Raoul Pal Stephan Livera

Bitcoin and Macro Collide | Raoul Pal on The Stephan Livera Podcast

Check out The Stephan Livera Podcast Episode Page & Show Notes.

Key Takeaways

  • The Bitcoin halving coincided with global uncertainty, the largest ever quantitative easing, and a bullish BTC-USD price chart
    • “I think that on a risk-adjusted basis, Bitcoin probably has the best opportunity on Earth at this point going forwards” – Raoul Pal
  • Dollar-Cost Averaging into Bitcoin is an attractive investment for millennials, here is why:
    • It comes naturally to a generation that grew up with in-game digital currencies and assets
    • Millennials are at their earning peak and looking to build wealth
    • Equity, bonds, housing markets are all at record valuations, combined with inflation weakening purchasing power
  • Central bank digital currencies enable governments to enforce negative interest rates by preventing physical cash withdrawal and even apply rates selectively
  • Using Bitcoin as collateral eliminates central bank interference in the natural boom-bust cycle of excessive leverage
    • Bitcoin is pristine collateral that can’t be rehypothecated and is transferable, divisible, and segregated

Intro

Quantitative Easing Meets Quantitative Tightening

  • Bitcoin halving coincided with global uncertainty, the largest ever quantitative easing, and a bullish BTC-USD price chart
    • Additionally, charting Bitcoin vs all other assets (Nasdaq, Gold, EMs, Bonds, etc.) reveal they are all breaking down against BTC
      • “I think that on a risk-adjusted basis, Bitcoin probably has the best opportunity on Earth at this point going forwards” – Raoul Pal
  • The ability of US banks to custody Bitcoin for themselves and other institutions is significant
    • Moreover, a Bitcoin ETF will bring in the registered investment advisors (RIA) who manage the assets of high net-worth individuals and institutional investors
      • “We are basically getting the ability to front-run the institutional capital, particularly the hedge fund capital” – Raoul Pal

Bitcoin Perspectives Shift

  • Bitcoin has sucked in more intellectual capital, going from the fringes to Fidelity filing for a new Bitcoin fund
    • That said, Bitcoin still doesn’t receive proper media coverage
  • Individuals first get fascinated by Bitcoin and then push for adoption in their own companies (e.g. MicroStrategy)
    • Bitcoin’s multiplier effect on companies’ valuations, and its potential to raise share prices, will attract more companies
  • Dollar-Cost Averaging into Bitcoin is an attractive investment for millennials, here is why:
    • It comes naturally to a generation that grew up with in-game digital currencies and assets
    • Millennials are at their earning peak and looking to build wealth
    • Equity, bonds, housing markets are all at record valuations, and inflation lowers the purchasing power
      • Additionally, long term, Bitcoin isn’t correlated with other assets

Government Action against Bitcoin

  • At $240Bn market cap, Bitcoin isn’t big enough to elicit government action
    • Additionally, a globalized world allows for jurisdictional arbitrage
    • An exception is emerging markets where Bitcoin serves as an exit from the financial system (e.g. Turkey, Brazil, etc.)
  • Central bank digital currencies may serve as on and off-ramps for Bitcoin, not as competition
    • “I don’t think it’s ever going to compete with currencies of states.” I think what it is, is a reserve a pristine reserve collateral asset, and that’s fantastic” – Raoul Pal
  • What about Government Adoption?
    • Bitcoin is still in rapid growth stage and experiences sharp volatility to be considered for central bank reserves
      • That said, expect adoption soon in countries who embrace digitization, and for its potential to increase in value

Inflation or Deflation?

  • GDP has stalled globally as a result of COVID shutdowns, “My core thesis is that we are slowly moving into an insolvency event” – Raoul Pal
    • Central banks can’t fix solvency events, it becomes a government issue, handled by issuing direct handouts
      • As a result, currency values overall will decline
  • It’s hard to combat the deflationary pressure, even with money-losing value
    • “We’ll have inflationary episodes for sure. But I think the trend remains level.” – Raoul Pal

The War on Cash

  • Central bank digital currencies enable governments to enforce negative interest rates by preventing physical cash withdrawal
    • Additionally, digital currencies allow for selective rates (For instance, not penalizing households or pensions, but forcing negative rates on other savers)
  • In short, a future of negative rates and massive monetary printing means an increasing Bitcoin value

Bitcoin is a Pristine Collateral

  • The next Bitcoin bull market will be driven by institutional adoption rather than retail demand
  • Institutions use Treasury bonds as collateral.
    • However, central banks can increase the supply of treasury bonds, lowering their value and constantly extending the boom cycle
  • On the other hand, using Bitcoin as collateral eliminates central bank interference in the natural boom-bust cycle of excessive leverage
    • Bitcoin is pristine collateral that can’t be rehypothecated and is transferable, divisible, and segregated

Volatility & Lightning Network

  • “Bitcoin is evolving, not as money, but as a reserve asset that has incredible upside.” – Raoul Pal
    • Nobody wants to spend it in exchange for consumer goods, reducing the probability of using the Lightning Network for spending bitcoins

Additional Notes

  • Derivatives are just leverage; they will reduce volatility over time but won’t dampen the price
  • Bitcoin will soon have a yield curve, and it will probably trade below government bonds
    • The private lending markets happening on Ethereum with DeFi will soon come to Bitcoin
CryptoStephan Livera Podcast : , , , , , ,
Notes By Mostafa Khaled

More Notes on these topics

Top Insights and Tactics From

31 Best Podcasts of All Time

FREE when you join over 12,000 subscribers to the
Podcast Notes newsletter

No Thanks