Bitcoin’s Bull Market Is Back | Checkmate

Summary

Podcast Summary: What Bitcoin Did — "Bitcoin’s Bull Market Is Back" | Checkmate

Date: May 19, 2026
Host: Danny Knowles
Guests: Raoul Pal & Wes Bell

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Episode Overview

In this episode, Danny Knowles is joined by Raoul Pal and Wes Bell to dive deep into Bitcoin’s resurgence and the broader macro and policy environments impacting savers and investors. The core discussion revolves around whether Bitcoin is back in a bull market, the psychology of market participants, the impact of macroeconomic changes on risk assets, and Australia’s controversial new tax policies. The episode blends market analysis with personal reflections and policy critique, giving listeners both actionable insights and a dose of real-world financial frustration.

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Key Discussion Points & Insights

1. Are We Back in a Bitcoin Bull Market?

• Defining the Bull Market

  • Raoul argues that the "bull market starts the day after the bear market bottom," stressing that market psychology shifts before new highs are reached.
  • "The worst day of the bear is the start of the bull." (01:19, Raoul Pal)

• Capitulation Analysis

  • February's drop to $60k marked a significant "price pain capitulation" – evident in on-chain data and widespread fear.
  • Raoul places an 80% chance that the bottom is in, marking the start of a new bull phase.

• Key Levels & Probability Framework

  • Important price levels: $78k (short-term cost basis), $85k (momentum and on-chain significance), $95k (clear breakout zone).
  • "Once we get through 78... the odds of us going to 85 go up a lot. Once you get above 85, the odds of us going to 95 go up a lot." (05:55, Raoul Pal)
  • Breaking $85k is seen as the threshold after which bears have "lost control".

Notable Quotes

• "People start buying dips rather than selling rips... It's not hard to construct a million dollar price target." (00:02, Raoul Pal)
• "I think the tide has now changed.” (06:11, Raoul Pal)

2. Metrics That Matter

• Technical & On-Chain Perspective

  • Technical: Weekly RSI hit an all-time low (26), typically aligning with cycle bottoms.
  • Raoul utilizes a diversified set of nine models for mean reversion and technical trend; none predicted a drop to $45k, so his base case is that $60k was the capitulation.
  • Realized price and “true market mean” are emphasized as critical metrics, focusing on the average cost basis for active investors (currently in the $75-$82k range).

• Behavioral Anchors

  • Human psychology influences market expectations — people misinterpret macro moves for immediate price action or panic over daily volatility.

Notable Quotes

• “The daily chop just noise drives you mad… Zoom out and look, massively oversold, probably no longer expensive.” (07:15, Raoul Pal)
• “If you just start DCA over that last 20%, means you’ve got an 80% chance of winning.” (16:21, Raoul Pal)

3. Market Structure and Buyer Psychology

• Post-Capitulation Sentiment

  • After the $60k low, smart money increased accumulation.
  • Many regretted not buying more, signaling general sentiment has inverted from "fear of holding" to "fear of missing out."
  • The shift from "selling rips" to "buying dips" is seen as confirmation of the bull regime.

• ETF and Institutional Flows

  • ETF investors and corporate buyers (like Saylor) have become major sources of demand, now matching each other in net flows.
  • ETFs have proven to be the ultimate "hodlers" of this cycle, holding steady even through steep drawdowns.

Notable Quotes

• "[ETF investors]…The Hodlers of this cycle, unquestionably." (33:15, Raoul Pal)

Timestamps for Market Structure

• 01:04–06:25: Bull or bear? Market capitulation and probabilities
• 11:38–16:21: Realized price and the true mean

4. Macro Risks and Anomalies

• Bond Market as Bedrock

  • Rising yields in the US, UK, and Australia are sending clear signals—"the market saying something’s wrong with the bedrock" (00:14, Raoul Pal and revisited at 39:38).
  • Deficit spending, inflation, and lack of investor trust all combine to push rates higher.

• Assets in a Higher Rate World

  • Higher yields disincentivize risk assets, increase government borrowing costs, and challenge the status quo for traditional portfolios.
  • Gold and Bitcoin, as assets outside the traditional system, benefit over the long run from this debasement.

Notable Quotes

• "You want to have assets outside of the system because everything else is going to be debased." (00:27, Raoul Pal)
• "The dollar's just not going down... Bonds are down 50% since 2022 and going lower." (49:25, Raoul Pal)

Timestamps for Macro Discussion:

• 39:31–50:33: Macro risks, yields, assets, and system trust

5. Australia’s Tax Policy Upheaval (The "Australian Fuckery")

• Policy Changes Outlined

  • The 50% capital gains discount (for assets held >1 year) to be scrapped and replaced with indexation (adjusted for CPI), drastically increasing effective tax for most savers.
  • Partial grandfathering proposed; the transition point creates a bifurcated system.
  • New regime means much higher tax burden, especially for young or new savers—potentially doubling the effective tax rate.

• Impact on Savings & Social Mobility

  • Policy disproportionately harms those trying to save for a house or pay for private education—billed as a "currency devaluation by stealth."
  • Will likely add years to typical savings goals and encourages a "serfdom" dynamic.
  • Could depress property markets and startup formation, potentially triggering capital flight.

• Political Context & Public Reaction

  • Seen as either gross incompetence or outright malice by politicians.
  • Listeners are encouraged to fight back: "You've got to make an uproar in this instance." (68:48, Raoul Pal)

Notable Quotes

• "They have truly. Truly. Yeah. They're fucked over the average Aussie." (69:12, Raoul Pal)
• "If this continues… you probably have to go overseas. That's… where it's at." (76:17, Raoul Pal)

Timestamps for Australia Policy Segment

• 56:31–86:53: Australia’s cap gains tax overhaul, implications, and political fallout

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Memorable Moments & Actionable Advice

• Apathy = Opportunity

  • On-chain metrics and subscriber stagnation suggest market apathy — a classic marker of late bear/early bull phases.

• Ignore (but don’t delete) the Bears

  • "Don't delete bears. Just ignore them. Ignore them. Laugh at them." (18:52, Raoul Pal)

• Living Life vs. Waiting for Price Targets

  • Discussion on gold vs. bitcoin as savings tools—using gold for shorter-term goals, bitcoin for generational wealth. Life is more than numbers:
    • "You may not want to postpone your life… Sometimes parts of life are more important than money." (52:44, Raoul Pal)

• Sending a Message

  • Fight policy changes—write to your MP, use social pressure, memes, and community voice to oppose unfair tax grabs.
  • "Every email they receive is noise until they get a thousand of them. Because every email represents 100 people who didn’t say anything." (81:47, Raoul Pal)

• Global Relevance

  • The Australian tax measures are seen as a possible "trial balloon" for global policy shifts. "This is a warning shot to be very fair to them… this is a trial balloon for the rest of the world." (69:56, Raoul Pal)

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Notable Quotes (with Timestamps)

• "The worst day of the bear is the start of the bull." (01:19, Raoul Pal)
• "If you just start DCA over that last 20%, means you’ve got an 80% chance of winning." (16:21, Raoul Pal)
• "The trend of yields is higher. Literally the value of the collateral that backs the whole system goes down in price. It's the market saying something's wrong with the bedrock." (14:00 & 39:38, Raoul Pal)
• "You want to have assets outside the system because everything else is going to be debased." (00:27 & 47:20, Raoul Pal)
• "Don’t delete bears. Just ignore them. Laugh at them." (18:52, Raoul Pal)
• "Every email represents 100 people who didn’t say anything… That’s a voter base.” (81:47, Raoul Pal)

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Final Thoughts: Call to Action & Hope

Despite ending on a note of policy-driven frustration, the conversation is ultimately one of resilience—both personally (savers should take control and advocate) and for Bitcoin as an asset (its role as a monetary exit and hedge remains clearer than ever). The episode encourages listeners to stay informed, push back against policy overreach, and remember the broader vision: sound money and financial self-sovereignty.

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Useful Segment Timestamps

• 00:00–11:38: Bull market psychology and on-chain signals
• 11:38–19:26: Metrics, cost basis, levels to watch
• 39:31–50:33: Macro risks, yields, global trends
• 56:31–86:53: Australia’s tax policy, social impact, political critique

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For a full dive into the arguments, data models, and spirited critique—plus a rallying cry for political engagement—this is a must-listen for bitcoiners, investors, and anyone concerned with financial autonomy in a changing world.

Transcript

[Raoul Pal]

Once you get above the tipping point and then you get that flipping of sentiment, people start buying dips rather than selling rips. It's not hard to construct a million dollar price target.

[Wes Bell]

Do you think this signifies that something's going to break and they're going to need to print a load of money?

[Raoul Pal]

The trend of yields is higher. Literally the value of the collateral that backs the whole system goes down in price. It's the market saying that something's wrong with the bedrock.

[Wes Bell]

But what does bitcoin do in that environment?

[Raoul Pal]

Do you think there is a price or a value where your obligations are larger than your assets? You want to have assets outside the system because everything else is going to be debased. We're in an era where the monetary system is changing. The world is going to look very different on the other side of this thing. I believe this is a trial balloon where they're trying to see how willing are people to accept changes of this magnitude. There's an exit route. We've got a period of time here where you got to fight back.

[Wes Bell]

You ready?

[Raoul Pal]

Let's go.

[Wes Bell]

Let's get into it. Checkmate. Good to see you, man.

[Raoul Pal]

Likewise, man. Thanks for coming down.

[Wes Bell]

You were pretty dejected when I saw you outside, but we're going to save that bit for later.

[Raoul Pal]

There's good reason for it.

[Wes Bell]

Let's start with bitcoin though. Are we in a bull or a bear market? Because the way I look at this is, I think the bear market, sorry, the bull market, starts the day after the bear market bottom.

[Raoul Pal]

The worst day of the bear is the start of the bull.

[Wes Bell]

I'm not this believer that you have to get past all time highs to go into a bull market. But like, is it too early to say we're in a bull market or do you think we are?

