← The Wolf Of All Streets
The Wolf Of All Streets
"This Secret $8 Trillion Liquidity Injection Is Coming For Bitcoin In 2026!" Raoul Pal
00:55:21
Loading summary
Transcript134 lines
- [00:00]
A
What if 2025 wasn't a failure for bitcoin in the broader crypto market, but was a setup for something much, much bigger? This year was supposed to be the year the news was perfect. The institutions showed up, regulation flipped, adoption exploded, and yet prices stalled. Liquidity vanished, and crypto felt like the most uncool corner of global markets. In this episode, I sit down with Raoul Pal to break down what actually went wrong and why. Liquidity, not narratives, controls everything.
- [00:31]
B
Liquidity is 90% of all price action. Everything else is just us talking.
- [00:35]
A
And why 2026 may be the most important year for crypto markets and the global economy we've ever seen.
- [00:42]
B
We need to create about 7 or 8 trillion dollars of liquidity in the next 12 months to pay the interest on the debts. 2026 is really important for the Trump administration to try and win, so they will do anything they can.
- [00:57]
A
We talk fiscal dominance, debt rollovers, why the Fed no longer controls the game.
- [01:02]
B
Mirren came out the same day they announced it and said the risk weighting should go to zero. And what he's saying is we want to jam the banks with unlimited amounts of treasury bond issuance. So now we've got a buyer. So they've completely neutered the Fed.
- [01:16]
A
What's really happening behind the scenes in crypto markets and how AI, tokenization and smart contracts could redefine value itself.
- [01:24]
B
These things cannot exist without each other. They're kind of co joining the hip, which is why when you go to Abu Dhabi, Dubai, when you go to the US Administration, it's like there basically are two technologies that matter here. It's blockchain and AI.
- [01:37]
A
If you're confused, frustrated or questioning your conviction, this is the conversation you need to hear.
- [01:45]
B
Let's dope.
- [02:00]
A
Everyone's looking for smarter ways to build their Bitcoin stack. Well, here's one most people overlook. You can earn Bitcoin every single time you spend without ever buying it directly. That's where today's video sponsor Gemini, comes in. The Gemini credit card gives you instant crypto rewards on every purchase, and there's no annual fee. It's a MasterCard World Elite, so you can use it anywhere. MasterCard is accepted. Gas, groceries, travel, all of it. Now, here's the breakdown. 4% back on gas, rides and transit, 3% on dining, 2% on groceries, and 1% on everything else. The best part, you're earning Bitcoin or one of 50 plus other cryptocurrencies automatically deposited to your Gemini account. For me, it's been A really effortless way to build exposure to bitcoin just by spending, spending like normal and doing the things that I do every day. I've literally earned bitcoin just from filling up my car with gas. And historically, bitcoin Rewards held for one year have appreciated 279% on average. You're not just spending, you're building a portfolio. This is the Gemini credit card. Sleek, straightforward, and one of the easiest ways to turn everyday purchases into long term value. To get started, look at the link in the Description and get $200 in Bitcoin when you spend $3,000 in your first 90 days, click the link in the description to apply and start earning instantly. See rates and fees in the description for more info. So 2025 kind of sucked.
- [03:26]
B
Yeah, it was shit. Every day somebody slotting the market while tech stocks go to new highs. Everybody else is having a party and we just feel like the really uncool kids at the party have been watching from the outside while everyone's having a good time.
- [03:41]
A
It's funny though, I feel like even in other markets it's been confusing for people. As good as the Mag 7 has performed and as good as that makes markets look, I feel like a lot of people are still finding creative ways to lose money all over the place.
- [03:54]
B
Yeah, it's just been a bit of a weird year. In the end, the S and P and NASDAQ did okay, but didn't do great. But some things did really well. If you had gold and silver this year, you're a God after stinking for the two years prior to that. It's just like over the long run, we know all of this stuff goes up because of debasement, but the nuances of what market? Who'd have thought that the fourth year of a crypto bull market would be negative? A down year, zero people. And then it's like, yeah, it's been just tough for people.
- [04:32]
A
You talk about the debasement trade. We've been screaming about that for as long as we've known each other and long before. But it seems like in the third, fourth quarter of this year, all of a sudden that actually became a mainstream narrative with institutions at JP Morgan talking about the debasement trade. I guess Paul Tudor Jones always has. But Ken Griffin talking about bitcoin as a hedge against the debasement trade. Right. I mean, these are the kind of like cheering for Darth Vader and the Emperor, I guess, when you start talking about JP Morgan and Citadel. But still, it's been a Bit surreal that it's become such a. A narrative. Yeah.
- [05:07]
B
And, you know, narratives are sort of allowed or not allowed, driven by, you know, whoever whispers them to the media, whoever creates the narratives. To go and it's clearly been everyone's blessing is like, you can say that the government is debasing currency. It's like the weirdest thing because before it's like, we can't talk about this kind of things. And now everybody says it, and now people start talking about. They wrap it up in nice terms. It's now called fiscal dominance. And fiscal dominance is we're basically going to debase your currency. Or financial repression is the less nice way of saying it.
- [05:45]
A
Okay, so if the new catchphrase is fiscal dominance, does that mean that the Fed has effectively been neutered, or is it just a narrative?
