Dialogue with Raoul Pal: The Decisive Point of 2026 in the Five-Year Cycle, Choosing the Right Assets for Long-Term Holding Without Relying on Luck

整理 & 编译：深潮TechFlow

Guest: Raoul Pal, Founder and CEO of @RealVision

Host: Kevin Follonier

Podcast Source: When Shift Happens and Raoul Pal The Journey Man

Original Title: Raoul Pal: How to make it in Crypto in 2026 (without getting lucky) | E152

Broadcast Date: December 18, 2025

Key Takeaways

Raoul Pal shared his investment framework on how to succeed in the cryptocurrency space in 2026 without relying on luck: choose the right assets, hold them long-term, and be patient. He believes that while many are paralyzed by short-term market fluctuations, the overall development of cryptocurrency is just beginning, and we are only 3% of the way to its goal of reaching a $100 trillion market.

"When more people are scared off by short-term fluctuations, the real opportunities lie in long-term liquidity and network effects." In his latest interview, Raoul Pal provided a non-lucky investment framework for 2026: extend the cycle from four years to five years, seize the window of real liquidity coming in, hold quality assets driven by adoption, and manage your portfolio with the principle of 'minimum regret.'

Highlights

• The market has bottomed out.

• Bitcoin will become a better store of value than gold.

• Liquidity is the most dominant macro factor currently.

• Real liquidity demand will appear in 2026.

• Crypto investment is actually a long game, but many people want to see immediate results.

• I initially thought the crypto market cycle was four years, but now I extend it to five years.

• People's anger often stems from mismatched time expectations and reality.

• I haven't heard anyone at Coinbase say the market is over; on the contrary, they all believe it is just beginning.

• There is a classic saying in brokerage accounts: the best-performing clients are often those who have passed away.

• It is unrealistic to pin all hopes and dreams on cryptocurrency, but for many, it may be their only way out.

• I have learned not to get caught up in who makes me unhappy or what problems occurred at work today. Most things are not important; what matters is whether you are moving towards your set goals.

• Long-term trends are easier to predict, while short-term ones are difficult.

• Humans learn through experience and lessons. Now, we have a new generation of investors. They need to learn through mistakes to gradually grow and overcome difficulties.

• The key to success in the crypto space in 2026 is to hold the right assets and stick to your beliefs rather than relying on others' opinions.

• Some tokens will still cause investors to lose money even with increased liquidity because they are inherently bad investments.

• The "minimum regret portfolio" is designed to ensure that when you look back at your investments, you won't regret hasty actions, avoiding foolish investment decisions.

• Most people never do research. They just say, "You tell me this project will succeed." But the question is, how much do they really understand about the project?

• Many people "borrow beliefs" when investing, such as "a certain big shot said this project is good, so I bought it." But in reality, this reflexive cycle often leads to poor decisions.

• Zcash is the last true privacy token and the last opportunity in the cryptocurrency space that could bring 1000x returns.

• After Bitcoin, only two protocols have truly broken the traditional mold: one is Ethereum, which achieved programmability; the other is Zcash, which focuses on privacy protection.

• I might choose to buy in during the next downturn, which I expect to occur in 2027, by then Zcash may become one of my investment targets.

• Currently, cryptocurrency is a $3.5 trillion asset class, and we may reach a $100 trillion market cap in 10 years, which means we have only traveled about 3% of the way.

• All game assets are essentially NFTs or non-fungible contracts, meaning that all future game assets will exist in the form of NFTs.

• You need to understand that you cannot get everyone on the lifeboat; some people do not want to be helped.

• If I believe the total market cap of crypto will reach $100 trillion in the future, I will focus on that long-term goal rather than worry about Bitcoin dropping 30% last week.

• Quality assets like Solana, even if their prices drop, I will hold firmly because I value their long-term potential.

From "God" to "Fool" Every 6 Months

Host: On the internet, your reputation is always polarized. Every six months, you might be hailed as a "God," then cursed as a "fool." How do you deal with this?

Raoul Pal:

Those who criticize me often do not understand my entire body of work; they only focus on specific points. I have tried to filter accounts in the comments section to distinguish between verified and unverified accounts, and the differences are significant. I believe much of the criticism is deliberately manufactured, and there may even be some state actors involved in spreading discontent through the comments section. They target anyone and any topic for various reasons.

Host: Can you elaborate? Is this possibly bot-driven? Or is someone manipulating it from behind?**

Raoul Pal:

I think it could be both. Some accounts in the comments section are very suspicious; for example, they have been registered for only three to six months, follow only me, and specifically attack some of my viewpoints. When you look further into these accounts' activities, you find they have posted almost no original content, just retweeting some information, and then suddenly posting fierce criticism. Some state actors may have realized that attacking different people and events in this way can effectively spread discontent. Ordinary users see these comments and become enraged, further amplifying this negative sentiment.

