Speaker 1Welcome back guys. We're here in Singapore at Token 2049 and the one and only Raoul Pal is with us and Ovi from Rekt. How you doing guys? Good. We're kind of exhausted but at the end of
Speaker 2our trip here so.
Speaker 1Oh my god, it's been a good one though right? Lots going on in Singapore this week. So Raoul, we'll start with you shall we? Go on then. So, did you want to talk?
Speaker 3Oh yeah, yeah. I mean, you know, I represent the DJs, you know, they're all very professional. So I want to know, are we in the banana zone?
Speaker 2I can't even talk about fruit anymore because I'm just
Speaker 3going to get lynched. You're bad, you're bad.
Speaker 2I called this banana zone and it was like everything, all my liquidity analysis, everything set up and then the government shut down and that was the end of liquidity and then we've had a war since. So it kind of didn't work out maybe and so I think everyone's kind of wildly bullish right now, but we haven't got a massive increase in liquidity yet. So what we've seen is AI stopped going up and then crypto went up. So rotations are a kind of sign there's not a massive amount of capital around yet. So I'm not sure. I think it's still coming. But we still got rates too high, we've still got the dollar too strong, we still got oil prices too high. So liquidity is kind of not pumping yet. So I think people just need to be a little bit cautious. Maybe this is leg one and then we've got corrected a bit sideways and stuff like that.
Speaker 1You know, obviously some people think about the four year cycle in crypto, but you've mentioned potentially this cycle is a bit extended.
Speaker 2Is that how you see it or do you? Yeah, I do. So A, the four year cycle for me was a debt rollover cycle. They've extended that to like 5.8 years. So really it should end Q1 of next year. But if I look at the liquidity cycle overall, like crypto went down without liquidity going down, it was just kind of flat, which tells you there's kind of not enough liquidity around. So we didn't have a full liquidity cycle, which every other one has been. And then when you look at it, what's the probability of this is a super cycle? You've got the biggest capex event in all of history happening, but there's more money than God going into the markets. The Treasury Secretary of the United States and the Federal Reserve are trying to get the banks. They're massively increasing lending by increasing by steepening the yield curve. So that's liquidity in itself coming. They've still got the debt rollover, the debt issuance at the short end. So I think there's a good chance that this keeps going until 2030. You'll get periods of slowdowns, but this is what we lived through in the 90s, late 90s, like Greenspan raised rates once in 97, did nothing else ever again. Well, he had to cut once in 1998 with the Asian crisis, but really he didn't do anything. And let productivity kick in and economic growth kick in and just run it hot, but that's what they want to do. But you've got to get the banks lending all of that. So I think there's a real probability that this goes on much longer in a much bigger way. And, you know, people calling the top in the tech sector is like, you haven't got a fucking clue what the top is. This generation is roaring 20s, some might say. Yeah, I think that's right. Yeah, I don't see any probability that anybody can slow down this expenditure. Yeah, because what the US slows down, China wins the world of ASI.
Speaker 1We were talking to. Arthur Hayes yesterday and like how, you know, rates are obviously rising and people are dooming about that. But he's like, these companies are trying to create gold. They don't care what the level of rates is,
Speaker 2they're crowding out just cash flow generating businesses in history.
Speaker 1Yeah, well, they are, but they're crowding out everyone else, right, because they're tapping the market.
Speaker 2So the government, so the government did this on stage yesterday with Zoltan, who's like the world's expert in this stuff. And he's like, yeah, well, the government's just issuing the short end and the hyperscale issue at the long end is fine.
Speaker 3Yeah, so maybe we're not in the big banana zone. It's like a plantain, you know, for now. Yeah, that's right.
Speaker 2You can see the small banana growing on the tree, but it still might die if somebody f*cks it up again.
Speaker 1It seems like the crypto market is kind of kind of front running the idea that, OK, Besson said, I'm the house, I'm backstopping the bond market. Bonds have said yours, but we're expecting another, we're expecting another wave from him at some point, right? With a bit of a bazooka, I imagine, right?
Speaker 2Again, I'm not sure. I'm not sure they care as much because they're not issuing at the long end. It doesn't cost them anything. It's not increasing their costs because they're issuing at the short end. As long as that short end is anchored, as long as Walsh doesn't start thinking he needs to hike because of inflation. And then you look at stuff like employment growth, it's going nowhere, right? That's typical. Productivity is now rising faster than employment growth and wage growth. So it's telling you that that whole part of the economy is not going to be.