- [05:51]
B
Oh, no, it's entirely been neutered. So what they did is it was Steve Miram was the plant in all of this. Steve Mirren basically said that he was the architect of a lot of the Trump tariffs. But then he went into the Fed and started talking about the ESLR changes. And these three letter acronyms we always know mean something, but they pretend they mean nothing. And really what it is is the amount of Treasuries, the risk weighting of Treasuries on a bank's balance sheet. And because of after the financial crisis, they've made them quite risky on a balance sheet. So banks didn't have a lot of it and hedge funds were providing liquidity and others. And they made this little change to say, we're going to reduce risk weighting. It's a tweak. Basically what it was setting up is for the banks to buy the debt. So they buy more debt, they use it as collateral. They then leverage it out and create loans, and that flows through the whole system. Scott Besant was saying in a different way, he's like Main street over Wall Street. Wall Street. What his definition was quantitative easing was a gift for Wall street, of course, because assets went up and it didn't do anything for the economy, really. But when you do it by the banking system, loans go up and that helps everybody. So loans were tight beforehand, so loans become easier is the idea. Then they also talked about they wanted the. They wanted the treasury not to use the balance sheet as the primary mechanism of liquidity. And so they stopped qt. Fine. Then they've had to technically add to the balance sheet. But what they're saying is, we don't want the Fed to add the liquidity because then we're beholden to them for their use of the balance sheet and for interest rates. And those guys are. Are not aligned politically with the fact that we have to pay for all of this debt and issue new debt. So what we're going to do is we're going to change the regulations, neuter those guys, force them into lowering rates, try and get new people into the Fed to keep rates low because we need to roll the debt. That's game number one. Meanwhile, we'll now get the banks to change it. The moment the SLR was kind of rushed through at the end of the year, that comes in in January now and is mandated by April 1. Mirin came out the same day they announced it and said the risk weighting should go to zero. And what he's saying is we want to jam the banks with unlimited amounts of treasury bond issuance. So now we've got a buyer. So they've completely neutered the Fed.
- [08:36]
A
But we did get the announcement that the Fed is going to be buying bonds. And. And although nobody wants to refer to that as qe. Right, Because I guess.
- [08:43]
B
No, because it's technical. Again, we're too stupid to understand. We call it qe, but the real people who understand just call it a technical. Whatever. It's like. No, it's all the same thing. You're creating money.
- [08:56]
A
Okay. So at the end of the day, 2025 probably sucked because the anticipated liquidity didn't come in or didn't come in the ways that we did anticipate and when it might have the government shut down.
- [09:07]
B
That's right. I mean, if I go back and we nailed most of the year, even things like the M2 chart, like a gift now, I always said they weren't going to last forever, but everything started breaking apart in July a bit. And July was when the treasury started rebuilding the general account, but we drained the reverse repo, which was the offset, so we had no real offset to the treasury building up $700 billion. And so that kind of pulled the rug a bit from crypto because it's furthest out the risk curve. And then the shutdown happened and the next tariff war with China, and before you knew it, everything blew up. And so we've been diverging ever since in crypto because we're the furthest out the risk curve. And so the rest of the year was playing out almost perfectly. And I did not see the shutdown coming.
- [09:59]
A
Yeah, I really think that that's the undiscussed killer of our amazing Q4 that was promised. I guess then the question becomes what happens when we inevitably shut down again in January because we know that these guys can't get along. I mean it's coming again.
- [10:15]
B
I mean the odds are going up again. I don't know. My guess is 2026 is really important for the Trump administration to try and win. So they will do anything they can. So whether they have to somehow paper over the cracks in liquidity, if that happens again, we're still caught in a liquidity trap right now because the banks don't have enough liquidity. Year end funding is a problem. The money markets were breaking. They probably still have to do something with the I can't believe we've all had to learn about fucking plumbing. But here we are. They're going to have to do something with a standing repo facility to allow the banks to fund themselves into year end. I mean what a shit show. And we're still caught in that. And then I'd love to hear your conspiracy on this, but whatever happened in 101010 something is bad. And to me when I look at the everyday selling in my mind and I could be wildly wrong, we've all got our wild thesis is everything broke on Binance. Even the market makers couldn't put in orders because the API is broke. So my idea is Binance's market making organization as well ended up having to be the backstop to all of that. Everything that got sold down to nothing. So they end up with this huge book, let's call it $20 billion of liquidated stuff of which they need to work out of. And $20 billion in shitcoins is a lot of liquidity.
- [11:46]
A
Yeah, especially when there's no buyer anymore for shitcoins. Like you couldn't have a worse time in the market to have a forced selling of assets that are the most illiquid that they have ever been.
- [11:56]
B
So that what's your thesis?
- [11:58]
A
That makes sense. So I have a similar thesis. I guess I just didn't pin it on Binance specifically I thought because the.
- [12:04]
B
Market makers, Winter, Mutant, all the others, where the rumors go doesn't seem to be the case. But Binance is big and opaque and it was their market that broke.
- [12:15]
A
Yeah, I mean it makes sense because the market makers suffered from automatic deleveraging so they couldn't make markets at all. Besides the fact that the AP's eyes were off and they literally couldn't get orders in the exchanges closed their positions, their positions are closed. They obviously can't be on both sides of the book, creating spread, who bought.
- [12:33]
B
The other side of those positions? So somebody has to, right?
- [12:37]
A
Yeah. I don't even know.
- [12:40]
B
The thing is, because we couldn't get orders in, none of us could, the market makers couldn't. So then it has to be the.
- [12:46]
A
Exchange or some internal market maker or something. But I guess that's right. That makes sense. And they can't sit on those positions indefinitely.