Of course, I also acknowledge that some criticism comes from real users who may misinterpret or shift blame for their own mistakes. However, many comments are malicious. Now, Twitter has rolled out some features that show account source information, but even so, those behind the scenes may use VPNs to disguise their locations, such as showing they are from the U.S. or other countries; this issue is not easy to resolve.

FUD on the Internet and State Actors

Host: You mentioned state actors; why do they deliberately attack anyone?

Raoul Pal:

Because it creates a sense of anxiety at the societal level. When no one knows what is real and what is certain, everyone is suspected of being a fraud, and everything is deemed wrong; this chaos can lead society into a state of collapse, and this situation is often deliberately manufactured.

In fact, Russia realized long ago that the most effective way to undermine a social system is to blur the truth. They would support both anti-government and pro-government activities simultaneously, creating contradictions and divisions. They also spread mixed information, making it difficult for people to discern truth from falsehood. The result is that society loses its foundation of trust in the truth, and once trust collapses, society becomes easier to manipulate.

For example, the political system in the U.S. has become extremely polarized. There are shadows of state actors behind this phenomenon; they do not simply support one side but rather exacerbate contradictions, making people's positions more extreme. They create conflicts on both sides, resulting in mutual hostility, with each side thinking the other is terrible. But in reality, most people's views are not that extreme. This artificially created division causes society to lose consensus on anything, making political decision-making increasingly difficult.

Host: What is the benefit for them?

Raoul Pal:

State actors create a lot of discontent and conspiracy theories, leading people to doubt everything. When significant events occur in the world, such as in the U.S., Europe, or countries like the U.K. and France, they usually intervene. However, if the media is filled with distrust and contradictory information, the public will lose trust in everything and will not support any action. This public consensus is key to driving international affairs; even in a politically divided world, this consensus is needed to accomplish important things. But the goal of state actors is to destroy this consensus, leading society into chaos and ungovernability. The harder it is to govern society, the stronger people's discontent will be because they feel attacked by other groups. If this hatred deepens, society will be unable to reach a consensus on any issue, which is a very serious problem.

This phenomenon is very common and has been going on for a long time. For example, during Brexit, this situation was very evident. Many people thought these attacks were aimed at one side, but in reality, both left and right were attacked. This phenomenon is particularly evident in U.S. elections and is ubiquitous across the internet.

Some people think these attacks come from opposing camps, but when you closely examine some extreme MAGA accounts and some radical left accounts, you will find they are actually manipulated by foreign forces. In some international events, you will find information filled with contradictions, and almost no one can discern the truth.

Host: This creates division. So what should we do?

Raoul Pal:

I believe we need to introduce digital identity and zero-knowledge proof technology to address this issue. We need a way to verify the authenticity of users, such as confirming they are real people and their locations, not disguised by VPNs, but through passport information. Of course, this information does not need to be publicly displayed. This is the advantage of zero-knowledge proof: it can verify the authenticity of information while protecting privacy. We must find a way to achieve this because, with the proliferation of artificial intelligence, we are creating machines that can generate content infinitely. AI can quickly generate content, such as producing a 10-minute interview, and ordinary people find it hard to discern truth from falsehood.

Is It Realistic to Pin All Hopes and Dreams on Cryptocurrency?

Host: For those who are real, emotional, and even angry, they are indeed human, and this emotion is normal. After all, you often say that everyone has some hope and dreams in their investment portfolios, especially in cryptocurrency investments.

But is it realistic to pin all hopes and dreams on cryptocurrency?

Raoul Pal:

It is not realistic, but for many, it may be their only way out. Some might suggest they find a part-time job or take on another job, but in reality, some people are already working three jobs at once. The problem is that we cannot change the existing political system or stop currency depreciation to pay off debts. So what opportunities can we offer these people? Should we directly subsidize them? But more often, they will see cryptocurrency as a "casino-like" opportunity, especially those in more desperate situations. As you mentioned in your post, crypto investment is actually a long game, but many people want to see immediate results. If you tell them that their funds might grow 20 times in ten years, they will think it sounds great. But most people do not want to wait that long; they hope to achieve 20 times returns in a month or even a year. As a result, they often deceive themselves into thinking that if they just catch this cycle, this quarter, or this trade, they can realize their dreams. But when things do not go as expected, they become angry because this method has never worked.

We have talked before that people's anger often stems from mismatched time expectations and reality. You can tell them that the proliferation of technology and market expansion is unstoppable. For example, the current size of the cryptocurrency market is $3 trillion, and it may grow to $100 trillion. In other words, we have only just begun this journey, having traveled 3% of the way. But when you tell them this may take ten years, their reaction is, "What about today? What if the market drops?"