[Raoul Pal]

So this is the right framework to think about it. So the way I've been describing it, you don't know when the bottom is in until months and months and months after. Then you look back and go, oh, okay. It was obvious. We spoke very soon after we hit 60k in February. My view was, and I've been calling it the price pain capitulation. This is the point where everyone who is price sensitive just gave up and they all gave up at the same time. You can see it in just the amount of loss, the amount of coins that move, the amount of fear. My inbox got slammed. There's a ton of different anecdotes and reasons. That was a point in time where if you've Been through a capitulation before your alarm went off and you go ah, that felt different. That felt like June 2022. Yeah, right. 17.6. We went to 15 6. But no one really price wise, no one cares but the eight months that separate them. So there is a very good case to be made that that was the price pain capitulation. Now if you go back and look at previous bear markets, 2015, we, we kind of revisited the low. I figured 250 bucks or was we didn't go below it. In 2018, we didn't. We basically bottomed and there was just like slow multi month grind higher and then April away we went in ftx. We had June kind of eight months of grinding with FTX in the middle of it. That one we did go lower, we did go lower than the previous, than the price paying capitulation. That's actually the only example we have where it went lower. And I think a lot of people, because recency bias is a real thing, look at 2022 and say it must be lower. Lows may not be. We may pull back to 65 and bounce higher from there. We may pull back to 75 and set a higher low. So from my perspective I've been saying there's about an 80% chance that we've actually got the bottom is in. That's my base case. So that was like we're in a bull market, we'll look back at it. But my view is that you build confidence. So we know unless bitcoin goes to zero, we can all say that at some point in time we're going to be back in a bull. So what we're trying to do is work backwards and say, well at what threshold do you go from 50% to 60 to 70 to 80 and depends who you are. Like for me I spend all day in the data and I trust my own gut more than anything else and my own instinct on studying this stuff. I've got about an 80% view that the ball is in play. But it's going to take a long time. Like all like 2016, 2023, 2023 took us the whole year to get above 30,000. The whole year of just boring grinding and everyone was afraid that every sell was another lower high. But ultimately the thing just wanted to keep moving higher. So my view is that we, if you want to go back and say is it a bull? I would say yes. 80% odds, 20% is still very meaningful. 1 in 5. However, I would also say that once we get through the 80s, right? 78k is quite important. Short term cost basis, true market mean a bunch of on chain levels. That's kind of the middle. That's the middle of everyone's cost basis where they feel if you get above to 85, people felt a brief sigh of relief. If you got 85, you break through what I call the second line of defense, 200 day moving average. Suddenly your momentum guys with a Bloomberg terminal bitcoin shows up as a not red asset. There's a bunch of things that just we get above a big supply cluster, people's cost base are there getting above 85. The bear case, in my view is in trouble. The bears are also going to defend that level very, very hard. The last line of defense is ironically the same as the bull's last line of defense. We spoke about this again when we had Alec on 80k in November. 95. So the 50 week moving average, just super simple stuff, right? The classic bitcoin bear is you break below the 50 week moving average, you visit the 200 week, we got to within 3% of the 200 week. The 200 week is now higher than where the bottom was, like 60 and a half now. So even if we revisit the two in a week, it's not going to be a lower low. But the other thing is once you get to 95, the Bears are kind of, they're kind of in trouble, right? And you've already given up the 60 to 95. So by the time we get above 95, every man and his dog's going to agree it's a bull. I try to work backwards and say, well, if we get through 78 and by the way, I don't expect we'll do this the first time ever. It's always going to take a series of whacking our head against the ceiling get through 78, the odds of us going to 85 go up a lot. Once you get above 85, the odds of us going to 95 go up a lot. So it's almost like an exponential increase in the odds. And I'm looking at the way market structure looks at the moment. To my instinct, to my gut feel, I think that 60k was sufficiently bad that it scared a lot of people. Smart money's radars go up and go, okay, I need to accumulate and something that I think happened on this rally and I know this cause I've received tons of these messages, people who go, so it turns out I didn't buy as much as I would have liked below 70 where do you think the next dip's going to go down to?

[Wes Bell]

I'm like, ah, that's a signal.

[Raoul Pal]

That's me in 2019. We got to 4k, 5k, 6k. I bought way too much at 14 and then I got slammed in the second bear. But I kept buying through that process. I'm like, I think the tide has now changed. So that's what I'm. That's my current view.

[Wes Bell]

But if you're 80%, what are the metrics that have hit that make you 80% sure?

[Raoul Pal]

So there's a bunch of things, I mean, let's just start technical, right? Let's just start with the technical models. Now, I'm no technical analyst, but I understand how it works and the reason why I like to look at technical stuff on very big picture. I know that every man and his dog with an ETF, right? The TradFi guys aren't looking at the stuff that I look at, but they're going to look at the weekly RSI, which got to 26, which is the lowest level it's been ever. And every time it's been below 30, it's been the bottom, like the bottom. So from a technical level and even if we sell off again, is that

[Wes Bell]

what these institutional people are really looking at?

[Raoul Pal]

Oh, hell yeah. I mean, again, a lot of these guys, they just have filters, right? Their quant is in there doing all the weird numbers. But a lot of these guys have got a Bloomberg terminal. They see Bitcoin, where is it relative to its 200 day moving average. When it flips, it goes from red to green. Suddenly they've just got their eye on it. They don't care about stuff on the daily chop because they know, as everybody should learn eventually, some people don't. But as you should learn eventually, the daily chop just noise drives you mad. Yeah, doesn't. Doesn't mean anything. And everyone applies. I've got this like, I guess a human psychology thing that I use as an anchor. People love to take big macro stuff, the debasement trade, and they apply it to the next candle. They go, why isn't it going up? I don't get it. And they also take. So they take big picture things and they expect it to happen on a micro timeframe. We do the opposite as well. We look at the next red daily candle and go, oh man, just another lower high. It's all over. The bears were right. And they compress and they extend small stuff to be very big. And the big guys, they've done this Enough times they just zoom out and they go look things massively oversold, probably no longer expensive. You know, like if you just really zoom out and go like at 60k I've got a mean reversion model that looks at on chain technical trend. All of those models if you put them together and aggregate them just like I don't want to have bias for technical bias for on chain bias for fast models, slow models. I use nine of them. Take an average right work out where we are because I don't know which one's going to be perfect. None of them are going down to 60k. Was what I call Q10 event, 10th quantile. 10% of all days have been lower in history. If you look at where bitcoin was relative to all these things, it oscillates around 10% of days were lower. Now that means that 90% of the time it's higher. So that's a pretty good gauge. Like we've bottomed at Q4 Q5 in previous bears. That's 54k. That's the realized price right now I see a lot of bears posting like, you know this bear flag is going to break down to 45 maybe. And I'll learn a lot if that's true because it's certainly not my base case. My model says that's a Q1 event. Now can it happen? Yes. Nothing's a zero probability. But am I going to make a base case on something that has only ever happened in 2011 at $2 bitcoin, I can't in my right mind do that. So I have satisfied myself that I'm not worried about 45k if it happens. I'll learn from that experience, but it's not something that phases me at this point.

[Wes Bell]

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[Raoul Pal]

Yes.

[Wes Bell]

Why is that one of the most important metrics right now?

[Raoul Pal]

It's actually a very interesting metric. So the realized price, there's two on chain models, three that I think everyone should understand. They're all the same idea. So let's start with the big boy, the realized price rather than looking at every. So the spot price is every coin in the supply valued at the spot price. That's the market cap. The realized cap is every coin the supply value when it last moved. So Satoshi's million coins are big in bitcoin terms. Zero in realized terms. Now that's an important hold that idea. Old lost coins, big in bitcoin, small in USD. Someone who bought yesterday his coins worth 78, somebody bought the top 126. So the idea is that when coins move around the system, they're signaling they're not lost. And as they're revalued, some of them are cost basis changes, some of the inflows, ETFs, all of that stuff we can also then measure. So every coin has a cost basis based on when the UTXO was created. Aggregate them all together. What is the average purchase or acquisition price in inverted commas? And this is where it starts to get funky and interesting. From my perspective, it's not really an acquisition price because satoshi's coins, they're valued at zero, but at 60k, at the low, they hold $110 billion of unrealized profit. Now, in order to get to break even, which means we hit the realized price. Every previous bear, we've gone below the realized price. So tons of people are looking, saying, we haven't hit the bottom of the bear because we haven't gone below the realized price. The problem with that is satoshi can't take those 1.10 billion in profit. But the guys who bought the top, to get to break Even, you need $110 billion worth of people who buy the top and huddle through it. Now, the challenge with that is they do lock in the losses. They reduce their unrealized loss because they go, oh, shit, get me out of this thing, right? I don't wanna hold it anymore. So they panic. So in order to, over time, as bitcoin gets bigger, those locked unrealized profits, they actually create this like lowering effect because you've got all these coins that never contributed contribute to the numerator, the realized cap, the value of every coin when they moved, but they will always have a big weight in the denominator. And if you know how a fraction works, if you've got a bigger denominator and a smaller numerator, you're going to have an underestimate, always going to be underestimating. And the bigger Bitcoin gets, the bigger that underestimation will be. Now, the model that I believe is when everyone says the realized price is the cost basis of everyone, it's the cost basis of every coin. But every one is a human thing. That's a person behind the coin, a person behind the screen metric. That's what I call the true market mean. Now, Dave Puhle and I developed this as part of our coin time economics framework. And what we try to do is we have this formula. Think about every coin of all of the coin days, right? One bitcoin generates one coin day per day. If satoshi's coins, they've only ever accumulated coin days They've never destroyed them. The guy who spent yesterday has destroyed all of his coin days and he's only just starting to reaccumulate them. So that's the two ends of the spectrum. This guy's coin is much more active. Satoshi's is dead. So we literally use that health bar across the whole system and work out, well, where are the active investors? Let's get rid of all the lost coins and the early, early, early investors who have no cost basis. And you know, we're arguing over where they're going to move with quantum. Let's look at what the average cost base is for active investors. 78K. What saylor's cost basis. Who's. I would say a DCA.

[Wes Bell]

This is about 78K.

[Raoul Pal]

75.

[Wes Bell]

Okay.

[Raoul Pal]

What's the average for the ETFs in terms of the inflows? 82. What's the average? I've got this model where I do like a difficulty regression between. A regression model between difficulty and market cap in the ASIC era, average cost all into mine about 82. So you're getting 82, 82, 78, 75, that zone. And then when you look at the supply distribution, there's a ton of coins in that 85 area, both from the tariff tantrum back in 25, but then also on the first sell off that we had started this year, it's the middle, that's the centroid.

[Wes Bell]

So all that is the reason that 85k is such an important level. Because we're getting above that.