- [12:55]
B
No. Don't forget they have a very big shareholder now, which is mgx, which is part of Abu Dhabi's sovereign wealth complex. So they have accounting and all of that, audits and stuff to do. So my guess is you've got a massive overhang of stuff. You probably bought it cheap. There may not even be a loss on this stuff. But they have to offload it. And so every day they offload a billion bucks a day or half a billion bucks a day, every day for 40 days.
- [13:26]
A
Whether it's Binance or someone else, I can tell you that from my years in markets, watching charts, it feels like somebody is just systematically selling everything every day. And that's not a normal behavior. And I don't know who else has that much money. We had the, you know, whale wallets, moving coins or dormant wallets, I guess, more specifically than whales and selling. But that feels like it's done. Like, how many guys wanted to buy a yacht and decided that this was the time? I know that there were a lot of them, but they're not selling the exact same amount every single day, on the hour, every hour. So I think that you're right. It has to be somebody that blew up and needs liquidity or somebody that has a whole lot of stuff to sell that they can't hold on to, that would.
- [14:12]
B
That's right. And, you know, people say it's nefarious. I probably don't think so.
- [14:18]
A
I think it's like, if those charts are real, which I don't know, Right. Like, was anybody really selling at 95% down? Were they still actually liquidating positions or is it just kind of, you know, chart mechanics? And that was a fraction of a penny by the time it was down there. But they definitely bought a hell of a lot cheaper than prices were trading at the beginning of that day. So if they bought something down 60% to make sure that there was still an order book and then it bounced, I mean, and they're down 40% from that day, you're still wildly in profit.
- [14:48]
B
Finance is a huge. If it's Binance, it makes the most sense that it is. And Whether there's a few others that got into the same situation that had to backstop liquidity. These are hugely profitable businesses with enormous cash flows. So this is not a systematic risk. It's just a pain in the ass for the rest of us to have to deal with this liquidity overhang.
- [15:07]
A
Yeah, not nefarious, as you said. Like if they did that and have to sell that, they have to sell. It's not, you know, it's. I don't think they're trying to market dump 20 billion in altcoins on a day. So they're doing it slowly. The question is how that sort of bleeds over to the price action we're seeing in bitcoin as well.
- [15:25]
B
But, you know, because bitcoin having seen like I used to sit next to the program trading desk at Goldman, so the program trading desk will get a call from like some big asset management firm like Capital International, and they would say, make me a price in this index in $5 billion, $3 billion, $2 billion. And these guys would calculate how long it would take to get out of it, what price to make all of that stuff. And then what they would do would hedge with a futures contract or the most basic thing. So when you've got a massive risk on and this event has happened, you've had to provide liquidity. You bought all this stuff down here. The first thing you do is sell Bitcoin because it's the most liquid market. So you're starting to neutralize your market or macro risks. Then you've got all the token dispersion risk and all of that stuff. And then you have to figure out that. And it still feels like, I know for some reason bitcoin still being sold. I don't know what quite the mechanics are, but there's something still going on here.
- [16:29]
A
Yeah, there's somebody just selling bitcoin relentlessly every single day. Maybe that'll change. It has to change eventually, right? Eventually they run out. But this does not feel like there's some major fundamental issue with the market. I mean, sellers buying a billion a week half the time. And we still see mostly inflows on ETFs. I mean, I think there's generally more buyers in the market writ large than sellers. Right. And price still.
- [16:57]
B
Well, the other thing when you look at it, the dichotomy here is the news has been preposterously good, squared. We couldn't have had more good news. And if we take a snapshot of where we are today, because I was in Abu Dhabi In Dubai last couple of weeks and I spoke to Coinbase, Binance, I spoke to all of the sovereign wealth funds, I spoke to Bitwise, I spoke to you name them. Everybody's like, all we've got is inquiries. All we've got is onboarding. All we've got is financial institutions building on rails. All we've got stablecoin inquiries. How do we build on stablecoins? All we've got is how do we tokenize our equities? How do we tokenize real world assets? How do we tokenize the bond market? The dtcc which clears quadrillions are like, well, how can we use the collateral? And put. It's like, okay, we had a good CPI print today, the market just went up, nuked again. So it tells you there's an extraneous factor, there's not enough liquidity around, which doesn't help. So crypto gets hit and then there's this overhang thing.
- [18:06]
A
It's really a head scratcher.
- [18:09]
B
I just think of it as like, we won't remember this in six months time. And I just think that 2026, probabilistically speaking, has to be a good year because of liquidity, fiscal stimulus and all the other stuff that's coming. Regulation changes and a Treasury Secretary who really understands about the business cycle and how we need to jam it if you want to win the midterm elections. I mean, it's all there and they're telling it openly.
- [18:39]
A
Yeah, I just wonder if it's all going to happen in August, three months before the election. Right. $2,000 stimulus checks coming from tariff revenue. They're not doing that now. People have forgotten it by March. Yeah, you have to do that if you're going to buy votes. You need to do it at the election.
- [18:56]
B
Yeah, but things like the no tax on tips is quite a big deal because the US is a big service economy and so many people work off minimum wage plus tips. And if you're not taxing them or massively reducing the amount of tax on people, I mean, that's a big pickup for a lot of average American workers. And my guess is that will happen sooner rather than later so that money can start filtering into the economy.