Speaker 1Why step in? With that sort of language, though, like, you know, they can test me if they want, but, you know, we are the house kind of thing.
Speaker 2There's a lot of levers he can own. The other one is the dollar. You know, he's speaking to the Chinese who want a weaker dollar. Japanese want a weaker dollar. You know, he owns that leg of the trade as well. So he's got the long end he can add liquidity to, sure. They can buy back some of that long end. There's a bunch of stuff they can do there. They can, as I said, weaken the dollar. They can force the banks to take more bonds. There's a whole, he owns a lot of the legs of this trade. And don't forget, we've got a macro hedge fund manager running the treasury. Yeah, yeah, yeah, exactly. He knows the game.
Speaker 4He knows full well the strategy in the game that he needs to play to.
Speaker 2And these things aren't quick, right? You've got to negotiate with the Chinese and the Japanese and the South Koreans and everything else.
Speaker 3You know, this is all big brain stuff, you know, but I'm more degen, right? I see green candle go up and I click the buy button. You know, that's what I like to do. Best time to buy. We do the same. We just pretend we don't buy. Yeah, yeah, yeah.
Speaker 4How do you feel about markets right now? I think it's very, very, very, very early in the next big run up. And if you're a believer of the four year cycle, you're mapping out the fractals and historical levels and periods, you'll have the view that, okay, there's maybe one more drop to come. Then there's a lengthy accumulation period that we're going to the next phase. But you know, these things aren't ever matched date to date, four year to four year each time. There's always something that changes. You can't completely disregard and discredit large macro events like I mentioned, but also that the huge AI boom is both the reason for the downfall of crypto in the last 12 months, but also a potential reason for the uprising of certain things. And obviously, I know you're a big Zcash fan yourself, but stuff like quantum resistance, like these are the things that initially kill the entire space. And then you get these green shoots from like, okay, now this makes sense. Zcash makes sense or something else makes sense, near whatever it is. And that's where you can see the liquidity and capital starting to go. But for me, the stuff to see things do a 20x or a 30x or a 100x or a 1000x in the middle of the bear market and then start to lead the next narrative on the way up is the way you usually see these runs start to happen. But I think it's very, very early. I think it's very early. Who knows how much more chop we have? Who knows if we have another big downfall? I'm not really sure. But I think the cards are shown, in my opinion, the cards are shown and if you wanted to play, have a relatively, I don't want to say low. Low risk. I'm going to kill all of us if I say that, but you have a good chance of owning things with a high probability of going higher over the next two years. Will they be the best performing things? I don't know. But I think it's a very unique point in the market to actually put on some big risk.
Speaker 2And also if you listen to the people who get kind of interested in trade at the earlier stage stuff, so Ovi does it, Anson does it, whoever's doing it, right? They've all kind of reported back from the trenches like there's a structural change going on and this looks like the start of a bull market. And I take that as a signal. I trade that stuff. It's a signal I hear. A lot of people I respect saying the same thing, like the trenches are reporting back that there are opportunities.
Speaker 3Yeah. We're reporting for duty, sir.
Speaker 1So I've got a question for both you guys, like the agentic economy, right? I've heard you talk a lot about how we need crypto rails for these agents to transact with each other and that's going to be how AI kind of takes the crypto market higher essentially, right? So explain to me, like, why is there a need for this? This kind of decentralized transactions between agents when at the moment, like the agents are using APIs into Stripe and stuff like that and it's working fine. So what's that critical need for it to be on crypto rails? And then how does that accrue to the crypto token values basically? Because I would have thought, don't the AI companies who are creating these agents take a lot of the share of the kind of fees from those transactions and how do they accrue to the tokens?
Speaker 2In the end? Yeah. In the end, an agent will choose the cheapest, fastest possible way of doing it. Like Stripe, great company, why are they building on stable points? Because faster and cheaper is the answer. And if you think about it, this is where I'm going to try and sound intelligent, is all intelligence has built the carbon substrate, humans, all the other stuff around us. We've just jumped substrate to silicon. Silicon's a million times faster. The machine economy runs at speeds we can't comprehend. Like Suey's TPS yesterday was 40 million. But this is insanity. But this is the speed at which the machine economy can run. Agents will use the fastest, cheapest way of doing it because that is their job. And so over time, we'll just see them using different rails. So that makes sense.