[Raoul Pal]

Correct. And then if you think about it on the way down, and here's some fun facts for you. People worry about buying the top because they're worried about their losses going up. We had about 270 billion at 60k. 270 billion of unrealized loss sounds like a big number. It's quarter of a trillion dollars until you factor in that we had 900 billion. Almost a trillion of unrealized profit evaporate. So people's portfolio that they didn't sell got smashed by almost a trillion. That's the painful part. So if you think about that centroid at 85, 70, 85. As price gets closer to that level, people who were previously counting out their bills and thinking, look at all this stuff I can buy suddenly go, now I'm in winter, I gotta wait. I hate this thing, right? I can't believe I'm down 50%. Oh shit, I gotta clear my leverage loan before I get liquidated. Like people start feeling negative. The more cost basis Levels you drop below the more people start to compound and go, I think it's over now. I'm in pain now. I'm gonna capitulate. Oh, shit, it's all over. I'm selling everything. So what you're doing is on the way back up. First line of defense, 78. Second line, 85. Third line, 95. As you get through those levels, there's technical models there that the dude with the Bloomberg terminal will see and the traders, the momentum guys. There's also levels that very often on chain models that describe human behavior where they feel once you get above the tipping point, you've now got a bunch of people who bought the bottom who now go, hey, I just got rewarded for that. And then the people who bought at 80k, they might take profits here and say, give me my money back. But if you get to 85, they go, ooh, maybe I should actually just hold through this now. And then you get that flipping of sentiment. People start buying dips rather than selling rips. So it's a process. Getting out the ass end of a bear market is a process. Usually takes best part of a year. But everyone fantasizes over this bottom wick and they won't do anything, including getting to the bottom wick. Go back to my meme reversion model. I was beating the drum at 60k. I put out a piece called, literally at 60k called welcome to Deep Value. And my point was I can't tell the future. I don't know if we go lower. But what I do know is that I don't have a single metric on hand right now that is in the bottom 20% of the cycle. If you just start DCA over that last 20% means you've got an 80% chance of winning. Don't worry about the price, just be there for that bottom 80%. Even if we pull back to 75, all of those folks are going to be very, very happy with their decision. So it's just about putting the odds in your favor, not worrying about this. Like delete bears, bears. Bears have no ambition because the problem with bears is that the best they can win is 100%. You can only short something to zero. And even then we know that that's constrained. The upside is unlimited. So if you spend too much time listening to bears after most of the damage has been done, RSI getting to 26 on a monthly, on a weekly basis, Sorry, that's a momentum sign. The the downside momentum is no longer in their favor. It's like it's just, it's just a bad short.

[Wes Bell]

Delete bears.

[Raoul Pal]

Yeah. No, don't delete bears. Just ignore them. Ignore them. Laugh at them.

[Wes Bell]

When we last did the show, I think bitcoin was about 60k. It was like pretty much the bottom. And I remember we were saying like, this feels like deep value. And I'm not in the data like you are, but I've been looking at the bitcoin chart for 10 years now. And so I just get gut checks every now and again. And 80k, it doesn't feel like deep value anymore, but it does feel like things are sort of swinging. Like I was desperately stacking as much as I could. I was doing anything I could to stack at 60k. Okay, that's kind of stopped for me right now.

[Raoul Pal]

Agree.

[Wes Bell]

But like, if 85 is the next number that we need to get past and then 95, like how quickly do you think that can happen?

[Raoul Pal]

And this is why the recovery from a bear takes ages. Because people like you and I aren't the same. Right. We're still like again, my mean reversion index, it's, it's 33. We're in the bottom third. Do you care if you got like, if you walk into a casino and say 2/3 of the time you're going to win, are you going to like not play? No, of course you're going to play. So it's still, still a good price. But it's no longer that I'm gonna just like sell chairs mode. Right. I'm not gonna find what I can do. Leave your daily DCA plugging away. Cause it's still good value. But like, am I putting big slugs in? No, I'm just letting the DCA just tap away. If we see anything with a seven handle again, right down to like a 75 or a 70 or a 60, anything.

[Wes Bell]

I mean what we are now like

[Raoul Pal]

78, 76 5, I think. But that's the idea, right. There's a lot of people who are now were expecting 40 and they're now going, maybe I'll take 50. And if it comes to 65, then they might just take that as well. So what we're really looking for is do we get the transition into a full buy the dip regime now there's a lot of things starting to inflect, but to my view, we've more or less hit our ceiling at this like 80k zone. You need to pull back. This is something that in like in markets, the bears at this point in time are going to get super excited on every red candle. Sometimes you must go down to go up because you generate like we had, by the way, all of April. Pretty sure it was April. We had a massive amount of short interest. People were just shorting this thing all the way from 65 up to 80. Yeah, that's cooled off a bit now they finally realize, oh, maybe I should go long. And you're starting to get this like degenerate traders just like going long at the top, going short of the bottom. But there's more and more people that realize I got too cute. It was at 60, I thought it was going to 58. I wanted my 58k gang.

[Wes Bell]

I wanted that just for the memes.

[Raoul Pal]

Now it's at 80 and I didn't buy as much as I wanted. And those people just, there's just a ton of them who are going to go, okay, yeah, I got too cute with the problem. I probably should have just DCA'd. Now I'm going to have to. And that's a hard feeling as well because that's me in 2019. I didn't buy anywhere as much as I would have liked in the 2018 bottom between 3 and 5k. I bought way too much at 14k. And then we had another bear market that ended in Covid, but you know, really we chopped around. 8k was kind of the average for that year. You know, 14K was not a good price but now I look back and it's a great price. So you know, it's just a game of time frames. Just don't get caught up in all the micro daily stuff and you know, just unfollow bears.

[Wes Bell]

But how long do you think it takes? Cause we've October 7th was pretty much

[Raoul Pal]

the top right, which MEANT it was October 6th at 6pm UTC. I measured this because that's when all the four year cyclers have their bids, right? Whatever the price will be on October 6th. That's the top, that's the bottom.

[Wes Bell]

Yeah, at 6pm but so that's like eight months, seven months. You said it takes a year. Like how do you think we're close to getting out of this?

[Raoul Pal]

Well, it depends because if the bull market's in play now, if 60k was the bottom, if we look back in six months and it was the bottom, then the bull market started in February and by many metrics we talked about this, the bull authors the bear that follows if that thesis is correct. And again all of this is a thesis. I can't predict the future, but that's my Current working model. If that is the bottom, then this bear market has a lot of similarities. And this is the part that I think a lot of people miss. A lot of the under the hood damage, the realized loss, the fear, the losses that actually came into the system, the pain people experienced. I can tell you my inbox on that day told me from very serious bitcoiners, I've heard this from other very serious bitcoiners. They go, I just had message from people who were tenured and they were terrified thinking it's all over. And I'm like, that is the signal, that is the feeling that people just go, I'm so long this thing, I don't know what I think it's over. Like, oh shit. That's the kind of event that really flushes out everyone who is price sensitive. If you're a tourist, you're gone, you're done.

[Wes Bell]

But it's crazy to me that tenured people would think like that. Like if you've been through the COVID crash and you've been through the FTX crash, like this one was nothing.

[Raoul Pal]

No, but I think this is where, and this is why I like the psychological angle of all this stuff. Bitcoin was in a bear market versus other assets from January 2025. Yeah, we topped versus bonds and fiat on in October 25th. But in, by the way, let's zoom out a little bit because bitcoin's a long duration asset. If we zoom out a little bit and look at bitcoin's performance since the end of the 22 bear market, because that's a key point because everything went through a bear market, bonds included. And we suddenly move into a bonds are heading higher, rates are heading higher regime. A bond bear after a 40 year bond bull. The end of 2022 was a regime shift for the world. Not only that, you've got the US freezing, Russia's reserves, gold, all that stuff. So end of 22 is a very good anchoring point to say what changed since then. Now if you measure bitcoin's performance, even include up till today, including the bear, Bitcoin kicked ass 2023 all the way through to the end of 24, January 25th. It topped out everything else started running. Gold, silver, equities, AI trade, they started outperforming bitcoin. So people's emotions was this parabola envy. Yes, Bitcoin upwareness up versus Fiat. But you don't think about your past gains, you only think about what you're not getting today. Right. People Live in the moment. So versus everything else. Bitcoin was in a bear market through all of 2025. And that's why I think November at 80k we had a very, I think we did a pod then as well. That felt like another very meaningful flush out because we just had this, like this thing sucks. I might as well go and buy Nvidia, right? Get me out of this thing. So you got this pent up frustration. And then February was just the final nail on the coffin. People just like, I'm totally done now. Everyone was talking about everyone turned into a silver bug for a period of time, very short period of time. That silver parabola matched Bitcoin's post 2023 performance. Yep. So in a way silver kind of caught up. Also a speculative long tail, precious metal sound money caught up with bitcoin's performance, including its bear market. So that just puts into perspective that yes, silver went vertical to match bitcoin after it went down 50%. You know, since that time period, if you zoom, really in Operation Epic Fury, Bitcoin is up 50% versus silver. Since then it's up 20% versus equities. It's actually doing like, if you drill down and say, well, Nvidia specifically. Yeah. Once you get down to individuals. But you've got to look at these things in terms of like, you know, what is a reasonable comparison over what timeframe? You know, people love to measure, oh, bitcoin's the same price it was at the 2021 top. It's like, yeah, what happened the last time it was the same cycle, top price in a bear. It's kind of a good place to actually buy. Um, you know, and by the way, pro tip, don't buy the top and then not buy the bottom. Because if you buy the top, yeah, your performance is going to suck in the bear. But if you buy the bottom and you stop worrying about all these, you know, oh, it didn't go up top to top. Bottom to bottom is what matters.

[Wes Bell]

Yeah.

[Raoul Pal]

The CAGR of the 200 week moving average is like 40%, 35%. The floor is increasing at 35%. Everything else is just noise up and above that.

[Wes Bell]

Do you think we'll have the psychological level at 100k again? Because that was obviously a big thing on the way up. But now we've passed 100k, do you think it'll still be something that plays?

[Raoul Pal]

I don't think it' meaningful, no. And you know, look, I'm yet to find a satisfactory reason for why we just had so much selling above 100k truly. I've just settled on the. I've satisfied myself that 100k was a very special number for a lot of people. It was the stretch of all stretch targets and we hit it.

[Wes Bell]

I remember when I first got into bitcoin, people talked about 100k like they talk about a million now. Like it was this thing that seemed like, don't get me wrong, I can see how a million dollars happens but like it still seems pretty far fetched. And it was 100k when I first came into bitcoin. I think there was people who had been holding from 2013, 2012 and like that's just a huge number.

[Raoul Pal]

It is huge number. It's, it's, it is the point where further gains actually don't improve your life that much.

[Wes Bell]

Yeah.

[Raoul Pal]

You know what I mean? And by the way, if bitcoin goes to a million dollars, there's a lot of people listening to this who, if you put yourself two cycles before yourself and you, you'd be there now, right? That aspirational target a lot of people have. It's like now it's actually meaningful. And again, none of this is because we like assume that bitcoin must go to these levels. It's just, you know, a rational view of where fiat's going. The whole world, the whole bitcoin case, it's not hard to construct a million dollar price target. It's kind of a base case of use it versus gold. It's just better. Is my son going to find bitcoin more useful than gold? Of course he is. I mean I found bitcoin more useful than gold and it's a pain in the ass to move metals, which is a feature. It's also a massive bug. The Internet's a thing guys. It's a real thing.

