 It's a once-in-a-lifetime opportunity we've been given. We get to front-run a wall of money. This month, Bitcoin is back on the world stage. After surging by over 40%, 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 in this market movement remind of the 2017 Bitcoin bubble and the following crash. This time, though, the outcome may be very different. 20,000 here is not the same as 20,000 back then. Back then, it had gone up 100-fold when it got to 20,000. We haven'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? To find out, we talked to Raoul 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, Raoul. 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 by 50% one month after. So what do you think? Is this rally different from back then? And if so, how is that different? 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 contact is institutional money. And what's fascinating is once you look at the supply of Bitcoin, there's about 900 a day come onto 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 gonna 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 while 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. 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 DeFi 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 outperforming Amazon now. So 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 bother? Because Bitcoin itself, yes, it's a very volatile asset. Yes, we're gonna 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 still we saw that this year Ethereum was the protagonist of this DeFi 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 own 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 goal, they kind of get it. But when you say a platform for programming smart contracts and decentralized finance, and by the way, they're gonna change the algorithm and it's done in a different way to Bitcoin. They're like, hold on, 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. Some analysts told Bloomberg that actually Bitcoin is not getting nearly as much attention as it used to in 2017. Katie 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 onboarding institutional clients, family offices, endowments at an enormous pace. But 20,000 here is not the same as 20,000 back then. Back then it had gone up a hundred fold when it got to 20,000. 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 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 Doughty, portfolio manager at CIT 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 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 gonna deal with Christmas and New Year. The US economy's got the same problems. I think it goes into lockdown in January, February, once the Biden administration comes in because the virus over Thanksgiving, New Year and Christmas is gonna grow substantially. I think we've got problems in India after Diwali, where you've got hundreds of millions of people together celebrating, and I think we're gonna get a big second wave in India. So we've got problems. The vaccine takes time to take out. Even the Pfizer vaccine needs to be at 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 gonna 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 US 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's 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 had 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's gonna 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 called 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 coronavirus 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 positive period for the economy while during the coronavirus pandemic this year, we saw much more preference towards growth stocks which are, 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 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 US bond markets going on in the 30-year bond. Everybody's betting on reflation. It's 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 what's 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 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've got a very dangerous situation here. According to some investors, Bitcoin is still experiencing an identity crisis. According to derivative trader, cantering Clark, some investors see 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 coexist within that single asset? And if not, which one of these two identities is going to 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. 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 the identity of Bitcoin as the ultimate store of 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 Plants B stock-to-flow model, which predicts Bitcoin will reach $280,000 by 2022. We had buy three CIO Charlie Morris in our show not long ago who claimed to have debunked this stock-to-flow model. Well, I suppose that you sum it up but 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 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, Plants B stock-to-flow model, and him and I have spoken about this reasonable amount, is there is no perfect model. So anybody who thinks they're some amazing engineer or mathematics guy who can disprove this, it's nonsense. What it is is a hypothesis that needs testing. But let's assume Plants B 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'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. Still, Bitcoin's essence hasn't changed. 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? It's 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 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, basically opportunistic trading. Oh, okay, all right. So you said that you are ready to have a 50% downturn in Bitcoin. So that's a huge blow for someone who has 50% of its liquid assets in that specific asset. Don't you think so? That's 75% now. So you're saying that you have 75% of your liquid assets in Bitcoin? Correct, 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 Bitcoin goes down and stays down? I doubt it, but let's say I'm wrong, that I'm the idiot. It goes down, stays down. It then messes around at 5,000 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. I've been running portfolios for a long time, and 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 Cayman Island to make a bet like this? It's not necessary. In fact, 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, 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 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 where they are in their lives. Their riskability is what they need, their past history, what their fears are. Let's say a middle-aged man, 30s, 100K of spare money that can invest regular income. I would go 50%. So you lose 50 grand, okay? Worse, what do you do? 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 gonna change their life because they've already still got 75,000 in savings. It's a hindrance. But if that 50,000 you put in goes up 50-fold or 10-fold, 50-fold, two and a half million, 10-fold, 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% in Bitcoin and the remaining 50% 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, 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 gonna underpriced 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. So I actually have a feeling it might be above his target of about 250,000, but I don't know. But I like that optionality. Worst case, 150, best case, north of 250. I mean, finding 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, we've interviewed, we kind of pioneered the business model of interviewing the smartest people in the industry, peer-to-peer interviews, famous hedge fund managers that nobody else could get, the best, most in-depth analysis, our long interviews. We realized that we have 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. You know, doing as you're doing, but do it at scale with, you know, all of our production facilities, all of our network to bring more people into this. So we partnered up with Silvergate Bank and BlockFi, and they've helped us, via their partnership, to offer this for free, because the rest of our business is all subscription only, because it's a big business with a lot of, you know, production crew and stuff like this, but this is gonna let us get it in the hands of many. So people, anybody interested in this space, we've got incredible content, and it's just go to realvision.com forward slash crypto, sign up with your email, and you can gorge on content. We've got huge amounts. Awesome, thanks a lot, Raul, for talking to us today. Yep, great to speak to you as ever. Thanks so much. Coin Telegraph, like, subscribe, and hodl.