Speaker 1So it's like just over time, we're always going to move towards the fastest and cheapest. So that's where we're headed. So it might not happen in a year, but that's where we're headed.
Speaker 2But don't forget, Stripe are integrating with agents. Everybody are allowing agent integrations. So what you're going to get is just more capital moving online. on chain and moving through chains. And that's just a net positive for the industry.
Speaker 1And you've been very big on SUI over Ethereum, for example, right?
Speaker 2No, I think everybody's a net beneficiary to this, like the layer ones are the net beneficiary overall because that's the coordination layer of the new digital age and, you know, yes you can get the application layers and the layer twos, but it all accrues in the end in some way, shape or form to the value of the layer one.
Speaker 1But why does SUI have an advantage over say Ethereum?
Speaker 2Because it's faster and cheaper and that works, right? When you look at, yeah, I think of the layer ones really simply, think of cloud compute, right? These big platforms. There's usually five concentrated in three, there's five main things, the same with operating systems, it's the same with programming languages, it's the same with pretty much every kind of network, there's usually about five, and we've got two right now. So then there's a good game is to figure out who are the other three or who are the other two. Sure, sure. And SUI seems like pretty much set up exactly for this, what are the other ones? You know, is it near? Is it something else? Is it? I don't know yet. Avalanche have a, you know, a chance of this stuff, I don't know, but that's the simple game. And Solana and Ether kind of in the game, obviously.
Speaker 3Yeah, sure. So if you're, you know, it seems like you might think we're in some super cycle that might last a few more years, like how do you think we should position ourselves to, you know, benefit from this opportunity?
Speaker 2For me it's, there's the easy way and the hard way.
Speaker 4Yes. That's the very good way to put it, I think.
Speaker 2The easy way is just own some of these Layer 1s and do nothing, and maybe own some NASDAQ as well. You'll be fine. The hard way is to try and find which application is going to do it. So the barbell is the fun way. You hold a core holding in some Layer 1s, it could be Zcash as well, it could be Bitcoin, Ethereum, Solana, whatever you want, and then you can do whatever you want with the rest.
Speaker 4The real question is what return are you seeking? Are you happy just, you know, doubling, tripling, quadrupling your money, or are you trying to get this next 10x or 25x or 50x?
Speaker 2Yeah, but that ends up being my wallet of shame.
Speaker 4It is, it always is, it always is, but that is your sort of Layer 1 app barbell, because the apps will be the ones.
Speaker 2Have you gone back and looked at what you traded like two years ago? Sadly, when I do my taxes,
Speaker 4yeah, when I do my taxes every year and I go through some of the miserable transactions, it's. I looked at my smoking chicken fish.
Speaker 3Oh, God, yes. And Cameron's like, "Why did you buy this?" That was a sound investment at the time.
Speaker 1So, okay, so we've talked a lot about the alts and stuff, where does hype fit into your sort of landscape?
Speaker 4It has a certain level of maturity now where I think the risk-reward ratio has changed quite substantially, and I don't think there's large amounts of risk, I don't think there's a large amount of downside, but what's the next move for hype? Now, if you're someone who's been in hype since $2 or $3, you have a gigantic position in it, and if you get a 2x on it, you're like, "Yes, I'm going to 2x my life." "I'm going to 2x my net worth, that's great," right? But as incremental new investors, I think it's become more of a TradFi-style investment where the return profile is much less than what I would want from a crypto investment, if that makes sense. I think it will maintain its position as the highest market share DEX platform. I think it has a quite significant advantage in its TradFi integrations versus other guys, maybe lighter as the second. And I think that's one of the reasons why I've been running there, but, you know, for me, it's like, "What am I going to pay for if I'm hype at just $100?"
Speaker 2The one that's in a similar situation, Zcash, it's like, you know, it could go a long way. There's no cash flows, baby.