[Wes Bell]

Who's moving the price now? Because people always talk about sailor buys. Not really affecting spot bitcoin price. Who is going to take us from here to 85 to 95k?

[Raoul Pal]

Yeah, I mean I think people overthink this. A lot of institutions have. I ran this study, I'm well overdue redoing it. Just looking at the ETFs and who their owners are, 13F filings and the like. I did this way back in 2024, so it's long out of date, but the stats were like 20 25% was institutions. And then when you look at the breakdown of those institutions disproportionately, the most amount was held by like very, very small firms. You know, some of them running like 100% their Bitcoin hedge fund. Yeah. Or they've got a 5% allocation. Once you go up to like the trillion dollar, the multi trillion dollar asset manager, they're like 0.0001% guys going to 0.002% is like hundreds and hundreds of millions of dollars. Like you just need the incremental accumulation. And I think people fall into the trap of being like, oh, it was individuals and it was companies. It's gotta be sovereigns next. It's like, you know, it could also just be companies getting bigger, you know, like individuals. For me, I'm later in my life, I'm later in my earnings career. As you get older, you tend to earn more money. I'm buying more bitcoin. I can't. My capacity to buy bitcoin is significantly better than it was. Yeah, the prices are higher.

[Wes Bell]

I'm putting more dollars in and getting less bitcoin.

[Raoul Pal]

Well that is also. Well, yes. There's also a component of like do you buy more because you understand this thing more and you know, and that's why bear markets like this. You can actually ramp things up because you've got that conviction. But you know, institutions do the same thing.

[Wes Bell]

Yeah.

[Raoul Pal]

Once you get through 100k, and here's the other story. Once you get through 100k, the institutions that don't have the nuts to step in now will step in. Back in.

[Wes Bell]

Do you think Risk adjusted. This is like the best bitcoin's ever been.

[Raoul Pal]

It's. Well again, if we go down to 45k, it's a 2011 $2 Bitcoin based on my mean reversion study. You know, of course it's not the same as $2 Bitcoin, but I'm like, if you think about it, in order to go lower than where we are now, you needed catastrophic fraud and a complete evisceration of the whole lending market. Now there's two things that I can see that could genuinely, let's say three things that could genuinely be that risk factor. I can see there's a fourth is just macro. You know, world implode. Okay, fine, we're going to get into that. Yeah, down, go up. The other one is quantum. Turns out to be a real thing. I don't think there's anyone serious who thinks that's coming in the next couple of years. So at a minimum we'll probably be higher should that ever show up. There's two others. I was going to say there coinbase has a major hack, right? Major loss of custody failure, huge black swan. I would say the most catastrophic thing that could happen, Treasuries. And then the other one is just Saylor has a problem. There is a game here where price goes down, the equity value goes to zero and your preferred, because if you think about, you've got the bitcoin stack, you've got to subtract the debt, you've got to then subtract the preferreds, that's what's left in the equity stack, right? The MSTR share. There is a point in time when the equity does go to zero and it's not when the price goes. When bitcoin goes to 10k, the equity goes to 0, much, much higher than where that is. And then stretch. Sorry, not stretch. Stride starts to get eaten into and then strike. And there is a level where things go pear shaped there, right? People don't like to talk about, but there is a real risk. If you subtract away and look at where the equity value is 0, it is not where Saylor says price could go and the company will be fine. It's a lot higher than that.

[Wes Bell]

But what percentage would you put on that happening? Because it's got to be pretty low, right?

[Raoul Pal]

I think it's low. Of the four risks I just illustrated, let's leave macro. Of the three bitcoin specific ones, I think it's the most likely of the three. Quantum being the least likely coinbase, just because something can go very wrong there, that's another big risk. But yeah, Saylor having a real problem is, I would argue, the most prescient almost.

[Wes Bell]

But you're talking to 2% risk or yes, 2, 5.

[Raoul Pal]

But again, depends where the price is. And I think when you run the analysis and actually look at where that equity value is, I forget the actual number. I think from memory it's like in the 50s, in the 50ks, like MSTR is like quite literally. Well, it's worth zero because there's no equity left. If you went to liquidation now, people can put a premium in there because they're like, well, the company probably won't liquidate, they would actually just sell the bitcoin to deal with it. But there is a world where MSTR had a pure. I'm going to do an equity analysis of what is left after obligations.

[Wes Bell]

The answer is zero and it's as high as 50s.

[Raoul Pal]

I need to check the numbers and to be fair, I'm actually leveraging someone else's analysis here, which I won't. I won't take credit for. But having read their paper, I forget the exact number, but it is. It is higher.

[Wes Bell]

Wow, that's kind of scary.

[Raoul Pal]

It is, it is.

[Wes Bell]

So ETFs like how when we last spoke you were saying how strong they've been through this bear market. Is that still the case?

[Raoul Pal]

We're about 3% off AUM all time high. And Eric Balchunas was on Marty's pod the other day and he was saying cumulative flows, I've been tracking cumulative flows. And he was saying that is the metric because it's dollars in versus dollars out. It got down at the all time high. Like at 50% down in price. We were down 12%. 12 and a bit percent from the all time high of like 63 billion. I think we're like 5% off all time highs. Now.

[Wes Bell]

I would not put my money on ETS being the best holders.

[Raoul Pal]

The Hodlers. The Hodlers of this cycle unquestionably.

[Wes Bell]

And the other load of friction and people won't sell.

[Raoul Pal]

No, I actually think that Eric's got a good point that a lot of these people are either it's a very small position, they just don't care or just the characteristic of people who buy ETFs is that they've. They buy and hold it. It's a small part of their portfolio. They're willing to take the risk potentially

[Wes Bell]

going in retirement accounts, all the rest of it. Yeah. That's cool though. So are they, are they the biggest buyer in the markets at the moment?

[Raoul Pal]

They're about equal with Saylor at the moment. So when you look at total capital flows, generally speaking through all of the bull and all of the bed until very recently when you look at spot sell side, it's been five times bigger than your ETF inflows on net. Five times more than five times bigger than Saylor right now. Saylor, just in terms of the amount of money that strategy is pulling in. And the ETFs, they're approximately equal. They're about as large as in terms of the on chain world in terms of the amount of flows. So they are very serious buyers. Relative to the amount of sell side, we're seeing a massive decline in sell side. From an on chain perspective, there's two components. There's realized profit and realized loss. You can look at them as individuals, you can combine them together because they both tig with signals. A lot of on chain metrics come from the perspective of holders or sellers because in order to print something on the on chain perspective you have to own the bitcoin. So if you're realizing a profit, it means you think bitcoin's going lower. If you are realizing a loss, it also means you think bitcoin's going lower. It's a signal from the sellers seller side metric. So the amount of profit and loss being locked in right now is very, very small. Just comparatively speaking, we see this in not just late bears, very late bears, and all through early bulls, 2023, 2016, some of 2019. Like the period where it goes nowhere and drives you mad, but the bottom's in. That's the kind of environment where it's just like, no one cares. Peak Apathy Our free subscriber list for the newsletter. Right, we've got Paid and Freeze. Freeze has just been like a straight lineup since we started the newsletter. There's always flows coming in. There's always. It's gone dead flat since February. No matter how hard we push, it's gone dead flat. Great sign. Apathy.

[Wes Bell]

That's probably similar to the podcast. I would say that the growth, apart from, like, standout guests like this show probably do quite well because we're here talking about the bitcoin price and people want to know. But, like, I think the amount of subscribers has definitely slowed because I think it gets to the point where people just like, I'm not interested in hearing about bitcoin for now. I'll come back 100k.

[Raoul Pal]

Yep.

[Wes Bell]

On the Saylor thing, do you think there's an additional risk where he's actually custodying some of his Bitcoin at Coinbase? So it kind of like.

[Raoul Pal]

I think they do custody some of it. Yeah, No, I think they do, but

[Wes Bell]

he compounds those two risks because the Coinbase one can also affect Saylor.

[Raoul Pal]

I'm not worried about Saylor losing the coins in, like a theft perspective. I'm just thinking from a capital stack perspective that they may have to sell literally to make the equity. Not zero anymore. Sure.

[Wes Bell]

But they can domino. Like, if the Coinbase hack happens, that it was one of your risks, even if it's very, very small percentage that is going to affect Sailor. And then what happens to the.

[Raoul Pal]

Oh, yeah, I know, but do you

[Wes Bell]

think he should hold his own coin?

[Raoul Pal]

No. Look, I think there's reasons why they don't. I'm not going to speculate on why. I'm sure they've got their reasons. That's one of those things where, like, if you're betting on anything to do with strategy, it's. It's inherently a Long bet on Bitcoin. If anything goes wrong with Coinbase, that's just like a. Everything's affected. Like it literally it's, it's the asteroid. So it's like, honestly, if it happens, what do you do? You go long. Yeah, you go long because like it's, it's complete and total disaster. It really can't get that much worse from that point onwards. Probably take a long time to recover. But like, you know, asteroids here go long.

[Wes Bell]

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[Raoul Pal]

Macro is very interesting.

[Wes Bell]

The one that's crazy to me. I think people when you talk about bonds think it's boring, but it seems to be like it's the signal for everything.

[Raoul Pal]

It's the bedrock.

[Wes Bell]

And 30 year yields in the US, the UK, Australia, I'm sure other places are now above 5%.

[Raoul Pal]

The trend of yields is higher. And why that matters is yields are inversely related to price. So if the price or the literally the value of the collateral that backs the whole system goes down in price, higher in yields, it's the market saying that something's wrong with the bedrock.

[Wes Bell]

And so I think the UK is actually pushing 6%. Is that the market saying, well, we actually, we saw inflation come back in the us. Is it the market saying they're scared about inflation? Is it them saying, we think the debt is out of control, deficit spending is out of control? Is it all of these things? Like what?

[Raoul Pal]

It's all of the above? Yeah.

[Wes Bell]

It's basically the market saying, we don't trust you anymore?

[Raoul Pal]

Pretty much. I mean, if you think about it like at the highest level, there's obviously nuances, especially when you talk about the global reserve currency versus Japan. There's going to be certain nuances here. But higher yield means they can't attract enough buyers at that price. So the price must go down to find buyers, which means yield must go up. If you can't lend. If you can't get financing at 5%, someone might lend to you because you're riskier at 6%. And if you can't get financing at 6%, you might have to go to 7, you know, and that, that lifts. This is the thing. If the sovereign, the Aussie government needs to borrow at five and a half percent for 30 year, who's more likely to pay back the Australian dollars? The government with a printer or you, Mr. With a job and a 30 year mortgage? Yeah. You know what I mean?

[Wes Bell]

Like it's, but is this like, do you think this signifies that something's going to break and they're going to need to print a load of money?