- [19:25]
A
It makes a lot of sense. And then the other thing that just worries me, I won't say worries because my thesis is the same as yours for 2026, but we had all the catalysts in 2025 and it didn't happen. Not liquidity, but from a news perspective, we got everything we could have wanted and more. And I feel like everybody just takes for granted that we're going to get everything we wanted more. Which gives it a bit of a priced in vibe as far as the news and adoption side, not the liquidity side, that's completely different. But how can you get bigger news then JP Morgan accepting Bitcoin and Ethereum as collateral or the DTCC partners with Canton Network to.
- [20:05]
B
The weird thing is we now don't believe we can have nice things. Yeah, that's right, that's accepted. It's like look, we know with the scum of the earth, we're crypto investors with degens, we're now being punished for all of our sins. We get it. So there's no belief. And then if you're an asset allocator, you've not been forced into the market by price rises, you've been forced into upping your gold allocation, you've been forced into tech stocks and people fought that all the way. They've been underweight the whole way, but as price goes up they get forced in, which keeps this self fulfilling, kind of reflexive cycle. In crypto you haven't had to do anything. In fact, they've done really well by not allocating this year. But if that dynamic changes, if it changes, they all hear what the government's saying, they'll all hear what everybody's saying and they will have to force themselves in.
- [21:01]
A
All the good news matters when price is going up. It's the bottom line. And it's kind of the same old saying, nothing's better marketing for an asset than higher prices. And we've seen that for Bitcoin over the years. I guess the concern though is that even as we got higher prices in Bitcoin, it never really trickled down into the rest of the market. And a lot of this institutional adoption actually if you read between the tea leaves, could be great for the technology and the institutions, but bad for the tokens.
- [21:26]
B
See, I don't believe that. So from the work that we do, Bitcoin dominance is driven by the business cycle. So if the business cycle is lackluster or early stage, then bitcoin dominance tends to be higher. When the business cycle picks up, which it has not done because of liquidity and rates and stuff like that, then bitcoin dominance remains strong. But the moment it changes, then everything starts to outperform. And Scott Bessant is telling you day in, day out it's going to be a strong economy. And this is why all the forward looking indicators suggest all of that. The other Thing is to bear in mind, and this only dawned on me the other day, I can't remember if I saw something on Twitter that made me think about it, but anybody who's bought bitcoin is watching the announcements coming out of Wall street, the government. And what they haven't figured out is that that is all smart contract land and they're in pristine collateral land. Two different things.
- [22:34]
A
Yeah, totally right.
- [22:35]
B
Debasement, pristine collateral, the beauty of bitcoin, we all understand that. But the actual action is about to happen in smart contract land and people are wildly underweight. That again, I was around the Middle east, they've all got bitcoin, bit of it, not enough. They're all trying to figure out how to fit it in their portfolios. It's being top down driven. You need to have higher weightings in this stuff. The individual portfolio managers are like, we can't quite fit this in yet anyway. So they're getting there. But none of them own smart contracts.
- [23:09]
A
So basically they're still behind in the minute that the narrative once again catches on and they realize, oh, I need to own Ethereum or Solano or any other layer one.
- [23:17]
B
Exactly. And you know, and they need a barbell approach to this because this is how the market works. Because if you think about it, the number of use cases for smart contracts vastly exceeds the use case for bitcoin in tam.
- [23:32]
A
Not even close. Especially when you have DTCC saying, listen, by the end of 2026 we're going to be token tokenizing every asset and that's every security on the planet.
- [23:42]
B
So if we step back and say, okay, well why does this affect the underlying token prices? Because these are just slots on the blockchain that are going to be in demand. So everything, every time you tokenize an equity, you're creating block space demand which drives the value of the token network. So again, people don't really understand this stuff. There's been a lot of shit fighting about how to value networks because we've not seen a use case of this magnitude coming, but it vastly changes everything.
- [24:12]
A
I guess then the next natural question is at current prices, if we're going to move towards a model where we value utility and actual earnings and metrics, are we wildly overpriced and need a repricing and then see who wins when we're actually giving them proper valuations based on usage and block space.
- [24:30]
B
See, I don't believe that's how you value a network. I believe you use Metcalfe's law, which is basically the number of active users sort of multiplied by the total value transacted on that network. You know, that's how Amazon works. Google works all of this stuff. It's not how much revenue does Google make is the value of Google, it's really driven by how much actual volume of transactions. If you think about the vast scale of the advertising industry and think of how much accrues to Google, 60% of every advertising trade goes through them or something, and so they capture pennies of it. But Google has always been priced because of this stuff and particularly early stage the market prices and the growth of these applications layers built on top of a network. So I don't think cash flows are relevant at all today. They might be in 15 years time, but not today. It's like can this new application create value and grow on top of the network? In which case you're going to price this stuff at vast multiples. Remember Amazon traded at a P of 800 for eight years.
- [25:39]
A
Valuations can be exceptionally out of whack for a very, very long time.
- [25:43]
B
Yeah, Tesla, because nobody believed it was a network company. And soon, sooner or later everyone's realizing that this is networked AI across networked cars with network robots, network logistic chains. And everyone's going to go oh shit.
- [25:58]
A
Yeah. I'm trying to play devil's advocate, even though it's very hard because I agree with everything you're saying. What about the push and pull between private and public blockchains so that a blackrock or a dtcc, we have seen them largely make announcements with existing public chains that we can invest in the token. So it's sort of theoretical, but if they go the private route and they just basically circumvent all of the decentralized chains that we love and those tokens are never used and they do it themselves, co op our systems, you know, good for the technology.
