bumps you know the kind of often knows it's going to lose but it does it to slow the whole industry down this is the take that Jake shinsky gave me when I talked to him last uh that it might be the

opinions of some of the more deceleration Regulators uh especially the Biden Administration who I would classify this as is that like they might want the SEC to be even more hostile to uh crypto as a whole up to the point of like you have to lose in court and that's how regulation is determined so if you aren't fighting and losing then you're not trying hard enough so go ahead and take as many people to court as possible and then the law what is is okay and is not okay will be determined by in which core cases does the SEC lose

and that's how regulation is set according to one philosophy which seems to be how just slows everything down which suits everybody right because if they're all terrified about it you can see you know the almost every other Central Bank in the world of of certain size is working on cbdcs the US won't because it's terrified of making the move and the US has a history of this and I wrote some threads about this in the past so after the US left the gold standard right everybody now needed to exchange

currencies with each other and the US was like well we don't really want to be involved in this because they were worried about what was going to happen to the dollar so the UK started the foreign exchange markets and it became the biggest Market the world has ever seen and the UK dominated that market ever since second was the second one was the offshore lending in dollars so the US was really worried about dollar circulation outside of the US didn't know what how to deal with it

same thing with a reserve currency we're on to [ __ ] this up so they just basically restricted um US Bank lending to various entities so the UK started the euro Doll Market which is the offshore dollar market and it siphoned through other Global Banks it became the largest market the world has ever seen the US missed all of those so that's why liore the London interbank offered rate is the interest rate for

the entire world or was until they just changed to sofa then it happened again in the very late 80s where the derivative Market in the US was basically the Chicago Merle exchange and the Chicago border trade but then the swaps Market was developed and it was an OTC market and it required Bank regulatory Capital the US Regulators to protect their own exchanges said you're going to we're

going to make it so hard for you to do that you're not able to so the UK started the swaps Market which then became the whole deriv OTC derivative Market which based the UK which became a 1.4 quadrillion dollar market so the US has a history of doing this in its fear of screwing up I get it you're the incumbent you've got a Fear Factor the UK has a innate ability to Arbitrage

that so they see the opportunity that's why the city of London is so big the UK stock market small it's because they took all of the business from the US and what was very interesting as they see the US fumbling the ball yet again with crypto and the UK stood up and said we want to regulate this properly we want to bring it here to the city and we want to turn this into a huge market and they've done this this this would be the fourth time and you know I I remember speaking to the guys at coinbase about this I think it was Brett um who runs

their institutional sign I'm like he grew up like me in the traditional Finance industry back in the 90s all of the main offices of all the US Banks was London Goldman's biggest office London JP Morgan's biggest office London Morgan suley's biggest office London all of them because of this and slowly after Basel 3 regulations came in in the early 2000s Capital went back to the US because the US didn't um put such string stringent um things onto the balance

sheets of the banks so money flew flowed back so it just feels that the opportunity here is this whole thing to happen all over again it sounds like it and I guess when you when you paid the history like that does seem like the US has often pulled the handbreak on like Financial kind of uh um changes and Technologies and kind of like been a lagered with respect to that but there like if you look at this from a non-finance lens and look at this from a lens of it's a technology like

the internet um the US has also had a history of being kind of first Movers dominant like the 1990s when like building Silicon Valley all these things yes and no when you're in a monopolistic power situation look at Google's inability and I know the Google web 3 team well they understand it yes they do they think it's great but even the CTO of Google as far as I'm aware is a huge web 3 fan but they can't do anything because it's

going to disrupt their own business it's so this is classic innovators dilemma type of stuff where the US is the incumbent Monopoly of money Global money and it's fearful of changing its system in case it loses control of the system so this is why they've kind of if you think about it on this kind of spectrum coinbase good binance bad yeah right because coinbase is within the walls they've now given they've blessed them with a monopoly

basically and shut out binance which is the world's largest exchange which is probably Chinese controlled in as much as coinbase is is US controlled and therein lies the separation much like Chinese Tech firms US tech firms this so this game is being played out literally everywhere we see even the ETF for them is quite funny because the ETF they think of is keeping the money within the

system right so it has to go through the intermediary and the middlemen and all the checks and balances that they've got so they know where it goes I actually think of it differently I think it's a trojan horse of cryptand put into fat world because what you do is you give people a taste of what this is and they will move out the risk curve they always do and they'll come into cryptand so I think the SEC and the US government think that it's a victory to channel

assets through the ET F I think it's a victory for cryptoland as a trojan horse ah pu Victory then I so so R for the rest of this episode I think we're going to be be zoomed out and maybe we could just kind of like zoom out on on this issue do you think that these types of hand breaks that us Regulators are pulling right now will that slow us down at all and in particular when we're looking at the bull market that we're in right now in 2024 will that slow down the bull market could it disrupt the bull market uh is this an impediment in

the medium to long term no firstly obviously it's a global Marketplace secondly bitcoin's got the seal of approval eth will get the seal of approval at some point what you've now created is capital inflows now this is not direct investment because it doesn't go directly into crypto land it's like a trade deal that money gets recycled in the crypto economy and out the risk curve profits get recycled into VC VC creates new products which create the new opportunities for the next

cycle so I don't think it slows it down because that still continues you know Mom and Pop in Ohio are not going to be using Unis swap to trade you know some hundredth token so I don't think it really matters the issue actually is as you alluded to is I just feel sorry for us innovators right I mean that's the that's the issue and that they're having to move you know off to token