Host: I see some people say that when the market performs poorly, you always use "think long-term" as a way to deflect. What do you think of this statement? How should we respond to those who are hostile towards you?**

Raoul Pal:

Short-term market fluctuations are often influenced by noise and short-term factors, while long-term trends are driven by two core factors: the speed of technology adoption and currency depreciation. From a probabilistic standpoint, long-term trends are easier to predict, while short-term ones are difficult.

Of course, market performance often deviates from long-term trends in the short term; this is very common, but many people are unwilling to accept this fact. They pin all their hopes on certain economic indicators, like M2, believing it will perfectly predict market trends, but in reality, the market will always deviate. As a macro analyst, my job is to figure out the reasons for these deviations. Understanding the reasons behind these can help us better adjust our judgments about long-term trends. In the short term, noise often obscures signals, while in the long term, it is easier to see the real trend; this is the key point investors need to understand.

Buy and Hold

Host: The crypto market is gradually maturing, with increasing participation from institutional investors and more professional traders, yet the result is that alpha in the crypto market has been almost squeezed out, leaving only the opportunity for long-term investment. What ordinary investors can do is "buy and hold," or bet on the long-term trends you mentioned. I tend to agree with this.

Raoul Pal:

I have seen similar situations, and this is also why I left the hedge fund industry in 2004. At that time, I was mainly engaged in macro trading, which relied on macroeconomic data; we would analyze the long-term trends of this data, and typically a trade would last from six months to three years or even longer, which is the essence of macro trading.

However, as more new investors entered the hedge fund space, they began to demand monthly evaluations of market performance from fund managers. The result is that even if a trade is profitable in the long term, as long as there is a brief pullback in a given month, the fund manager might choose to close the position early. This short-sighted behavior not only compresses market volatility but also reduces overall investment returns.

Today's cryptocurrency market faces similar issues. With changes in the macroeconomic environment and the rise of systematic funds and high-frequency traders, the space for short-term trading has been further compressed, and macro trading has lost its original advantages in the short term.

Many people are too eager for quick success; they always want to do something, always want to participate in trading. But in reality, if you are looking for excitement, you can do other things; the time span is the most valuable asset for investors.

Liquidity is Key to the Game

Host: 2025 has been a challenging year for cryptocurrency investors; if you haven't chosen the right coins, you basically won't make much money. Many people's investment performance has not been ideal; there is no longer a market where "only up, no down." Why is that?

Raoul Pal:

I have been trying to explain to people that it all comes down to liquidity; liquidity is the most dominant macro factor currently. The entire market is like a game, and the core rule of this game is how liquidity flows. In the cryptocurrency market, there is an additional "game rule," which is the actual adoption of tokens. Whether it is layer two networks, layer one chains, or application layers, the key lies in the speed of technology adoption and the degree of token depreciation. These two factors together determine market performance.

However, the mechanics of liquidity are quite complex. In traditional finance, liquidity is usually associated with quantitative easing (QE), which increases market funds through "printing money," but this process has now stopped. We also need to consider the net liquidity of the Federal Reserve, which involves the Treasury General Account (TGA) and reverse repos (RRP). The Treasury General Account can be seen as the government's checking account, with funds constantly flowing in and out, while reverse repos are another tool that affects market liquidity. The interplay of these factors determines the level of liquidity in the market.

One reason is that the rate of change in liquidity has been very low, and another reason is the extension of the debt cycle. People often say that the crypto market has a four-year cycle, but this is closely related to the economic cycle. Since the 2008 financial crisis, countries have lowered interest rates to zero and set the maturity of debt to 3 to 5 years, so every four years there is a wave of debt maturing that needs to be refinanced.

However, I have noticed that the recent business cycle does not seem to have recovered as expected. I started to re-examine the data and found that in 2021 and 2022, many countries extended the maturity of their debt to over five years. This means that the liquidity surge that should have occurred in the fourth year has now been pushed to the fifth year, which is 2026. This is why liquidity has not increased significantly at present. Real liquidity demand will appear in 2026 because there will be $10 trillion of debt that needs to be refinanced.

Additionally, the number of tokens in the market has also increased significantly. Finding truly valuable tokens has become increasingly difficult. Sifting through tens of thousands of tokens is very complex, so we advise investors to simplify their investment strategies as much as possible. Focus on holding mainstream large tokens and do not take too much risk. If you want to try some small projects, you can operate with a small amount of funds. We have discussed this many times.

Many people ask me, "Why has my portfolio lost 90% in this cycle?" I would counter, "Who told you to invest in these tokens?"

Host: So liquidity has two levels; it flows in and out, but in the long run, liquidity is generally increasing, right? However, there are simply too many tokens in the market now, and even if liquidity increases, it cannot benefit all tokens. I think this is a very important message; some tokens will still cause investors to lose money even with increased liquidity because they are inherently bad investments.