- [26:32]
B
I guess they will try it, but they'll realize decentralization is where the security of the chain lies. And if the information they're transacting on that network is valuable, they need to have a decentralized chain. So my guess is they'll come round to it. But yes, there will be some private chains, much like there's still private intranets, but it's a player versus everything world. You and I've talked about this endlessly. People think of it as a PvP. The more use of blockchain, the more valuable all of our tokens become. Because the more use of blockchain and the more people move around, the more applications get built because after the financial system we haven't even got to tokenizing the Internet. We've got all the dreams of web3. We only started that game. We're getting excited about the financial markets. The other side is addressable TAMS of 8 billion people.
- [27:30]
A
I was just going to ask you about that. It's funny because every single conversation I have now so I'm sure it's the same for you and maybe it's self fulfilling. We're all a bunch of macro economists now. Nobody's talking about in game assets and the metaverse. What happened? Where are my NFTs, man?
- [27:50]
B
Yeah, and all of that will come, will definitely come. It's like every ticket, every contract ends up being an nft. People don't realize the scale of this technology but we don't have enough capital and we don't have enough attention to do it all in one go. And we didn't have the right regulation. So the regulatory green light goes to the people with the most instant capital which is the financial system because they capture the economic efficiencies of using blockchain super fast. So it makes sense to me. Eventually the web two, the existing Internet will move to these Rails. And so if you think about in terms of time horizon, I keep saying just extrapolate out the log trend of the market cap of Crypto, we're at 3 trillion today. If you extrapolate it out into this nice little log regression like we all do on the bitcoin chart, you get to about 100 trillion in 10 years time or less by 2032, 2034. So for $100 trillion we've got 97 trillion of wealth to create. That ain't just coming from the banking system, it's not big enough. It'll come from the wholesale adoption of everything using blockchain, rails, digital ID, everything.
- [29:07]
A
So looking forward to 2026, you gave an incredible presentation. It's a lot of breakpoint that's kind of broken the Internet. I see your face every five seconds. I love. But obviously liquidity is going to drive things largely. Maybe you can just I guess give us the picture of what you're expecting in 2026 but then we can get into the more exciting conversation of once that happens and we stop having to talk about macro every second. What are you excited about in web3 and crypto specifically?
- [29:38]
B
Yeah, so we have when I look at the chart of interest payments and look at total liquidity, interest payments lead and then we have to have liquidity to essentially pay for the interest payments. And that tells us we need to create about 7 or 8 trillion dollars of liquidity in the next 12 months to pay the interest on the debts.
- [30:02]
A
That's a crazy number. I'm old enough to remember when a trillion was a lot of money.
- [30:06]
B
Yeah, that's right. And so, okay, so that means we've got all this to go. So how does that come? Well, if we look at the changes to the SLR, this little innocuous three letter acronym that probably brings 3, 4 to 5 trillion of liquidity that's driven through the banking system. Call it 3 trillion, call it 3 trillion for easy math. Then we've got the fiscal stimulus. Well, the fiscal stimulus probably adds a trillion and a half into the banking system. So that's what, 4.5 trillion. And we've barely started looking at whatever levers that they can use. We've got the balance sheet rebuilding, they got the drawdown of the TGA. Well, let's chuck in another trillion there. We're now 5.5 trillion. Okay, we're getting very close to the numbers now. Imagine if they then change the SLR fully and get rid of all the risk weighting. We're now immediately at 8 trillion. So without having to do any complicated maths, it's like, yeah, without even talking about rates. So the, the liquidity coming is big. Will it come exactly as I say? No. Will it all be smooth? For sure not. But generally speaking, that's the game we have to play. So that's what I look forward to in 2026 is like if 90% of Bitcoin's price action is explained by global liquidity, then that's the most dominant macro factor of all time because it's 97.5% for the NASDAQ and you know, equivalent amongst all the asset classes. So therefore we just need to worry about this one factor because everything else is noise. And this one factor says you need to print money.
- [31:59]
A
They're going to print so much money.
- [32:01]
B
And that's the whole thesis behind the everything code. It's quite simple really.
- [32:06]
A
So they're going to. Let's assume that that's the correct thesis for 2026. Bitcoin obviously would rise. What do you think happens to the altcoin market? Does it look like the alt seasons of the past? Do we get it in sort of bubbling narratives? Metaverse summer and defi fall or you know, RWA spring? Do you think that it's going to be more selective or that it's going to be across the Entire market. Also, at what Bitcoin price or signal do we actually see it flow down? Because we made it all the way to 126. It never did. Still. Right.
- [32:42]
B
Remember, it's driven by the ism.
- [32:43]
A
Yeah. And the business cycle.
- [32:44]
B
And by the way, in which case, wherever the.
- [32:47]
A
I was like, I've heard this somewhere before.
- [32:50]
B
So when the business cycle crosses positive, wherever Bitcoin is, that's where it starts.
- [32:56]
A
Okay, that makes sense.
- [32:58]
B
It's really simple.
- [33:00]
A
The premise there then is that the previous cycle of bitcoin to altcoins and all those things wasn't exactly internal to the crypto market. It was actually based on this exogenous factor and people just.
- [33:13]
B
Which is the same that drives small caps, it's the same that drives credit markets. It's all the same. It's the risk curve. So let's talk about the performance. So right now, I've always said expect a 35% pullback in Bitcoin twice a year in a bull market. We've had two of those. And then what happens is there's a risk curve. So eth falls 40%, 45%, Solana falls.