[Raoul Pal]

It's a funny one because, and I'm talking to Nick Barty, I honestly, I rely a lot on Nick to process a lot of this stuff. But my general fr. I think this whole, the way macros trade. Again, I'm a macro tourist, right. I just, I try to puzzle things together as best I can. The thing I found very interesting is how assets haven't traded the way people expected them to. Oil, for example, should be much higher. Everyone's mental model should be much higher. Now there's an argument to say that we're drawing down on inventories I've listened to. I think Doomberg's got a good perspective, which is that China's got a ton that they bought in the years leading up to this that they're now releasing back into the market. There's all sorts of like supply dynamics. Also. Life just finds a way. You know, I've been using that line a lot from Jurassic Park. Life just finds a way. You know, when they sanctioned Russia, do you think Russian oil didn't leave Russia? Of course it did. Of course they found ways to turn it Norwegian, you know what I mean? Like they fill it up in the middle of the ocean. Life finds a way. So I think oil prices have surprised people. There's still certainly risk that this war gets worse and then price go up and then infrastructure gets damaged. Like we're in no way in happy days. I think oil prices surprise people. The geopolitical hedge, which is gold, has done terribly in this process. Why? Because it did really well leading up to it.

[Wes Bell]

It's just same reason bitcoin same or the inverse reason.

[Raoul Pal]

Why bitcoin? Well go listen to a big gold podcast and replace the word gold with bitcoin when they say, oh yeah, gold's always the first thing people sell because it's highly liquid. Yeah, of course it's also just like it got to an RSI on the monthly at 95. Guys it's overbought like last time it was there was 1979 and then had a 20 year bear market. So you know, I'm not expecting that. But someone's got to pull back equities all time high. But then you've got to break down which sectors of equities are doing well. Some sectors are doing terribly, some are doing really well. So I think the market's trading in a very strange way. But also when you look at it's on low volatility, bonds are going higher. But the move index, which is the bond volatility index, surprisingly subdued. It was very high after the 2022 bear market, took really three years to cool back down. Yeah, it's spiking here or there. It spiked in March and spiked a little bit recently. But a lot of this is happening on low volatility. The dollar, the US dollar, you give any this the kind of set of facts in front of us, you would expect the safe haven bid for the dollar to be pushing DXY well above 100 which is where things start to get painful for, for the rest of the world. It's floating around 99, 98 to go below 98 back to 99.

[Wes Bell]

But why is this happening? Why is it not reacting the way you'd expect?

[Raoul Pal]

It's a good question. And this is where you start to put like this, why I don't believe all this like oh, they're manipulating markets. All markets manipulate on certain levels. When you've got the bond market telling you a similar story to the oil market, similar story to the dollar. To me a lot of the macro trends are still in play. There's bigger things that outline weigh it. Could it be that the world can actually handle $100 oil better than the world thinks? Could it be that there actually is the capacity to. Maybe the loss of barrels isn't as big in there. You know, Saudi's got pipelines and when you piece it all together, yes, it's a problem, but it may not be the end of world problem that's been pitched. Bond yields going up is no doubt a risk factor. I mean if I look at it from Australia's perspective, Australia's got a, we have no energy. You know, like there's petrol stations that ran out of diesel and we're a very big country. It takes a lot of diesel to move stuff around. We consume a ton of it. And it got to the point where The Prime Minister's saying, you know, we're very glad we secured X million liters, not barrels, liters of diesel. And you run on the back of a napkin, you're like, that's three days, one day. So you're telling me that where it is so bad that you're willing to get on television and tell people you bought one day worth of diesel. That's crazy. No wonder your bonds are going higher because you're bankrupt.

[Wes Bell]

Australia's in a strange position at the moment.

[Raoul Pal]

We are, and I'm hoping, but I'm not hopeful that it's the kick in the nuts. We need to go, hey, we should probably. We dig a lot of stuff out of the ground. We process none of it. We are totally reliant on other countries to survive, which is not really a good spot to be in.

[Wes Bell]

That's cope.

[Raoul Pal]

Hmm.

[Wes Bell]

That's cope. Explain the fact that you're saying you're hopeful.

[Raoul Pal]

I am hopeful. I'm always hope. I'm the optimist. I think being a pessimist, I think bears have no ambition. Delete the bears, ignore the bears. I think bears have no ambition. No, look, I mean, I'm hopeful. Sorry. I'm not hopeful it will happen. But I do hope that there's enough people and I've had enough conversations with people who have no interest in any of this stuff, who have suddenly gone, really. We had no fuel on land. And like even the storage capacity. Right. The. I think the IEA requires you have 90 days worth of fuel.

[Wes Bell]

Yeah.

[Raoul Pal]

That's not on your shores, that's just on someone's shores. I think Australia's is in the us. That's purely just to flood the market with oil. It's a price thing. It's not a you have your supplies thing. I believe that we will now go through a process of saying we probably should have some reserves on land, obviously. No shit.

[Wes Bell]

What do you think this is going to mean for Walsh coming in as Fed Chair? Because he. Everyone expected him to come in and cut rates, but like that seems like he can't really do that right now.

[Raoul Pal]

Yeah, look, I mean, I've never been a Fed watcher. I'm a civil engineer. I don't think the Fed matters, honestly. I think the Fed follows what the rate, what the bond market does. I think they just followed the market. I think a lot of. I think we're in a world. If you just take Lyn's perspective, what they do with interest rates is kind of irrelevant. It's all on the Short term end. Honestly, who cares when the government's the one spending the money in fiscal dominance? It just doesn't matter. Right. If banks were lending a ton of money it would matter. I just don't think the Fed and central banks matter that much.

[Wes Bell]

So. But what do you think this means then for normal people? Do you think people can expect inflation to go higher over the next few

[Raoul Pal]

years and rates to go higher and

[Wes Bell]

rates to go higher?

[Raoul Pal]

I think it's going to punch from. It's painful. Yeah, no it is. And that's, that's kind of the world I think we're moving towards. And it's one of those things for you to think about it because I thought about this stuff for a long time but then to live it and feel it and experience it, it's a whole different thing.

[Wes Bell]

But what does bitcoin do in that environment, do you think?

[Raoul Pal]

So at the end of the day what we're looking at is liabilities or obligations getting too big sailors set up. Not that I'm saying it's equivalent you there is a price or a value where your obligations are larger than your assets and the more people. This is why you want out of the system. Gold, bitcoin, this is why sound money, what sound money advocates always talk about. You want to have assets outside the system that are undebasable because everything else is going to be debased when the times get tough. Go to satmo. Joe's thing. What is the problem? That the button exists and they're going to push the button. They're going to push the button because it's the only way they can do it now ironically Australia right now is attempting austerity by raising taxes. They're trying to not push the button to be fair but the problem is it's made everyone significantly poorer. Will make everyone significantly poorer. We will see how much stomach they have for austerity because I think they're going to end up just reverting back to the printer. The worst scenario is they go austerity and the printer because then you just

[Wes Bell]

lose both sides royally because like with bond rates so in the UK I think it's the highest since the late 90s US higher since just before the financial crisis. If bond yields are like risk free rate is five and a half percent or whatever, what does that mean for risk assets? Because they've got to really perform to be attractive.

[Raoul Pal]

Well gold has always traded inversely to the real yield on the 10 year until they froze Russia's reserves. We're in an era where the monetary system is changing, as we know, right, this is the period of tumultuous change. The world is going to look very different on the other side of this thing. If we're going through all of these structural reforms of what the savings currency is now, I'm very much in the world where you have to separate the global reserve currency, global reserve asset. One is medium of exchange, one is savings. We've actually seen this in a microcosm in just the bitcoin crypto world. Stablecoins are the medium of exchange. Bitcoin's been the store of value. This breaking apart of those two components of money, I think is we're separating the treasury from the dollar. The dollar will continue to be the medium of exchange. I think that's very, very clear. It's why Brent Johnson's. I think Brent Johnson is dead right with his milkshake theory. If you look back at all the money printing that's happened, all of COVID everything, the wars, everything the US has got into, really, the DXY hasn't softened in like decades, just been stronger. It's just staying around 100. It goes through ebbs and flows, but it really hasn't gone down the way a lot of people would have expected given how much of an exorbitant privilege they've exercised. The dollar's just not going down. Bonds are down 50 odd percent since 2022 and going lower as rates go higher. So the asset is getting crushed and gold's up significantly. Right, so. And by the way, bitcoin is also up significantly over that period of time. Yeah, it's down short term, but it is also up significantly. So my general view is, are we moving towards a world where we trust each other more, that we trust governments more?

[Wes Bell]

Absolutely.

[Raoul Pal]

Not that we're going to stuff more. Am I going to buy more government bonds in the road ahead or am I going to buy more gold and bitcoin? The answer is very, very clear. Clear to me.

[Wes Bell]

And so do you think that the asset side of that will be a mixture of things like gold and bitcoin rather than one dominant?

[Raoul Pal]

I think so, yeah. And I've used this example. I have gold and bitcoin as my two primary holdings. Gold is the exact same trade, it's just slower. You know, if it's down 20%, I'm not that fussed. Bitcoin being down 50%, I'd really hate to have to sell it to do anything. Down 50%, couldn't care less. I'd sell my gold down 20% ballast.

[Wes Bell]

I'd never fully understand the reason you hold gold because you always say it's because you don't mind selling gold. But like, if you think bitcoin has more of an upside, would you not rather have more bitcoin and sell less bitcoin than.

[Raoul Pal]

No. Bitcoin is a longer duration. Even though gold's an infinite duration asset, Bitcoin's an even longer duration asset. So the way I think about it, I think it is improbable. And even if it does happen, gold going to $20,000 an ounce, right. Going to 5,000 is a double from its peak, more or less. I think that's in the cards. Is a double going to change my life? Probably not. Probably not. Bitcoin going from 100 grand to a million or from 60 grand to a million, totally feasible, Totally practical. Is that going to change my life? Yeah, big time. So what do I want to put, what do I save in bitcoin for my kids? School fees. He's 8 months old. That's a long. That's 10 years away. Right? So I've got 10 years to let bitcoin do its thing. What about a house deposit? I may want that in the next three years, two years, one year gold, the right place for that deposit. Clearing my mortgage, my 30 year mortgage. Bitcoin, it's about duration, right? Gold simply doesn't have. It's got a lot of growth in it. It just simply doesn't have the growth multiple that bitcoin does. So I position my savings. That's why I just really don't care what either of them are doing, truly. But that was my general thesis. I don't want to hold cash if, by the way, I go, okay, now is the time. I really do want to start looking and looking to buy. And I'm going to auction. Auctions. It won't be in gold. It'll be in cash, in a term deposit somewhere or in a bank account. Because the idea is I now actually need the dollars, right? And I can't take the volatility. So it's me peeling back. Where is my volatility tolerance. I'm willing to take volatility right on the correct time frame.