Raoul Pal:

That's right; these tokens lack real use value. Of course, some tokens may attract attention temporarily due to becoming memes, but this hype is hard to sustain. People need to understand that even among mainstream tokens, there are significant risk differences; the extent of the decline depends on the maturity of the token, the number of users, and the depth of the market.

Minimum Regret Portfolio

Host: You previously mentioned not to invest blindly; we can place this advice into a more traditional investment framework, advocating for a more conscious investment approach. For young cryptocurrency investors, this method may sound a bit boring, as many people start investing with a mindset more like "gamblers," especially those from the easily distracted "ADHD generation." But in reality, the goal of investing is not to get rich quickly but to avoid large losses and accumulate wealth through long-term compounding.

I feel that in this cycle, most cryptocurrencies have lost money, so people are starting to gradually realize these eternal investment principles. What do you mean by the "minimum regret portfolio" you mentioned?

Raoul Pal:

The so-called "minimum regret portfolio" is designed to ensure that when you look back at your investments, you won't regret hasty actions. We have all experienced those seemingly ridiculous investment decisions, such as allocating 10% of our investment funds to high-risk projects. We have also mentioned some tokens with funny names, and these projects have basically gone to zero, but I still hold them because I don't want to let people down or for other absurd reasons. This is what is known as a "shame wallet"—a small account filled with failed investments. If the amount is small enough, it won't have a significant impact; but if it involves large sums, it can be a disaster. So, the core of the "minimum regret portfolio" is to avoid making these foolish investment decisions.

For example, investing in Layer 1 is a relatively simple choice. Compared to other types of tokens, they are larger in scale and have higher adoption rates. In a market cycle, these assets will not go to zero. Even if their value may gradually decline over time, they will not crash instantly like some high-risk projects. You won't experience situations like the "LUNA effect" or certain DeFi protocols suddenly collapsing. Layer 1 blockchains are relatively stable, which is their advantage.

Next, you need to ask yourself: Am I blindly following the market narrative? Now you can easily do some basic research yourself. For example, you can ask ChatGPT, "What are the on-chain metrics for this blockchain? How is the user growth data?" This information can be found in seconds, but most people never check. They just say, "You tell me this project will succeed." But the question is, how much do they really understand about the project?

Chat GPT and On-Chain Data Metrics

Host: How does ChatGPT perform in analyzing on-chain data metrics?

Raoul Pal:

It performs excellently. Last weekend, I wrote an article about Metcalfe's Law in "Global Macro Investor" and explored how to value it. I brainstormed with my AI and found a simple way to measure it: by observing the liquidity of stablecoins, the value transfer of stablecoins on layer one blockchains, and the relationship with active user numbers—these metrics were actually suggested by ChatGPT. It recommended that we refer to five key metrics commonly used in DeFi and then rank different blockchains based on these metrics. This way, we can effectively judge which blockchains are overvalued and which are undervalued.

It also has a solid grasp of technical chart analysis. You can directly upload a chart and ask it, "What do you think?" It will provide very insightful analysis. You just need to keep communicating with ChatGPT, adjusting your questions until you find the right way to express them, and it can give you the answers you want. At first, you might think, "It doesn't work; it can't answer my questions." But in reality, the problem often lies with us because we didn't ask the right questions. I learned this through trial and error. It does take some time, but once you master the method, it becomes a very powerful tool.

Does Raoul Follow His Own DTFU (Don't Fuck This Up) Framework?

Host: I must commend your DTFU (Don't Fuck This Up) framework because it has indeed helped me navigate this investment cycle smoothly. Do you fully adhere to the "Don't Fuck This Up" framework yourself?

Raoul Pal:

The answer to that question is: Yes and no. I do focus more on my investment decisions; whenever I say "focus," many people assume they should focus like me, but the reason I can take on higher risks is that I have built a valuation model based on multiple factors to help me determine when to increase my investments. I may adjust these strategies in the future, but for now, I feel comfortable with my allocation. This strategy has higher volatility because it is designed for early-stage and early network adoption. You need to understand that this model has higher volatility during market upswings and also more severe downturns, but not everyone can withstand such fluctuations. So, do I fully adhere to my framework? The answer is, I follow it in most cases, but I also make adjustments based on my research and risk tolerance.

Additionally, I have other investments, such as digital art and Ethereum-related projects. While these projects carry some risks, the cash flow they generate allows me to be more flexible in my asset allocation. Of course, this does not mean I am always right; I just do more research, so I am willing to take on more risks. If I mess up, that is my responsibility; others should not blindly follow my asset allocation. My advice is to follow some basic guiding principles rather than directly copying my portfolio.

Host: Never "borrow beliefs." This is the most important point. Every time I incur a loss, it is because I was "borrowing beliefs."