Speaker 4Exactly. Exactly. There's no cash flows, no ceilings. That's the best way to think about it, I think. Because the hype, you can, you know, all these perp DEXs and anything that generates revenue, pump fund is another example. People are calculating revenue multiples, people are calculating, you know, cash flow forecasts. There's a. And that's what I realized with
Speaker 2this is, like, the Layer 1s are not valued in this at all, and they shouldn't be. Exactly. It's like, if you turn off ETH tomorrow, you destroy all of stablecoins, all of DeFi, all of digital art, all of Layer 2s, it's like a trillion plus dollars of value. Exactly. But with the applications layer, it has to be revenues, because they're businesses. It's like, they're two different things, infrastructure and business, that's what's clearer in my
Speaker 4head now. I think a better way to think about Zcash maybe is its peak as a percentage of the total Bitcoin market cap. I mean, that's how people looked at Litecoin in the past, and some of these other older coins coming back, and I don't know, what is it right now, like 1%? 1.6. 1.6%, yeah. So, if you believe Bitcoin goes a lot higher, and you believe Zcash can increase its market cap as a percentage of the Bitcoin market cap, yeah, then there's still a lot of convexity there. And if you still believe we're very early in this run up, but I think, you know, something like that, where it is just a narrative-driven play, which is a very, very strong narrative, I think, probably the strongest. And it's easy. And it's easy. And you just, it takes you five minutes to explain to someone, right? It's like, oh, have you heard of really fast computers? Oh, okay. Have you ever thought about all these CIFAs going to happen?
Speaker 2Oh, right. And then you've got, you know, Nebel, who's been here. Yes, yeah. Merck, you've got Barry Silver, you've got kind of tons of these OGs, just saying, this is, at the Winklevoss, we're here doing the same thing.
Speaker 4There's a very concerted effort by some of the most, arguably most respected people in the space who are, like, pushing this. For me, it's my largest holding right now. Is it Zcash? Yeah. Yeah, it is. Yeah. And it's, that's the thing that I feel like I would want to take profits into, is the thing to hold. Denominate. Denominate in Zcash, exactly.
Speaker 2And would you, what do you think about holding it for the years, the Bitcoin-style trade, which is what they're all talking about? I'm, although-- Or would you take, like, half off or two-thirds off and then run the rest for--
Speaker 4Yeah, I think, I think I would look to take half or two-thirds off. I think I'm, although I've only been in crypto for five years, it feels like-- 100 years. I'm old enough to know you should never marry yourself to the multi-decade--
Speaker 2But you're also old enough to know that everybody who made any wealth in the trade married themselves to--
Speaker 4That's also true. Yeah, it's very true.
Speaker 2That's true. Yeah. Very true. The actual people who made real money. That's very true. There's so much value in sitting on your hands, right? Very true. I think so. Very true. But, because the real wealth, the actual really rich people did nothing. That's true. That's true.
Speaker 3Yeah, I think, I think Zcash makes people feel early to something again, you know? Yes, I think so. It's like two cycles behind Bitcoin. Yeah. There's the quantum resistance. Yeah. Privacy. They have a scaling roadmap. Like it's, Bitcoin's ossified in a way. It's unable to change quickly, whereas Zcash, there's people building on it and it's more centralized than Bitcoin.
Speaker 1So, obviously, volatility in this space has been getting crushed, right? And, you know, a lot of people are putting that down to the institutionalization, what word? Institutional, it coming into Bitcoin, loads of cool selling, pressing vol down. Do you think that kind of takes the convexity out of like things like Bitcoin? Now, where, you know, the chances of doubling or tripling in a year are so much lower now because of that constant wall of selling that comes.
Speaker 2It's also a function market cap. It's just a big asset. Yeah, yeah. You know?
Speaker 1Because like, you know, we had a strategist on from Standard Chartered yesterday and he still had targets for like 200k end of next year and stuff like that, but vol's at 40 now, right? So, call options, if you've got those sort of targets, then call options lower. Yeah. And then call options look cheap as chips to you right now, given where vol is on both ETH and even Solana, right? Solana options trade, hype options are now trading. So, there's a lot of liquidity coming on to the options market and if you believe in the convexity of these things and there's a proper cycle turning, then I think loading up on some calls across the space looks quite good.
Speaker 4I actually quite like that. I do like that as a. Vol is cheap. Outside, yeah. Outside punts, especially on majors as well.
Speaker 3Yeah. I love punting, so it sounds like. This is all punts. The last time I really
Speaker 2bought call options was right at the peak of ETH. Yeah, I remember. But it was 5,000. I'm like, "It could go to 15,000. I'm going to buy calls because I only have to put in a couple of percent." But back then. The whole of crypto Twitter read that as, "He's all in on ETH." It's going to 15,000. But vol was at 150 back then.
Speaker 1Vol's at like 50 now. No, I know. Yeah. So, there's a big difference. Yeah. There's value now.