[Wes Bell]

Okay, fair. Because I end up postponing my life because bitcoin is not the price I'm willing to sell.

[Raoul Pal]

Precisely. Yeah, precisely. What if I don't want to postpone my life? We were talking about this at lunch. You may not want to postpone your life and sometimes parts of life are more important than money and the dollars and the numbers and the value of your assets. Sometimes you just actually want to live. Sometimes you've got a family and their needs come before yours of saying, hey, I'd love to get to this value, but really want a house, really want that holiday, really want whatever. Because I've only got 80, 90 years here. And you know, you get old eventually and you can't do those things if you're not going to live it. What's the point of being here?

[Wes Bell]

Yeah, 100%. You said before the monetary system's changing. Like that's clearer than ever. And I think the stuff that's happening with Iran taking payment in bitcoin is huge.

[Raoul Pal]

Wild, isn't it?

[Wes Bell]

It's wild. Have you seen the thing that came out in the last day or two?

[Raoul Pal]

They've got like an insurance company.

[Wes Bell]

Insurance.

[Raoul Pal]

Yeah, because they. Because tether froze their stablecoins.

[Wes Bell]

Exactly.

[Raoul Pal]

Surprise, surprise.

[Wes Bell]

But do you think this is like that we'll look back at this as being a pinnacle moment in the shifting.

[Raoul Pal]

I don't know if this was the pinnacle moment, honestly. This, if we really look back, US freezing Russia's reserves in 2022 was the event that was the thing. Everything else is just a transition towards sound money. And then people realizing, do I want a piece of metal in my vault that I can't sell, or do I want something that's liquid and digital, that's global and is actually. Think about it's kind of better. Oh, and by the way, I can actually do this multi sig thing set up where I can have security around the world. We're in just that process of we're moving towards a sound money backing because it has to, because otherwise people just lose all trust. And then it's just a game between who's younger and who's older. Right. Bitcoin will progress one funeral at a time. That's kind of the framework.

[Wes Bell]

The reason I do think it's a pivotal change is I agree it starts with the freezing of the Russian treasuries. That was like Luke Groening calls it, the shock that was heard across the world. And I don't think Iran would be doing this unless that happened.

[Raoul Pal]

Agree.

[Wes Bell]

But the fact that this is the first time we've seen bitcoin in the wild being used, used in this way by a nation state in a clear attempt to basically go around sanctions, I think is huge.

[Raoul Pal]

I listened to a podcast many years ago. I didn't. To be honest, I can't even tell you what? Podcast it was who the guy was. So whoever it was, good shout. He was an oil trader and he was just. I found it amazing. He was discussing how oil tankers work and they really are just merchants that just go, oh, there's a. There's oil over there. We'll go and pick it up. Here's the price. Okay, now we've got a buyer.

[Wes Bell]

And it just do an arbitrage.

[Raoul Pal]

Do an arbitrage in physical world, right? And the idea is that you pull up somewhere on a port in Africa and you need to get the local currency and you got forex pairs and the banks freeze it. And he's like, bitcoin's just such an amazing asset. When you really think about its use. Case there head office in New York can wire the bitcoin straight to someone on Country X. They can get an exchange rate everywhere. And that's the other thing, right? Bitcoin's one of the few assets, Gold, the dollar trades everywhere in every currency. You have a forex exchange. I mean, the Australian dollar does not have an exchange rate in most currencies. It's just true, right, so that it's a kind of a example of, yeah, digital is actually a lot better than a hunk of metal that you need bolt cutters to chop into.

[Wes Bell]

And it's highly liquid in most of the world and liquid to a degree in all of them.

[Raoul Pal]

I saw a video the other day. I'm not sure who the bloke was, but I've seen his face. He's, you know, a very renowned gold bug. You know, standing there in front of a table, twice as big as this, covered in these, like 50 ton, you know, massive blocks of silver. He's got this big bar of gold and he goes, you know that all this silver is worth half as much as this gold bar. And I just retweeted, said, bro, get a coal car. What are you doing? Seriously, like, look at all this metal. What are you going to do with it? Ridiculous. So I get it, final settlement. But like, guys, it's time to move on. And it'll happen. It just, it's a process.

[Wes Bell]

Should we get onto the Australia fuckery?

[Raoul Pal]

I think so.

[Wes Bell]

When I turned up today, you're normally like dead upbeat, super happy. I turn up today and you were dejected.

[Raoul Pal]

It's been a shit week. It's been a shit two weeks.

[Wes Bell]

So loads of people listening won't know exactly what's happened. Do you want to just lay out everything that's happened?

[Raoul Pal]

Yeah, sure. So first Things first. None of this is signed into law yet. The odds are it is likely to happen, however. So short story is for I think it's since 1999, we've had a capital gains tax set up in Australia where whatever your gain is, so you've got your cost basis of 100 bucks, you sell it for 200 bucks. If you held it for a year, that $100 is not taxable. You halve it, 50 bucks is taxable. Now this 50% cap gains accounts for a whole lot of things. The holding time, inflation over that period. There's also the idea that you kind of accrued the wealth over the whole holding time, but you realize it on the same day that you sell it kind of accounts for all of those nuances. But most importantly, it allows people to save and grow wealth. Yep, yep.

[Wes Bell]

So that just to be clear, so it's 50% cap gains. If you hold an asset for over a year, you get a 50% discount.

[Raoul Pal]

Discount. So, and so then whatever's Left over that $50 is times your marginal tax rate. Now the low we have a tiered tax system. So the lower you are, the lower your tax is for very low income people. This can resolve to less than 12%, which you know, kind of is a good idea. Right? You want people who have less money to be able to save better and have a more favorable system the higher up you are. Our top marginal tax bracket is 190k and 190k. I mean it's 70 cents of the dollar for Americans listing. So that's like 135 grand. That's where you start getting slug with 45%. Then we have the 2% Medicare levy. So your tax rate's 47% marginal above 135 US. Now the labor government, as in all their infinite wisdom, has come out with a budget. Now the budget is not a in effect, but labor can push it through the alone, can push it through the lower house, the house of reps, and then the Senate if they just pair with the Greens. And can anybody point to a situation where the Greens haven't supported more tax. They have exactly the amount of votes they need to push it through the Senate. So this thing has a very clear path straight through. Now Australia has the housing bubble. Of all housing bubbles, there's very few. I mean Canada, you know what this is all about. I think Switzerland and New Zealand, we're all looking at each other going, who's the bigger idiot here? The median Australian house, house, apartment, dwelling countrywide is a million Aussie 720 US. That's the median. The median salary is 74k, the mean is 82. The median worker saving in a 5% bank deposit will take 40 years to save the deposit for a median house or apartment dwelling.

[Wes Bell]

Insane.

[Raoul Pal]

Doesn't make sense. Now there's going to be people saying, move regional or whatever. It's like, yeah, that's fine. Obviously we're talking about means and medians here. I'm not going to go through every state and country and city. So the idea is they've brought in this budget and they're overhauling our tax system. This is effectively a currency devaluation, more or less, but it is a very. They've pitched it, saying it's going to benefit young people trying to buy housing. Now, there's a bunch of things in terms of negative gearing where you can offset your. You know, if you're losing money on the rent, you know you're kind of banking on the capital appreciation of the property. So you'll lose on the rent, offset your tax. I'm not going to talk about that. That's its own beast. But they snuck in there. The pitch is we want to make it easier for young people to save for a house. The median young person has a low income. It's going to take them 40 years to save in cash for the deposit. So they have to save in assets. And these bastards snuck in there that they're going to put a. They're removing the 50% cap, gains discount on all assets, ETFs, shares, Bitcoin, the whole lot. And you're going to get an indexation method. So that means your $100 cost basis goes up to $103 with CPI and then goes up another 3%, that goes up another 3%. So if you just think about that, if you hold it for a year, in the current system, you would get. You make 100 bucks, you take off 50%, you've got 50 bucks that's applied to your marginal tax rate. Now you take off 3% and the $97 is added to your income at your marginal tax rate and at a minimum of 30%. So the people who are on the lowest marginal tax bracket suddenly have to pay 30% gains, not 12 or 1 or 2 or 5, whatever that works out to. If you think about what this has done, and there's this system, they're only doing partial grandfathering, which is also a scam, as far as I'm aware. Almost every tax reform in Australia, if you held assets under the old system, they remain under the old system. The problem is that at the 1st of July 2027, you move, you kind of index your value. Everything up to that point, unrealized is that the 50% current system and everything from that point onwards is indexed. So here's the thing, they're not indexing your tax bracket, but they are indexing your capital gains. If you're someone like me who has we kind of, I will straddle my 10 year goal of saving for a house, my 10 year goal of paying for my kids school fees, my tax goes up by about 40 to 50% just like the component. So that's effectively, when you look at it, they're already taking 25% more or less. When you do your marginal tax rate 50%, they're taking about 25, that goes up to about 40%.

[Wes Bell]

Insane.

[Raoul Pal]