Raoul Pal:

I do the same; whenever I do not conduct my own in-depth research, the results are often not ideal. For example, I recently interviewed Mert about Zcash. I noticed that while the market rebounded, Zcash was declining. I asked him, "Are we sure this is not a market rotation? Is someone trying to find new hotspots in a sideways declining market?" Many people "borrow beliefs" when investing, like "a certain big shot said this project is good, so I bought it." But in reality, this reflexive cycle often leads to poor decisions.

I actually like the narrative of Zcash, but I do not hold it. I understand the importance of privacy coins, but choosing a privacy coin means going against the government, which is a difficult struggle. Since 2013, I have witnessed the complexity of this struggle; it is not easy.

We should have the right to use private currencies. But the reality is that the U.S. exerts tremendous control globally through financial regulation, and the existence of privacy coins directly challenges this control, thus facing strong opposition from banks and governments. In fact, many banks do not hate cryptocurrencies; they fear they cannot meet KYC and AML requirements, and thus face lawsuits from the U.S. So, regulation is the root cause of all this.

Naval and Balaji's Optimism for Zcash: Is This a "God Signal"?

Host: I bought my first batch of Bitcoin from late 2018 to early 2019. At that time, I followed three insightful people online: Naval, Balaji, and Chamath. They performed exceptionally well in predicting the future of technology. At that time, Bitcoin was around $3,000, and all three believed Bitcoin would eventually rise to $100,000; I remember they had reached a consensus on Bitcoin back in 2012.

Each of their insights far exceeds mine, so when their views align, I realize I should buy some Bitcoin. It turned out that seven years later, Bitcoin indeed approached $100,000 as they predicted. Now, two of these three, Naval and Balaji, have put forth a new significant viewpoint—the importance of privacy.

As you mentioned, there are always some phase hotspots in the cryptocurrency space, but I always remember that it was these few who made me pay attention to Bitcoin and prompted me to buy in a few years ago. And now, two of them are saying: Naval believes Zcash is the last true privacy token and the last opportunity in the cryptocurrency space that could bring 1000x returns. Naval also compared Zcash's privacy features with Bitcoin. Balaji's viewpoint is that after Bitcoin, only two protocols have truly broken the traditional mold: one is Ethereum, which achieved programmability; the other is Zcash, which focuses on privacy protection. So, I think we need to focus on this direction.

Under What Conditions Will Raoul Buy Zcash?

Host: What conditions would lead you to decide to buy Zcash?

Raoul Pal:

I cannot currently determine if it is the best time to buy Zcash unless the entire market shows a clear upward trend and can sustain it. From the current situation, the market seems to be validating the theory of "rotation" (i.e., funds flowing from one asset class to another). However, I feel Zcash may already be in an overbought state. What to observe next is whether it can find a stable price range before starting a new round of increases.

Do I need to buy Zcash now? Not necessarily. My current investments in cryptocurrency are sufficient, and I do not need to hold Zcash to prove I am an early investor. So, I am not sure if I will chase the high now, but I might choose to buy in during the next downturn, which I expect to occur in 2027; by then, Zcash may become one of my investment targets. Because I feel it may experience a significant pullback. For me, buying in then may be more cost-effective than now. I have developed my investment strategy, and unless there are significant changes in the market, I do not plan to adjust now. However, I will continue to monitor its performance, and if its price falls to a more reasonable range, I will reconsider. My investment logic is that if an asset can prove its value and no longer experiences significant pullbacks after each surge, it may become a better investment target. Of course, it is also possible that its price returns to current levels or rises to $1,000 or even higher in the short term before pulling back.

Is DCA (Dollar-Cost Averaging) Bitcoin the Only Proven Way to Make Money?

Host: I saw a tweet about a boy whose girlfriend started dollar-cost averaging into Ethereum and Bitcoin from 2019. She completely ignored the noise on crypto Twitter, and as a result, her investment performance far exceeded her boyfriend's.

Raoul Pal:

This is actually interesting. There is a classic saying in brokerage accounts: the best-performing clients are often those who have passed away.

Host: Dollar-cost averaging seems to be the only proven way to make money in cryptocurrency, much like investing in the S&P 500, but with potentially higher returns.

Raoul Pal:

Yes. However, I believe there is a more optimized way, which is to increase your dollar-cost averaging when the market experiences a certain degree of decline. For example, when the market drops 30% or more, you can triple your dollar-cost averaging amount. This way, your compounding returns will be higher, and this strategy is not difficult to implement today.

Host: Psychologically, it is very difficult. Like me, I dollar-cost average into Bitcoin every month, but I always feel it will rise first and then fall, so I always buy at local highs.