- [33:39]
A
60%, Sui falls 74% and memes go down 99.9999999.
- [33:46]
B
Correct. Right. So there's your risk curve on the way up. The opposite plays out. Now, it doesn't mean memes all go up, but generally if you're in the right part of that risk curve, we, without being too risky, you should get decent pickup from things that are less liquid and smaller, earlier phase, stuff like that. So that's generally how it plays out. And it usually happens quite fast. As we know now we only have 12 months and maybe they're not going to win the midterms. If we start figuring out via prediction markets by September and it's all like, oh fuck, it's all over. So I don't know how long this thing lasts, but let's assume it's at least nine months. So then do we get the rolling narrative cycle? Generally that's how it's worked because when you're further out the risk curve, it's just degens who are buying it.
- [34:44]
A
Right.
- [34:45]
B
And we're always looking for the next tail chase, where can we make the next money. Because it's not Wall street coming to buy our gaming tokens or our means, it's us lot fucking around with our capital because we're feeling like we've made some money. So we have to understand how our psychology. So I think we will have that rolling thing. But generally speaking, the layer ones are so easy. If they're higher quality layer ones that have proven adoption, it's like that's a much easier bet. Whether your defi protocol or your gaming one or whatever will get adoption, we don't know. I mean, there's an interesting one, the thesis on zcash that's playing out. Okay. It was an internal rotation.
- [35:32]
A
Yeah, I would love to.
- [35:33]
B
There was an internal rotation because the market was going down. It went up. Okay, fine. We've seen that a hundred times before. Everyone gets trapped in the top, the market stabilizes and it plunges again. I think there's a decent chance that becomes a real narrative and people. When the market goes up, it fully goes up again. But I don't know because most of us who've been in crypto for a long time are tired of fighting the government and I just don't know if I want to do that all over again.
- [36:02]
A
Yeah. And we're jaded by the cyclical narrative I talked about. Right. So it would take a hell of a move to let it have a second bump if something else could capture that liquidity. Right. So we got our Privacy Season.
- [36:15]
B
Right.
- [36:16]
A
So what season comes next? Is it Privacy Season Part 2? It could be, but Zcash to me felt kind of out of nowhere and a bit coordinated. I have no conspiracy.
- [36:25]
B
Well, I think it actually came from Neville Ravikant who was like, you know, and. Because Naval is the voice of God on Twitter.
- [36:32]
A
Yes.
- [36:33]
B
That everyone listens to him and people had obviously had dinner with him and he's been talking about it. So all at once, you know, everybody's friends of Neval, from Tim Ferriss through to Balaji, starts talking about zcash and then it spreads out to the zcash OG holders like Barry Silbert and Chris Berniski and all those guys, all high quality guys. I think the thesis is right and it probably has a very important role in the future, but fuck me, it's going to be a hard asset to own when every bank wants to shut it down and every government wants to shut it down.
- [37:05]
A
We did this with Monero. I would think Monero would actually catch the price privacy bubble. But Monero's already been delisted in so many places that I guess it can't. Yeah, but is zcash for some reason, maybe I'm ignorant, really, because I haven't done the work, but is ZCASH really like the gold standard in privacy tokens?
- [37:26]
B
Because it's not, apparently so apparently so. I mean this guy was around from Satoshi days, super well regarded. The technology stack's been proven over time. You know, the people that we respect to actually do the homework stuff like Mert who's on X every day, says it's the real deal. Barry Silbert, you know, people who are good quality people say this and so fine, I'm just like, do I really want to go through that battle again? Because that's a hard battle. But that's why, you know, maybe they're right. Maybe it goes to 50,000 in 15 years time or like bitcoin does and it's now trading at a few hundred bucks. That's a great opportunity. But you know, having held bitcoin on and off since 2013 and gone through multiple down 85%, all of the stuff, it's like, it's pretty hard.
- [38:18]
A
Do you still think bitcoin has the down 85% in it?
- [38:21]
B
No, neither. I don't know. Down 50 probably. You know, don't forget dude, tech stocks.
- [38:30]
A
Can go down 50 in a few months. That now once we're at down 50, we're in the world of normal, in my opinion.
- [38:37]
B
Yeah, that's right. We're in the north. Yeah, the world of riskier tech stocks.
- [38:42]
A
10 minutes overnight a couple of years ago. Right. I mean there's nothing crazy there.
- [38:47]
B
No, no, so, so yeah, I think it's that maybe 60% last time was what, 65 or something? It was less.
- [38:54]
A
74 actually 60, we went 69k. I mean it depends on what exchange. But in the plus 70 plus, I think 70. The year one before was 85.
- [39:04]
B
What is it this time? 55, 58, you know, whatever. Because each time the, the magnitude of the sell off is less because the adoption of the assets.
- [39:13]
A
Yeah, it plays both sides. That's what. So even if you're like a super four year cycle believer and we topped on exactly the right day and it's all over. I don't understand believing that there's going to be another 75 or 85% drawdown. If we got disproportionately low upside, why would we get the same horrid downside without the upside in the cycle? So even if you believe we're going down for three years, why would you believe we're going down more than again?
- [39:40]
B
Because everybody will misconstrue this. That doesn't mean that your insert bags token will not go down a shit ton more than bitcoin. Bitcoin is the benchmark asset. Everything else is further out the risk curve. So everything will fall and your crappy. I got my idea from my mate last night who said this is the next great thing in AI tokens will go down 99.9%.