So they've more or less for people who are in full indexation, which is young people, they've doubled the tax. So in order to get on the first rung of the housing ladder, you need to climb the primary, the principal ladder, right, the primary ladder, which is your asset portfolio. So the assets that you're saving in, they're now going to tax it two times as much. Right. So for me, someone who straddles that world, over the next 10 years, they're going to take about 20 to 30% of my savings. For someone who is coming into that system, if you're a startup, you start a successful business, right, it's worth half a million bucks, your cost basis is zero. What's 3% CPI on zero? Also zero. So you owe the government full 47% of your sale price. And this is why you'll see a lot of memes of people inserting our prime minister and saying, I saw you do this. Well, welcome to our 47% shareholder. You take none of the risk, you put none of the capital up front, you pay none of the expenses, but you show up on payday for 47% of the value. So the great irony of this whole thing is that it locks in people who already own property. There's just so many other layers to this. People who already own property, they get to keep all their negative gearing discounts. And if you buy new homes off the plan, you also get to do the current tax setup. So what they've actually done is got all the young people who want to buy a home and say you're now going to compete with 100% of investors all vying for new homes, not old builds. So the whole setup doesn't help young people save. I ran the numbers on depending on the growth of your asset. Now most people, if you're on 5% or 10% or 15%, it's adding eight to five years to your savings goal. If you're. And that's if you're on the full indexation. If you're owning an asset that goes up 50% a year, which guys doesn't happen for a decade, then they take about a year. I ran another model saying, well, here's the current school fees, a typical private school now by the way, owning a home and sending a kid to private school. These aren't what I would call high net worth, upper high net worth things. These are, this is middle class, this is middle class. I literally want to give my kid a good education type stuff, aspirational things. It adds. I worked at how many years because school fees are 15 to 25 grand a year per kid, going up at 8% the debasement rate pretty typically. And I ask the question, how many years of school fees? If I just buy one Bitcoin now at 100 grand Australian, it's approximately the price. How many years can I peel off to cover all the school fees? How many years of school fees is it worth if it goes up at X percent? The general framework is that this new tax system removes approximately one to two years worth of school fees per child. So you go, how have you benefited me as a young person? I'm in my mid-30s, I've been saving to buy a house for a decade. You've added two to three years to my most optimistic case of when I actually step into the market and my boy just lost a year of school fees. And by the way, I've got to pick between those two. If I buy the house, it's harder to buy for the school fees. And you just look at this and go, how have My framework was, I'm like, I'm no genius, right? I think about a lot of stuff. I'm smarter than your average bear, right? Enough to be an engineer at least. It took me five seconds to go, something's fucking wrong with this budget. And then it took me about 10 minutes to go through just with an LLM and say, can you just model this out? Just a stress test, testing a couple of LLMs to make sure they're not hallucinating anything, come back with the same numbers and go. It took me 10 minutes to work out that this is not going to benefit young people in any way, shape or form, in fact it makes it considerably worse. I'm in the camp where you can look at this whole setup and go, for politicians, there's generally two reasons they make bad decisions. Incompetence. Door number one, malice. Door number two. I fall on the spectrum where I think generally speaking I like to give them the benefit of the doubt of being morons and just being incompetent with a bunch of stakeholders involved. All that, you know, in this case, you're telling me not. And here's, here's the kicker. They broke a lot of like the electric promises they made was specifically no taxes. We won't do what we just did. Yeah. Like when you think about that as a business, right. If I was to make a big decision, like I know I'm going to start supporting Ethereum in my data, that's a huge reputational risk. It's also something I'm not going to do by the way. But I would have gone through countless hours of study and thought and you know, if I'm going to make a big decision, it's going to change my reputation forever. I would think about it if it took me five seconds of thought, 10 seconds with an LLM. You're telling me not a single staffer did this and if the staffer did do this and they're aware of it,

[Wes Bell]

then it's malice, then it's malice.

[Raoul Pal]

So I just look at this and go, and I know there's going to be folks in the audience going there. It's always malice. I'm like, yeah, that's fine. But in this case it's really hard to argue against that.

[Wes Bell]

Do you think it's that they're so out of touch that these boomers think that the way people are saving houses is by squirreling money away in a bank account and not investing in assets?

[Raoul Pal]

So this is what I've been puzzling over. Who are the people they're interviewing to come to this decision? Because I have in my mind's eye what they look like and I'm pretty sure they shouldn't be asking those people anything to do with investing. It's quite interesting because like they, they, the media and you know, you look at the propaganda arm, right, abc, you look at how they're pitching this whole thing. You really had to work very hard to find anywhere they talked about the fact that they snuck it in for all assets. They did have a three minute video that I watched where they talk about it and they, and I you not they make the suggestion that this might actually make Investing in government bonds, a more attractive thing. And by the way, to their credit, that is true if you buy an asset that underperforms CPI inflation of 3%, you are correct, the current indexation method is much better for your tax. You're also poor. So you just look at this setup and go, they kind of want people to buy shitty government paper. And the higher your growth asset, the more. Indexation doesn't help you at all. Bitcoin goes up 25%, 20% and you take a 3% indexation, it's irrelevant. You're a startup with a zero cost basis. Indexation does nothing for you. And you just look at this whole thing. You know, this is a tax grab of all tax grabs. And ironically, people didn't vote for this because the election promised was. And by the way, I'm not going to pretend that I trust politicians in the first place and I certainly didn't vote for labor. But it's kind of interesting to see. I know there's been a lot of backlash. That's why you'll see a lot of millennials posting photos of Albo, right, with a triangle as part of a band saying, you know, good, good meme Daz saying, welcome to the team for doing jack shit of the work and taking 47%. Because that's effectively what it is. It is much the same as a currency devaluation. They devalued the savings of all Australians who hold assets. There's a bunch of people out there who are gnashing their teeth saying, bro, just leave. We also have an exit tax. The day you get on the plane, you realize everything. So basically we've got a period of time here where you've got to fight back. Because if you don't fight back and you don't send an email, a politely worded email saying, listen here, dickhead, what are you doing? You can't support this to your local mp, You've got to do what you can. Yes, there's an exit route. That's one pathway. But the vast, vast majority of people simply are not going to pick up, leave their family, leave their friends, sell their apartment, sell their house, sell their clothes and move overseas and then pay an exit tax which will take 30, 40% of their assets anyway. Most people are just simply not going to do that. So what do we do in the meantime? Because you've got to make an uproar in this instance. You just. And I'm not a polite, I don't go to rallies, I'm not a political dude. This is one of those things where they have truly. Truly. Yeah. They're fucked over the average round. You got to do something.

[Wes Bell]

But the indexing is a scam as well because we know the CPI numbers

[Raoul Pal]

are called to be favourable.

[Wes Bell]

Of course, like it's all a scam.

[Raoul Pal]

They can raise taxes by fudging the CPI numbers. Your asset has a bad year. Let's just imagine there's some kind of hit to the AI sector in June 2027 and all those assets sell off. 50% bang. Your index of 1 July 2027. That's your new cost basis. You don't get the 50% cap gains on everything before that. The accounting nightmare of the whole thing is just. It's. Yeah, it's wild.

[Wes Bell]

Do you think this will definitely go through?

[Raoul Pal]

I think it's a very good. It's a good test. So the reason why I wrote a piece on this when called when the government pulls the rug which is free so people can read it for non Australians don't believe they're not cooking this stuff in your neck of the woods. So this is a warning shot to be very fair to them. As much as I oppose it heavily I think it's a terrible idea. At least they're levying just a straight tax. They're going to inflate the money as well. But at least they're saying we're going to tax you outright. What will be very interesting. They're attempting austerity. What will be very interesting is this is a trial balloon for the rest of the world. How willing are the Australian people to accept tightening of the belts for somebody else's excess? And my answer is not. Not. And it's not because it's tightening the belts because you're going to piss the money away anyway. 100% if you had a vacuum. And this is the thing. If they had have come out with a tightening the belt tax policy that wasn't an outright scam and helped young people like I don't know all the existing properties. You can't. Negative gear as well and sorry, we're not going to grant like or we just limit it to property.

[Wes Bell]

They would clearly never do that though because like Australia runs on the housing market so well.

[Raoul Pal]

And this is the thing that I think is very interesting. I think they've just pricked the housing bubble because first and foremost we were just running out of buyers. The numbers were so high. You know they talk about median to median income to property price and I think five is where they deem it unaffordable they literally invented a new bracket for Australia called impossibly unaffordable. Above 15, right, Sydney is the second most expensive place in the world short of Hong Kong. So you look at all these dynamics, you go, I think they've pricked the housing bubble. Why? Because people no longer have certainty. They know the rules are going to change. So to come back to your original question, I believe this is a trial balloon where they're trying to see how willing are people to accept changes of this magnitude if they had to come out and put in hard changes that would be difficult for the economy to manage, but were directionally correct. That really did give people who are younger an opportunity. And I think about this like, I'm actually lucky that I'm going to straddle this system. The poor people who come into this thing who are young now have no hope they're going to get hit with a full indexation. It's a scam for their whole career. It's wrong. So if they had have said, tighten your belts and done it correctly and done a bunch of modeling that I, when I run the numbers, I go, look, I may not agree with all of it, but directionally, fair enough, I'll support it. But they came out and they just slugged everybody with a true scam. And it's like, I just can't.

[Wes Bell]

If you own bitcoin today, after these rules come into effect, does the bitcoin get grandfathered into the new system?

[Raoul Pal]

No. So it's partial grandfathering, which again is a scam in its own right. Whatever the price is, let's say you just bought at 30 grand Aussie, right? Whatever that is in US terms, you buy 30 grand and the price is 100 grand at on the 1st of July, 2027, that's 70 grand gain times your Bitcoin value. That 70 grand gain gets the 50% and then your cost basis in the indexation method is 100,000. So then you tack on 3% or whatever the CPI.

[Wes Bell]

So that's why you're saying you straddle it.

[Raoul Pal]

Correct. So if you think about it, if I was full indexation, the 97% of every gain every year is fully taxable. Whereas for me, the first part of Bitcoin's journey is 50% cap gains and then everything after that, which, by the way, I don't buy. This is why it's a real scam. I didn't buy bitcoin for one year. I bought it for my kids school fees before I even had a kid. Yeah. You know what I mean? I'm thinking more than a decade out, that decade is now going to be under the indexation method. Right. And sorry, it's actually getting beyond the point. The indexation method alone is a scam. Index the salary brackets. And you listen to the politicians on the news recently and they say, are you going to index salary brackets? And they go, oh no, I can't do that. It's like, what do you mean you can't do that? You can index your taxes but you're not going to index people's incomes. I mean, malice. Yeah.

[Wes Bell]

What do you think bitcoiners in Australia that aren't going to leave should be doing? Is this time to call your accountant?

[Raoul Pal]

Get a good accountant. Yeah. And not because you're doing anything wrong, but because they know how the system works. And a wise man once told me that when you squeeze the right hand side of the tax balloon, it creates opportunities on the left hand side. Tax is a complex system. When something breaks or they change the rules over here, it opens opportunities over here. Right. So a good accountant will understand the mechanics of how this stuff works way more than you and I do because we just don't. It's not our job. You know what I mean? So find a good accountant. And the other one, the Australian bitcoin industry body, they've got a whole page. Click on their link on their site for bitcoiners. They've literally got a template that you can send to your mp, a politely worded letter that just says, listen, I've run the numbers. It really just makes it a whole lot worse for young people. And if you're supporting it, really can't support you.

[Wes Bell]

I mean, borrowing against your bitcoin has never looked so attractive.

[Raoul Pal]

Yeah, there's also, I mean, yes, that's certainly an approach. There's trade offs to that as well. Right. However, it's custody and some people just don't want debt. There's a bunch of layers to that. But at the end of the day, the system is disproportionately. I actually think this is more of a principled thing. You have pitched this as improving housing and improving affordability for young people. You have kicked the rungs out of the pre ladder just to get on the first rung of the housing ladder for young people forever. It's just untenable scam. You just got to push back and say it is unacceptable.

[Wes Bell]

I mean, I guess the hope is that they have pricked the housing bubble because if they have the pressure, they're going to get to not push this through will be unreal.

[Raoul Pal]

Yeah, so that, and that's why I said it's a trial balloon. We will see what the consultation process looks like. Because it would amaze me if they didn't know that this pushback was coming. But then he went into the world of incompetence, right, where they inflate their egos and say, oh, they're going to love it. And then it actually comes down. People go, nah, mate, this, this is. This isn't it. So it'll be very interesting to see whether they back down.