2049 uh in Dubai shortly Dubai's attracting a ton of talent Singapore slowed down a bit Hong Kong getting Talent back again uh Europe getting Talent bizarrely Switzerland's got some great talent going on there in um in um crypto Valley UK's getting talent and others are moving offshore elsewhere so it's a shame as we enter this bull market well you've seen your fair share of of crypto Cycles uh this one's already um

manifesting differently uh we Bitcoin passed all-time high before the happing which is this like Hallmark of like what a crypto cycle is like first The Happening happens and then Bitcoin hits all-time high sometime like nine months later well now that order is happening in Reverse also this Bitcoin ETF thing is like perhaps the reason why that's happening um overall there are some things about this particular B Market that are different uh and this I think would be expected as time goes on and the crypto industry matures things are

going to change like we can't be having this like fouryear like 300% Cycles over and over and over again like we have to like be less insane as an industry um in order to get mainstream adoption but overall like how are you um how do you characterize the flavor of this particular bull market as with the data that we've been able to have so far so you know as I've spoken here before this is all driven by the the liquidity cycle it's actually a macro cycle driven by the refinancing of government debts because everybody reset interest rates

to zero 2008 they set their government debts all at three to five years gives us a four-year cycle that was the exact point uh the launch of Bitcoin it's also the US presidential election cycle it's all the same thing and election Cycles they give out candy to the kids which is their way of stimulating so it's all part of this stimulus cycle and deth refi cycle so I don't think that changes because the debt issue is still too big okay so what is the Nuance of

the cycle normally normally we've only got three data points but the crypto spring which is the first year after the bare Market this has been a strong one you know Bitcoin was up 150% or whatever so that's pretty strong because we brought in extra source of demand in as you allude to with the ETF but that actually came later but it was front running by hedge funds and participants yeah yeah is that where

we're in by the way now R is crypto spring like the year we just transitioning to crypto summer which is coming to in a sec okay so crypto spring transitions to crypto summer and that's usually happens after the harving and after the Haring you see something that I know everybody's getting [ __ ] for right now is if you go back to 2020 after the haing what happened eth Bitcoin bottomed right and then it

started out it's slowly based and then it started outperforming right that's when the market takes on risk and goes out the risk curve and that's when you start to see Bitcoin dominance coming down all of that kind of stuff that's what the summer is it's also altcoin season it's when we hit what I commonly refer to as the banana Zone when everything goes bananas right the bit of crypto magic now this banana zone is interesting to me because we've got this new source of demand this is the most

reflexive Market ever because the more people join the network the more the price goes up the more it encourages people to join the network the more the price goes up and obviously that reflexivity works in Reverse which is why we get strong bare markets but basically the world is underweight this asset cuz it's still new asset and it's an adoption curve so over time more and more people join the network as investors or users so I think we can see a second wave of panic into the Bitcoin ETF from

people you know I was speaking to a good uh friend of mine who's um kind of very well-known hedge fund manager ex hedge fund manager and one of the the billionaire crowd and he's like R when do you think Bitcoin hits 100,000 I said probably the summer you know with the kind of demand and ETF kind of feels like the summertime the summer he's like he's like you know so much wealth is getting made in crypto it's making the billionaire

class nervous I said what are you talking about what and this was a lovely Insight he's like okay there's two groups here who all they care about they're so rich all they care about is where they fit on the rich table right they can't be the Silicon Valley guys but there's this whole group that that compete with each other for how wealthy they are it's not even about returns anymore right it's like a score when you're in the top 10,000 you

can kind of Count Your Way to the Top and you really know exactly where you are and so he said they're all going to panic that they're going to lose relevancy so they're going to panic in they're going to panic into big coin you know the bill ACM of this world and you know all of these people so I thought that was funny but he also said the other group is the billionaire property developers he goes these guys are losing re relevancy fast because of commercial real estate and these guys have been lording around you know Palm Beach and

everything else as the kings of the hill and they're worried about their relevancy cuz you know once you once you're worth5 billion you know it doesn't it's not a about it's not a wealth game anymore it's like am I richer than my neighbor that's all they care about um and so he's like you know I think that they'll probably get involved as well and I think that mindset is pretty true everywhere right people see Bitcoin going up and then you hear that your mate you're playing golf or having a drink and he made money in it and then you think I've got to make

money in it and this is the reflexive Loop so that's what crypto summer is all about it's the fomo the madness the insanity that crypto becomes but it also drives adoption drives money into the VC again it it flushes money through the system allows people to build new product which is the next cycles's gains and all of this stuff so that's great and then we go into fall and this is where the complications lie crypto fall which would be historically 2025 they've generally finished at the

end of the year we don't really ever know exactly I think this cycle Maybe started a bit earlier I don't know and Falls can be the most tricky part this summer is the easy bit you just shut up and do nothing a number go up fall is tricky so if you go back to 2013 we had a 50% selloff people thought it was done because it already gone up I don't know 20x or something stupid it then corrected 50% everyone thought it was