- [40:05]
A
The business cycle has been bottomed out for years, right? I mean the ism. So there's sort of an expectation that it has to rise in 2026. It's been just beaten down. What if it just stays flat and low again? I mean what are the factors that convince you that we're going to see that move? And listen, it's not tied to a date, like if it's June or if it's November.
- [40:27]
B
So all of the forward looking indicators that we use and I've been doing business cycle analysis for 35 years and really, really for 25 years as the main source of what I do. Everything we look at says it's going to be strong, whether that's financial conditions, whether it's the number of central banks around the world cutting rates, whether it's just a whole raft of stuff that we look at. So probabilistically speaking, yes, ignore all of that. Donald Trump and Scott Bessant are telling you we're going to have a super strong economy and we're going to give you a fiscal stimulus. Oh, we might even invade Venezuela to get the oil price lower and we're going to goose the banking system then what they're telling you and we want Main street to win. What they're telling you is they want the ISM higher and this government of all governments understands how to do that.
- [41:28]
A
I am eternally blown away by the buttons they can push and the levers they can pull. Just when I think there's no more way they can prop up markets or pull something off, there's always another one. And it's unbelievable to me. It feels like they're just endless recessions are illegal.
- [41:47]
B
Well also don't forget, Scott, they got in in a large part because of two key donors groups, the technologists and the crypto people. If they want to fight the midterms and win, they're going to need that money. And the crypto people are going to be where the fuck is our bull market? The technologists are getting everything right now. They're getting the AI regulations, the hey, we're going to use all of the internal data. The entire US government creates super AI. We're going to democratize space, we're going to do everything they're going to get. And Brian Armstrong and everybody else is going to say we need a ton of get that clarity act through B, kick Wall street into action, get them start to actually do stuff. And C, we need the liquidity to get this market going because you're doing something wrong. It feels that the incentives are aligned for everybody to do this.
- [42:56]
A
We spoke at the end of last year, maybe it was the beginning of this year, but we talked about the election and you were the first one that made it just how clear to me it was the technologists that swung the election and specifically the crypto industry.
- [43:11]
B
And Elon Musk single handed. Yeah, Elon single handedly went to exactly the Occam's Razor, the single most important leverage point in the entire election and campaigned himself to win it. I mean, holy fuck. And it was obvious then what was.
- [43:28]
A
Going on and he's going to be worth over a trillion dollars when SpaceX.
- [43:33]
B
Yeah, and because it wasn't even so much, I don't think he even cares about wealth. And he made it very clear at the time is there is a fork in the road of the potential futures of the divergent paths. And if we go one fork, we're likely to be following Europe. If we go the other fork, we're going to accelerate and change all of the structural problems we have. It's not going to be an easy one, but also China's going to do it whether we do it or not. And that fork was the right split, I think, for the American economy. Whether the Europeans care or they just want a museum for old people, that's up to them. But if you want to be a global superpower, you have no choice. It's what other people don't understand is AI and the rise to AGI. And then ASI is the single most important race of technology in all of human history. It's the most important technology humans will ever invent. It'll be the last great technology we'll ever invent because I will invent everything. Post it. So this is the big one. This is the most powerful thing ever. Because what we've just created, people just don't get it yet, is we've just created a new, more intelligent species than humans. We've created our own replacements. Not they're going to kill all the humans, but at the apex of knowledge and intelligence, this is it. And there is no way the Americans can lose this game because then there's only one nation who can take it all, and one nation with this power. Okay, that's a very complicated world.
- [45:16]
A
Where does crypto benefit from AI? We've had endless narratives over the last year or two about the marriage between the two. But I think we all agree that AI is going nowhere and that those stocks and companies are going to be the biggest in the world as they continue to win that race. Is there actually a role we've seen with the miners, right, who can switch their data centers over and they can be AI data centers rather than miners, but is there a natural place where we actually see crypto?
- [45:46]
B
There's two levels. One is pressing current urgent need and the other is where the world is going. Pressing urgent current need is in a world of AI, we need authentication of humanhood. Right? So tokens and zero knowledge proofs is a great way of authenticating that. Scott is Scott Ra is Rason. There's a million videos of you and some of them aren't the real ones, some are the real one. Yeah. How do we do all of that? That's urgent. You saw Cathie woods congratulating some couple online. It was bloody AI and it was like, okay, it's so close to creating a big election problem. I mean, by the. By the actual general election better fucking have sorted this out because any state actor, any bad actor can spam the Internet with any Everything and nothing is real. And that's the collapse of society when there is no source of truth whatsoever. So that's a pretty big use case for this stuff. And then we're saying, okay, there's a bunch of people who are saying, well, we can make bots from AI trading stuff. Okay, fine. I mean, hedge funds have been doing that kind of stuff forever, blah blah, blah, it'll get better and better. Fine. Then there's the other world. The world that Ribbon Capital have talked about and I've written about is.
- [47:07]
A
An.