[Wes Bell]

So this is a very Australia specific thing, but I think the interesting part of this is like, yes, it's fucked. Yes, it's a scam, but this isn't going to end in Australia.

[Raoul Pal]

Absolutely not.

[Wes Bell]

Like, this is the kind of thing that will spread throughout the world.

[Raoul Pal]

Correct.

[Wes Bell]

And I think it's very important that we push back hard.

[Raoul Pal]

No, I agree. And it's very simple. Like, you know, my parents aren't overly politically active. I just. And by the way, neither am I. Yeah, me neither. No, I honestly couldn't care less. I wanted as little of the government in my life as possible. We're having conversations with this. They're saying, this just, it can't be. Your kids are affected now.

[Wes Bell]

Yeah, right.

[Raoul Pal]

And your kids, kids are affected. And the truth is, if this continues, if this system is put in place and not reverted, you roll this ball forward and my son goes, hey, how do I build wealth? The hard thing I've got to tell him is you probably have to go overseas. Yeah, that's, that's kind of the point where it's at now. If that message resonates with you, you gotta, you gotta speak up, Just talk to people, help people understand that. This actually doesn't help young people at all. It makes it considerably worse. And the simple mechanics is you gotta save in assets, otherwise it's gonna take you 40 years. We were talking at lunch. You spend money on beer and whatever else up till 25, you start saving at 25, okay, what's 40 years from there? You're 65 when you take your first mortgage for 30 years, for 30 years, and at 95, you pay the bastard off. If that story doesn't make sense, then you gotta save in assets. So then you wind back the clock and say you've just doubled the taxation on assets and the high growth assets get hit the most. You buy government bonds, you won't have much tax because you didn't make much money. But what do high growth assets mean? Growth, innovation, like opportunity. Don't you want Australians to be doing better by owning assets that are worth something and growing? And you just look at all the incentives this set up, sets up and you go, you're actually going for serfdom. This is feudalism at its finest. And you just have to push back because it is a permanent thing. Right. This goes into effect, yes, politicians can change it, but hoping for some other mob to come in and change it.

[Wes Bell]

So I don't pay any attention to the politics and especially Australian politics, to be fair. Like what has the pushback from the other parties been?

[Raoul Pal]

I mean they all push back no matter what it is. But I'm starting to see one nation, I mean one nation which is, you know, your equivalent of your reforms. I would say polling well ahead of the Liberals. They'll form a coalition. They'll have to. That's just common sense. Yeah. I would say that if this goes, look, I would say there's decent chance that labor has to wind this back. The degree to which they wind it back for people who are non Australian and Australians, that is our pain. That is how much politicians are willing to take austerity. That's like an indication of how much is going to be the print versus the austerity factor. And then we're going to get a coalition. I would say if they push much of this stuff through, if it goes through in a lightweight version just for property, they probably won't touch it. If they push it through in its current format, I would hazard a guess that they get slaughtered in the next election and they'll, they'll pull it back.

[Wes Bell]

But the thing that's completely fucked about this is like we were talking before, we both have companies that both operate in Australia. Like I just made my company overseas. Like there's no way that I stay in that, that jurisdiction, of course. And like, is that what they want from this? Is that the outcome they want?

[Raoul Pal]

And that's the thing. If you look at the incentives, that is the result they're going to get. So for you and I, it's harder because reincorporating somewhere as a whole lift everything can be done. Yeah. Reincorporating is a different animal to hey, I want to start a business, start a business somewhere else. Yeah. So my, my. And this is why the memes of sticking elbows head in your business and saying, welcome Mr. 47 shareholder. Imagine seeing that from thousands of young people.

[Wes Bell]

Memes are powerful.

[Raoul Pal]

Memes are very powerful. And it distills it it's, and there's, you know, you get the lefties who show up and say it's not really 47, it's like, okay, it's 46.5. Well, the truth is it's 45 because you pay yourself a salary of 150, 160, and then you sell your business for half a million. Well, okay, the 30 grand was at the marginal tax rate of 37%. Then everything else is 45 plus Medicare. So it's like, okay, it's 40, 45.75 marginal, 47%. Right. The whole meme is you're taking the whole pie. So memes work, you know, so if you do see Australians posting some ugly looking bloke in their, in their business photo saying 47%, give it a retweet. Because it's meaningful, it gets around the world.

[Wes Bell]

Yeah, it's sad to see.

[Raoul Pal]

Very sad to see. And it's one thing to think about these things, you know, it's another thing to get punched in the face. And again, I think there's a lot of folks who would say just leave. It's like, that's fine. The vast majority of people are not going to leave their families and friends. Yep. So therefore, and frankly, that's really, that's the majority.

[Wes Bell]

If you're a 24 year old single person, makes sense, Go nuts.

[Raoul Pal]

But once, think, once your obligations build and your life changes, that is a lifestyle for some people. Picking up and moving to Thailand is a lifestyle for some people. It might be the correct decision, but that's not the decision most people are going to make. Yeah. So my perspective is I want to talk to those people because that's the majority. Right. I have the means to move. I'm probably not going to move because where else are you going to go? You know what I mean? You can move somewhere else and they'll also change the rules. You move to Europe and they run out of energy. You move to Thailand, you move somewhere in the third world and suddenly we have a food crisis. Right. Australia's not going to be, There are trade offs everywhere you go. So yeah, people shouldn't be kicked out of their home. They can be, but you know, there's, there's a chapter between here and there where you just don't say okay and you know, push back. As a first port of call despite

[Wes Bell]

the government, Australia is a pretty good place to live.

[Raoul Pal]

It's a great place to live. And the problem is we are the lucky country. We just run by absolute buffoons. Which much of the Western world is. But this is a particularly egregious example of you have to understand the mechanics and you did it anyway. Which, I mean, I don't know what the conditions are for treason, but it's got to be close.

[Wes Bell]

I'm. I'm going to send a letter to politicians for the first time in my life over this.

[Raoul Pal]

I think most Australians should be. If you're a bitcoiner and you're affected, you should do it. If you've got kids, you should do it. If you're thinking about having kids, you should do it. If you're a kid, you should do it. Everybody should do it. Because every email they receive is noise until they get a thousand of them. Because Every email represents 100 people who didn't say anything or a thousand people who didn't say something. You get 5,000 emails, 2,000 emails. That's a voter base. That's now a issue that people are going, oh, hang on a second. This is now a problem and it's very, very simple. You must climb the asset ladder to come the first rung of the housing market. They've just doubled the tax on that. No way. This helps young people kick it back.

[Wes Bell]

Yeah. What a depressing way to end the end the podcast. It's unfortunate but bitcoin's back in a bull market.

[Raoul Pal]

It. Well, that's. That's the theory anyway. That's my theory. But no, look, and truthfully I know there's a lot of this. This event blocked my whole creative process last week and to this. This week I'm still working my own way through it. There's a lot of Australians out there who feel much the same way. It sucks. It sucked and it. The best way to think about it for savers it's a 20 to 30% currency devaluation and they did it via. In a very insidious method which they. Housing young people washed and it's just

[Wes Bell]

pure evil that like housing young people is the Australian equivalent patriot in America.

[Raoul Pal]

Oh, absolutely. No, it is, it is. It's the equivalent. And you know, housing is a religion. So it's interesting that they've been. They would also know that they're going to give the housing market a bit of a shaker. And that's the thing because negative gearing just not to carry this on but negative gearing most properties they're 2,3% growth at the moment. They're slowed down a lot since the boom after Covid 2, 3% growth capital. I've done the Run on some yields that you'll see. Like you can just go on websites and see what it's sold for, what it's rented out for. Yields are 1 to 2.5% from rent. If you're not getting and you're paying a six and a half percent mortgage and yields are going up on a variable rate mortgage, there's going to be a lot of people looking at this and going, hey, no negative gearing, no bueno. And 45% of mortgages are currently being investors. So you've just kind of removed half the investors.

[Wes Bell]

It's funny because we often talk about like the big button where they can print the money. It has like massive negative consequences on society.

[Raoul Pal]

Yep.

[Wes Bell]

Is that actually a better solution here than this?

[Raoul Pal]

It's a good question. It's hard. I mean, we don't know. This is the movie that you may watch or didn't watch. You can't tell what the counterfactual is because you have to live it. The correct. And again, to be very fair, the correct model here is something to do with austerity. The problem is this is not the right set up for that austerity. The correct austerity is not a. If you're already asset rich, you're in a much better position and if you're trying to grow any wealth whatsoever, you get twice as bad of a deal. That's not, that's not austerity, that's a scam. That's not an equal. It is an equalizing because it makes everyone poorer. It's a very communist approach to things. So it is an equalizer. But the better way to do it would be austerity. I don't know what the model is and some people said, hey, you should have come up with a better solution. In my write up. It's like, bro, it's not your job. It's not my job to come up with a solution. But I can tell you that the solution they came up with is dog shit. So I think it's about just understanding the boundaries of the problem. Saying austerity is the thing we should do. Going through the deflationary bust is the thing we should do. We won't do it. They will revert back to the printing. This is why I think Australia is an interesting test case. We were also test case of yield curve control in Covid. I think they were trying to manage the 3, 3 year yield or 7 year yield or some weird bloody esoteric vehicle and they got blown out. Right? The market just took them to task. So that was the trial balloon for the yield curve control. Now, eventually they're all going to have to go there, but it's this journey of, we know the long picture, we know the macro trend. People then compress all that macro trend into the next daily candle. It's the journey between here and there. That's. Yeah, Trial balloons. See how it works in Australia, See how it works in the uk. What's the appetite for austerity? What's the appetite for taxes? What's the appetite for inflation? You know, like, it's hard to tell which one's worse.

[Wes Bell]

Poison.

[Raoul Pal]

They're all bad. Yep. Welcome to the fourth turning, mate.

[Wes Bell]

I can't wait for the first turning. Surely we don't have long left.

[Raoul Pal]

And that's the thing, the first turning is greener, shoots right. And it's the thing that you and I. Right. Millennials, generally speaking, we're the ones who are going to have to cop the bright. I mean, how many, how many hundred year crises have we gone through since we left school? Right? Every six weeks we've got one coming on. So it's one of those things where, like, it's our job to kind of go through the ringer and you're supposed to craft a better story for your kids. We are the first generation who's worse off than their parents. Just mathematically make that the last time that happens, you know, have some grit, do the right thing, Push back. Get your parents to push back, get your parents friends to push back. Write the damn letter because it'll take you 10 minutes and you just never know. It might just keep kicking the nuts that they need and then you vote the bastards out anyway.

[Wes Bell]

Fuck yeah. Fired up. There you go. That's all we need to have a podcast. All right, thank you, man. That's good on you, man.

[Raoul Pal]

Thanks.