Speaker 2Yeah, there is. There's real convexity out there if. Yeah, yeah. You kind of need that liquidity thing, but it depends how far it goes. Yeah. How far out you can go in terms of time.
Speaker 4You are right on the institutionalization of it, though, because now you have the ETF, you have delta-neutral guys, you have people playing the funding gaps, et cetera, so it mitigates the levels you can break out at, because if someone's like, "Okay, cool. I have this delta-neutral trade, so I now need to rebalance, so I'm just going to whack you on whatever size I've got."
Speaker 2Which is what I think the Sunday afternoon moves are. Yes. Oh, absolutely. I mean. It's just the option hedgers waking up in Asia and just hedging their delta when they
Speaker 4wake up. Yeah. And they're trading Sunday night equity perps, by the way. There'll be news out, nothing will move, because none of the TriFi guys want to have money on hyperliquid. They'll be like, "Okay, this is going to be down 10% tomorrow." You short it unchanged from Friday's close, and you wake up and it's down 7%, but you can see it. If you look at hyperliquid equity perp funding rates over the weekend, you'll see this stuff go crazy, something like when Sam Altman and Dario posted that stuff about AI concerns, the equity perps for Micron, SK Highlands, all this stuff, barely moved, but the funding rates just went mental. They were like crazy negative for over three or four hours, and then you just woke up and then it'll obviously all neutralize when the stock's open, but there are lots of opportunities like that, which I think institutions can't do, but retail people definitely can do.
Speaker 3Nice. Hyperliquid's on Bloomberg now. It's on Bloomberg. You can feed in prices from Hyperliquid on Bloomberg now.
Speaker 4Yeah. If you told me this would have happened two years
Speaker 3ago, I would not have believed you.
Speaker 2Yeah. What's the
Speaker 3problem with perps? I just love cranking the leverage part. It's so much easier to understand than options. to understand the greeks you know yeah but it's easier to lose money yeah say options exactly
Speaker 1now you understand maybe that's why i lose money you know i'll be honest though you know me right like i teach options i have done for years and the reason why people are scared of options is because they buy them they watch that premium burn and then they're like they once their fingers get burnt they don't want to get involved again so to really bet like learn options and and make money for options you have to get comfortable with selling them yeah you have to be able to buy and sell them and i think that's the big challenge i found that the challenge like educating people around options a lot of people just when they hear the word sell options they just run a mile
Speaker 2right yeah but you know it's horses of courses because in an option you can come back into the money having been out of the money because you've got the time that works in your favor or against you you can use stop losses in perps same idea but you don't get the time you just get stopped out yeah and you lose the same equivalent amount so i don't know there's no nothing's easy i call
Speaker 1it safe leverage right like you perps give you real leverage but i think i think options can i change my answer to actually at the
Speaker 4top safe i've
Speaker 1lost more money in options but that's the sizing issue right you that's the sizing issue right it's only safe leverage if you size it but we all want to make money yeah i know
Speaker 2you've got to realize i'm not looking for three percent extra by selling a call option
Speaker 1i'm saying when you buy when you buy an option most people oversize the buy right and then they lose 50 grand or one trade they're like what the hell happened right so i think on the buy side you've got to make you've got to realize this thing is high octane that can explode in value but it can also evaporate in a week the
Speaker 2other thing that is quite interesting is people who use kind of in the money options as a way of putting down less money but you kind of keep into the trade without stop losses yeah leaps
Speaker 1essentially right yeah leaps yeah in the money leaps yeah yeah that is sensible yeah because you get some
Speaker 2leverage with it yeah and you don't
Speaker 1have a crazy time decay on it either so it's just like
Speaker 2you can't keep dialing it up to 100 when you're feeling a little bit racy in the morning
Speaker 1yeah well i mean that's the thing i think i think that options in the crypto space are only going to get bigger right and and you know people need to get educated around that right because there's there's you know we mean don't
Speaker 2forget there's more money for for uh brokerage houses and options than there are on everything yeah yeah yeah which is why therapist is now owned by complex yeah because it's you know yeah
Speaker 1options are a big business it's a good investment for sure but like me and dave always joke like altcoin type returns in the big in the large cap assets are are available if you know how to use options basically all right guys i think we'll call it a day it's been great to have you guys on
Speaker 4yeah enjoy the weather thank you thank you cheers thanks for having us you
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