I feel like a novice version of Michael Saylor. Just a few weeks ago, I was thinking, "Bitcoin will rise to $106,000, right?" So I bought in at the end of the month as usual. Five days later, it dropped significantly, and I adjusted my position. At that time, I thought maybe it would continue to rise. But it dropped, even falling below my purchase price just three weeks later. But ultimately, I do not care. Because when you stay in the market long enough, you will find that you do not care about the specific purchase price; you will not remember if you bought at the lowest point unless the market experienced a significant drop. If not, you will not remember at all. Moreover, impulsive buying at local highs is not important. When looking back at the charts, you will only think, "What does it matter?"

But do you remember when Bitcoin was $10,000, then it crashed to $3,500 when it fell to $35,000? Even so, now you have made 10 times your investment.

Raoul Pal:

In that situation, you might curse those you followed in trading, calling them frauds and saying they ruined your life, right? But now, you have made 10 times your initial purchase price. That is the problem. Those who truly understand cryptocurrency know that time is key.

You need to know whether your investments align with your risk tolerance. Do you understand what you are buying? For example, do you know that early-stage tokens may face the risk of not being widely adopted? Whereas assets like Bitcoin and Ethereum have the advantage of network effects. Even Ethereum, just a few months ago, some said it would drop below $1,000, and everything was over. But these people were just blindly following the market narrative without truly paying attention to reality.

Kevin's Lessons from Silicon Valley and Raoul's Views

Host: I previously mentioned that I went to Silicon Valley and interacted with top investors and entrepreneurs there, learning some concepts about exponential growth. I will share some insights I collected in the podcast and seek your opinion.

The first point is that I noticed there are quite a few early cryptocurrency believers, referring to those from 2017, 2018, 2020, and 2021, some of whom are starting to turn to other industries, especially the AI field.

Now we see some Wall Street ETFs and stablecoins, but I feel disappointed with the results of cryptocurrency, so I left. If I carefully interpret their words, I think the real reason they left is that they could not easily make money in the past few years. Or rather, the market has become more challenging; they may not have lost money in this cycle, but they also haven't made any.

Basically, they feel they have lost their edge, right? So they say the era of high returns in cryptocurrency is over. But when I went to Silicon Valley and talked to those who invested in Notion and Figma, their perspective was completely different. These people are building ETFs, observing market liquidity and narrative changes, and they have a very good understanding of the current state of the market. They believe the high returns in cryptocurrency are still ahead.

Cryptocurrency is fluid; most people feel, "Yes, everything will go up, right?" But the reality is that the vast majority of investments will ultimately go to zero. They will actually fail. We have witnessed this in the cryptocurrency market over the past few years. But at the same time, there will be some very excellent investments whose performance will be astonishing. The mistake most people make is that they do not hold these assets long-term because once these exponential investments succeed, their growth will far exceed your imagination.

Raoul Pal:

Yes, but I have a slightly different perspective. As a venture capitalist, you typically invest before the token generation event, so your valuation has more buffer. However, when tokens enter public market trading, the "strong get stronger" rule does not always apply. Because the "strong get stronger" rule refers to that distribution pattern: 5% of investments will bring all the returns, while the majority of other investments either perform mediocrely or fail.

In fact, your purchase price is a very important factor. I have tried both methods. In the last cycle of 2020, I bought a very broad portfolio. Ultimately, most of the returns came from Ethereum and Bitcoin, along with some Solana at the time. I believe that in this cycle, even if some trades perform well, most assets still perform poorly. So I am not sure if this is an easy investment method, but if you can buy at a very low price, it becomes much easier.

Host: I think the point here is that even if the prices of Bitcoin, Ethereum, or Solana are not considered cheap today, if they ultimately succeed, they will still bring huge returns.

Raoul Pal:

My point is that cryptocurrency is currently a $3.5 trillion asset class. If you look at the trend growth rate of market capitalization and make a logarithmic regression channel prediction, even assuming the growth rate slows down, we can still reach a $100 trillion market cap in 10 years. So even if the market growth slows down, we can still reach this goal. This means that we have only traveled about 3% of the way.

Additionally, Bitcoin's market dominance may gradually decline over time, while the dominance of smart contracts will gradually rise. Because the application scenarios of smart contracts are far more than Bitcoin as the collateral layer of the economic system. This is not a denial of Bitcoin, but because the value of the application layer far exceeds that of the underlying collateral layer. You can think of Bitcoin as the "U.S. Treasury" of the economic system, while all the financial leverage and applications built on top of it will be much larger. Therefore, in the long run, smart contracts may perform better. So, ensure you have enough smart contract assets in your portfolio to capture the process of growth from $3 trillion to $100 trillion. Because not all growth comes from Bitcoin.

However, this is indeed difficult to achieve. Simply buying does not guarantee success. But there is no doubt that the total market capitalization has 30 times growth potential. Thirty times is a very large number. So what does this mean for some successful tokens? Of course, not all tokens can achieve 1000x returns.