over and then it moon rocketed in a just a way you can't compreh then you get to 2017 same 2017 everyone kind of thought it was over early summer and then it did I don't know 10x from there it was bananas right that is really hard to deal with because 2021 was a stunted cycle we never got the accelerated final leg we had the

huge correction it went up poked his nose back up in the highs collapsed everyone's got PTSD from that the real money was made in those previous two bull markets in terms of percentage returns everyone now assumes it can only go up 3x from the all-time high there is actually no evidence of that maybe something was weird in the last cycle because the other ones did a lot past the all-time highs so I I'm slightly so how I think

of it as a distribution curve middle is it kind of does what it's supposed to do until sometime midh to 2025 it tops out okay that would be normal that would be Bitcoin as a price target of call it 200,000 mhm something like that you know 3x the alltime high kind of thing that's I would give us 60% probability I think there's a 20% probability that people who are calling

this a left translated cycle we' brought forward demand because of the ETF it dries up we're overperforming for this stage in the cycle I think people saying that tend to be one cycle people because they only saw the last cycle because others have outperformed earlier on so anyway okay there's a 20% chance of that then there's a 20% chance that this turns into a full- bone bubble cycle a 2013 2017 because of this new Dynamics you throwing in an EF as well

you're throwing you know the $65 billion of VC that went into the last cycle somebody comes up with some killer applications before you know it there's 200 million people playing a game there's you know stuff like this going on okay that could create something crazier and I'm continually assessing these probabilities in my head and because I there's so many people who I've not have PTSD from the last cycle the stunted top it's less translated they're going to take it away from us

starts to move my probabilities that you get a correction and then a spike you can't predict that because everyone's going to hate you if you're wrong like I got hated at the top Last Time by thinking we were going to have that right so it's it's like a it's and it's also very difficult to manage so it's a it's complex I would say but we don't have to care this year which is lovely so uh I want to add one one bring up one conversation here about the the stunted cycle of last cycle 2021 and end

of 2022 uh we had the rise of interest rates which perhaps was the cause of the stunting right like we had we maybe were on our way to do just another stereotypical cycle that we've seen in the past but then we had the fastest rising interest rates that we've seen in 30 years and perhaps you truncated the whole entire bull market to which the interest rates are still high to this day we haven't really seen interest rates come down Ryan and I for an episode not too long ago uh we were looking at the supply of M1 in United

States the US dollar uh and it's pretty like insane how much the monetary the M1 monetary Supply expanded postco when they like issued like four trillion dollars in a very short amount of time sem checks going everywhere the supply of M1 uh like quadrupled it went from like four trillion to6 trillion dollar inside of 2020 and then you can see when they turn the interest rates on and you started to see that Supply kind of like uh turn over and come back down but like

to say it came back down is just like it's not even a blip in comparison to the quadrupling of the M1 Supply that happened like we are just starting to marginally make a dent in it it's almost not even there and so like really just the emphasis here is that like all that money that we printed in Co is still out there it just went into like money markets it went closer to home it went closer to the Federal Reserve it created into bank Commercial Bank deposits on the on the Federal Reserve it stayed risk off because everyone just got walloped in 2022 in the markets and so

uh to add to the case that this is the 20% more bullish scenario since that money is still out there it's just waiting in my opinion just waiting for the floodgates to open back up and for that all of that real Capital that's inside the traditional system to work its way back down the risk curve and it just needs a lowering of interest rates in order to add theet fuel onto the fire it's there's there's where there was $4 trillion in M1 in 20 20 in 2020 there's now $6 trillion of M1 out there now

which could all end up moving down the risk curve we just haven't seen that move yet look I think that's that's very valid but let's look at the scenario where rates don't come down much sure cuz that's what people are worried about mhm right we don't need to worry about a bubble cycle it' be nice if we get but what we have to worry about is the other stuff and trying to figure this out so a lot of people on Twitter saying well rates are never going to go down not with inflation this slow right a

inflation's lagging all of the heavy stuff of inflation rents and stuff lags significantly so it should continue to deflate when you look at the true flation index it keeps falling so you know I I still think that game is still to be played out but let's assume it doesn't get back down to the levels and they don't cut or they cut a little bit because they've got to finance the debt right this is the problem this is what gold is sniffing out right now is how are they going to make the interest payments on the debt at 5 a half% rates well it becomes a

compounding of new debt issuant and they'll lose control of the bond market which means they have to do yield curve control which would be printing of money but within this let's assume that they do manage to get squeez in a few rate Cuts 75 basis points well that reminds me a lot of 1995 in 1994 we had a massive mov in rates Banks went under same situation markets puked they hated it and the FED

everybody thought there'd be a recession didn't get one and the FED cut twice or three times 75 basis points nowhere near where it would come back from and they kept them on hold basically until 1998 when the Asian crisis came they' cut it a bit and then raised it once and then but nothing really it was basically stable rates so everyone's like well if they leave rates here well that's that's nightmare for the markets well a the cost of 5% interest rates in a market