- [47:08]
B
Expression I've used with you in the past as well, is like tomorrow will be more digital than today. All information is now being tokenized. Tokenized. We have tokens that feed AI. That's how AI trains itself. It's on tokens. They're data tokens. The token is a packet of information that is machine readable. So if you would tokenize a physical book or a physical photograph, you have to make it machine readable. Various formats that process to make it readable by the AI is creating tokens. When we're moving to these super squid that suck everything, which is all the AI, all knowledge, you're going to have to tokenize extraordinary amounts of data, right? All of the data. If you want to get to asi. The race is how much can you suck. Out of all this knowledge. Most of this data is private or others difficult to get at, or it's held within scientists, universities, governments, and all of this stuff. So once you tokenize it in the packets of information, you can then trade it via tokens. I on the blockchain. What does that all mean? What is Raoul talking about? I'm talking about gigantic global, instantaneous marketplaces for data that trade 24 7. We won't be the participants. It'll be agents pulling data, trading data, collecting data, looking for patterns in data, and building the AI itself. The AI beasts themselves. That becomes everything, becomes a marketplace. All information, everything. And why? Because it is the only way to incentivize everybody and everything to share their data. Every marine biologist will take every single reading they've ever had, everything about the rees, every single bit of information, and sell it via tokenization. You'll have every university, all of us, as people might want to feed the AI our photographs. You know, we've all got hundreds of thousands of bloody photos from our phones. Can we get paid for all of that? Okay, that's interesting. Can everybody get paid for stuff? As the AI agents come. So now you've got AI agents which we know have to use other AI agents to do things. They need to pay for compute and electricity. And the only efficient way of doing this is tokens. And people say, yeah, but what about stablecoins? They'll use stable coins. Here's the really lovely one. You cannot. The dollar does not break down beyond 0.1 centar is the lowest denominator. So it didn't work. Dollar's not fractionalizable enough for these. Once you see it that way, you're like, oh, that's fucking obvious. So what you have to do is they'll use whatever structure they want. Can be any currency because they're agents, they'll just transact. So the agents are paying agents in micropayments all the time, instantaneously streaming money to each other all over blockchain rails. You then create vast marketplaces of information of which the agents need to pay for or the AI companies overall need to pay for. And then you've got agents on top trading these markets which are on top of blockchain rails. So there's your answer. It's like these things cannot exist without each other. They're kind of co joining the hip. Which is why when you go to Abu Dhabi, Dubai, when you go to the US Administration, it's like there basically are two technologies that matter here. It's Blockchain and AI.
- [51:03]
A
We're going to have so much time to talk and do podcasts when our agents are out there doing everything else for us.
- [51:09]
B
Our agents will be doing the podcast, we'll be drinking at Tilly's and having.
- [51:14]
A
A good lunch, watching the agents to do a great. Maybe our other agent's going to watch for us and give us a summary. Okay, so I know we're coming to the end of time. Best case scenario, then we get a massive bull market. How high are these things going? Going?
- [51:28]
B
I'm not going to do that game because I'm just.
- [51:31]
A
I don't, I don't mean. Yeah, yeah, I don't.
- [51:33]
B
You know what I mean? You know what I mean. It's just so tiring. Look, significantly higher, you know, multiples of here. So, you know, I'm not talking about a doubling. I'm talking about tripling, quadrupling, whatever it is. Right. Of bitcoin.
- [51:46]
A
I'm not trying to get you to say $15 million bitcoin by 2030. I just, you know, I guess I'm trying to get the idea of like if we just didn't even pull a 2x from the last all time high, you know, are we now in massive damp involved?
- [51:58]
B
It should be a classic. A classic. What we would think of as the four year cycle, which is the debt refi year just spread. Yeah, yeah. The debt refi year is this year. We know there's a lot coming, so probably a lot will be the answer. And so we don't believe we can have nice things and then we'll be given nice things again and we'll, we'll all come back and go, yeah, I get it now. I forgot all about that misery of 2025.
- [52:25]
A
It's going to be a non event. I'm pretty convinced it's. You know, it's so hard not to be focused on what's happening in the day, the week, the month. But none of it matters.
- [52:35]
B
Exactly. Because liquidity is 90% of all price action. Which is boring. It's weird. But everything else is just us talking when really it's all done by that.
- [52:44]
A
I love catching up with you though. Next time we'll do it at Tilly's while our agents do this conversation. As you said.
- [52:50]
B
Exactly. But that's the one question for everybody to think about is okay, if liquidity explains 90%, where can that thesis go wrong? As you said, could another government shut down? Yeah. Is it going to last long? No, but it will make us feel painful. Again, does something else change that dynamic. And if it happens, it will blow up the bond market. So I don't see how I keep coming so that I don't see how. As Lyn would say, nothing stops this train.
- [53:18]
A
Yeah. In my mind it's just when in 2026 and I am heavily waiting the back half of the year because of the election and not so expectant that we're going to see anything explosive in the first half. I hope I'm wrong, but it could be very boring and sideways and we could lose a lot of good soldiers in the time based capitulation.
- [53:37]
B
What we've also learned is it is almost impossible to predict an advance the wiggles. But generally speaking the direction is relatively simple. Except for this year which has been pretty shit. But I don't really look at year to year. I look at cycle to cycle. It's like we invest for the cycle and the cycle hasn't finished yet.
- [53:58]
A
Yeah. I think you could also make an argument that going back to January 1st or this time last year is nonsense. Everything kind of repriced after the election when we realized that we were just in a a different market, a different situation after Trump won. So if we benchmark back to the 70000s or wherever we were when that happened, it's still not as bad as it looks. Optimistic view.
- [54:18]
B
Exactly.
- [54:18]
A
All right buddy, well I'm going to let you go. I hope you feel a lot better. Thank you so much for having the conversation. I hope we can do it again soon in person.
- [54:25]
B
Absolutely, my friend. Looking forward to it. Take care and have a great holiday and new Year.