The Cryptocurrency Framework of Silicon Valley vs. Wall Street

Host: This is the technical knowledge I learned from Silicon Valley; these concepts are applicable, but Wall Street does not understand. Because their thinking is linear, they pay more attention to sequentiality.

Raoul Pal:

Wall Street's thinking habits are linear growth and mean reversion. These are their two characteristics. So when they look at cryptocurrency, whenever the market goes through cycles of boom and bust, they always think the market will mean revert. But we all know that if you convert the price chart of cryptocurrency into a logarithmic chart, you will find it is actually a fairly smooth growth trend. You can look at companies like Amazon, Google, and Tesla; their network adoption models are the same. In the early stages, their volatility is very high, but as they mature, volatility decreases. This is the same logic, and Silicon Valley has an intuitive understanding of this model, which is the foundation of their entire business model.

Host: And this volatility may fluctuate like Ethereum over five years, right? But if you extend the time frame to 20 or 25 years, you will find that it is not just a matter of potential; real growth will manifest later.

Raoul Pal:

I have a good friend who is an investor at Ribbit Capital and also one of the early seed investors in Robinhood. I think he is one of the best fintech investors of all time. Look at the development of Robinhood; initially, there was no significant progress, and they did not attract young people; millennials had little interest in stock trading. Then the pandemic came, and their growth began to go exponential.

Next, the GameStop incident occurred, and Robinhood nearly collapsed. But if you look back now, you can hardly find traces of these fluctuations on the chart. This kind of success requires immense patience and a deep understanding of potential survival risks. If you can persist and weather the storm, over time, the value of the business as a network will grow larger.

Exponential Growth

Host: Last year, we invited a guest named Haseb, who grew up in Silicon Valley and, like you, believes in the power of exponential growth. Personally, I believe in exponential growth because I have experienced it firsthand and witnessed its power multiple times. Perhaps you would say that the growth of stablecoins is exponential, and the trading volume of DeFi is also exponential, but this growth does not seem to be directly reflected in the value of Ethereum; the on-chain value has not been fully captured.

So, do you still not believe in exponential growth? Because every time exponential growth is mentioned, the answer is the same: no matter how we think, these things will ultimately become much larger than today. When they reach a certain scale, the scale effect will bring greater value. This is the core significance of exponential growth in the technology field—no matter how large you think it will develop, it will ultimately exceed your imagination.

This is also something Silicon Valley understands better than Wall Street. Silicon Valley's way of thinking is based on exponential growth, while Wall Street tends to favor linear thinking. In recent years, the focus of cryptocurrency has gradually shifted from Silicon Valley to Wall Street, which may make some people uncomfortable. If you believe in exponential growth and look to the future, whether it is Ethereum or Solana, they still seem very cheap today. More importantly, I think we should become true believers, not just believe but persist long-term.

Raoul Pal:

What many people do not understand is that there is currently a debate surrounding this issue. On one side are those who support Metcalfe's Law and network models; on the other side are those who try to pick cheap assets using cash flow and traditional valuation methods, wanting to be the "Warren Buffett of cryptocurrency." But the facts have repeatedly proven that the power of network models surpasses traditional analytical methods. Network models are compounding because the more valuable a network becomes, the more users it attracts, and more users bring more value, creating a continuously rising cycle. This growth is exponential.

Some say we should evaluate Ethereum's value based on its fee income. But this completely ignores its essence. Ethereum is not a company that profits from income; it is a network that supports the operation of an entire business ecosystem. The core of Metcalfe's Law is to capture the total value and the number of users driving that value. Therefore, you can calculate the unit value of each user. Current mathematics shows that each new user added to Ethereum is worth about $313,000. On Solana, this number is about $65,000. Of course, this data may have some deviations because layer two solutions are also attracting users. But the overall logic is that every new user joining will significantly enhance the network's value. As more people and businesses join, this value will further grow. People often forget that this is a compounding effect, not linear growth like traditional cash flow.

Host: Perhaps there is another angle that can help people better understand Bitcoin's potential. For example, Bitcoin is essentially zero income, so we cannot even measure it using traditional valuation methods. People cannot even debate this point, right?

Our mutual friend, Bitcoin expert Matt Hougan, once talked about Bitcoin. A few weeks ago, I asked him how great Bitcoin's potential is. His answer was very simple: Bitcoin will become a better store of value than gold. Today, gold's market cap is about $25 trillion to $30 trillion, while Bitcoin's current market cap is only $2 trillion. Twenty years ago, gold's market cap was about $3 trillion, and over the past 20 years, gold's value has increased tenfold. If Bitcoin can catch up to gold's market cap, that means over 10 times growth. Bitcoin's price could reach $100,000. And considering gold itself is also growing, if Bitcoin catches up to gold, the future growth potential could be even greater.

Another angle is the experience. What will happen when Bitcoin appears as "digital gold" on billions of people's phones? This is the true power of exponential growth. Just like e-commerce, people once thought e-commerce was a strange thing, thinking Amazon was just a niche phenomenon. But when e-commerce became not just Amazon but the entire industry on mobile phones, it became enormous, far exceeding anyone's imagination.

The same principle applies: What will happen when Bitcoin appears as digital gold on everyone's phone? Once Bitcoin touches everyone's life, its growth will exceed everyone's expectations exponentially.

Raoul Pal:

That's right; it all comes down to Metcalfe's Law and the relationship between user numbers and total transaction value (the core of this law is network effects; the larger the user base, the stronger the network's utility and appeal, e.g., the more phones there are, the more people each user can contact, and the higher the value). Now, if we want to use Bitcoin, we need to open a Coinbase account and complete various operations, which inherently limits the number of users. People say there are about 650 million crypto wallets globally, which is good. But if Bitcoin could be embedded in everyone's phone in a simple way, like through Apple Wallet or other similar tools, then the number of users could instantly reach 5 billion. If these people each transact the same value, the network's value will experience explosive growth. This is the power of exponential growth; once you understand it, it seems very simple.

Many people are always short-sighted; they say, "It's all over" or "This time it's really done." This short-sighted mentality happens almost every day. People forget that these things grow with time through compounding because they lack a sense of time.

Similarities Between the Internet and Bitcoin

Host: In the early 2000s, I was only 10 years old. When I later encountered cryptocurrency, I realized I was too young to truly understand its significance. I once thought, if I reached an age where I could invest, would there be a wave similar to the internet? But I missed that opportunity, and now it seems like a similar situation is emerging again. However, upon reflection, not everyone can succeed in such a wave. If everyone could succeed, there would be no failures in the internet era. If someone had held onto some stocks back then, they might have made a fortune. But the reason I do this podcast is to hope that people won't look back in 20 years and say, "I gave up; I missed the opportunity. Even though I heard this information and tried to invest, I ultimately missed out."

Raoul Pal:

To illustrate the difficulty of investing, we can take Amazon as an example. Amazon initially was just a company selling books using the internet platform. At first, its stock was driven high by the concept of "the internet" because people thought it could not only sell books but might also sell other things in the future. But then, Amazon's stock price plummeted by 95%, and many thought it was finished. However, as the market gradually recovered, Amazon also rose again. Even when it was not profitable at the time, its price-to-earnings ratio soared. Between 2014 and 2017, Amazon's price-to-earnings ratio even reached 850. Almost all hedge funds were shorting it because they could not see how Amazon could transform from a book-selling company into the world's largest online marketplace. Amazon not only profited from selling products but, more importantly, it became a platform supporting countless businesses to develop on it. This model is a manifestation of Metcalfe's Law—the value of the network grows exponentially with the increase in user numbers and ancillary services.

For example, Amazon needed to handle a massive amount of computing demand, so it developed the cloud computing service AWS. Then, they built a complete logistics supply chain to support business development. Ultimately, this network created enormous value. If we assess Amazon's overall value based solely on its profit margin from sales, it is far from sufficient. In fact, Amazon's scale has exceeded people's imagination, becoming a behemoth. But recognizing this from the beginning and holding onto its stock is very challenging; this is the difficulty of investing. In contrast, Microsoft's success seems more intuitive; almost everyone can see its potential.

Host: However, now we have the technological and Silicon Valley experience framework to help us understand the investment logic of cryptocurrency. So compared to the past, it may not be that difficult. But even so, investing in cryptocurrency is still not easy; the market is filled with noise, and the volatility is extreme. This volatility is not just short-term; sometimes it may last for a year or even longer. This volatility is indeed painful, especially since cryptocurrencies are highly liquid assets, right?

Raoul Pal:

That is the problem. Unlike ordinary investors, venture capitalists face much less pressure in this regard. They usually only need to evaluate their investments once a year, and many times, these evaluations are merely guesses. Therefore, they can, to some extent, ignore the short-term volatility of assets. But for entrepreneurs, the situation is entirely different; every day feels like a tug-of-war between "we are doomed" and "we are going to succeed." The process of entrepreneurship is filled with alternating crises of survival and hope, and this state occurs almost daily.

Host: Some have said that achieving wealth through the accumulation of time is actually a very boring process. Does this mean that this generation, especially those easily attracted by short-term stimuli, may ultimately fail to accumulate long-term wealth? Because they are always pursuing short-term gratification, which may lead to financial failure in the end?

Raoul Pal:

Do you remember when you learned to ride a bike and fell? I think the answer is yes. When you ride over a gravel road, if you brake hard, the wheels may skid, and you will fall. Through such experiences, you learn how to better control the bike; humans learn through experience and lessons.

Now, we have a new generation of investors. They need to learn through mistakes to gradually grow and overcome difficulties. Each of us has made mistakes on the investment path, so we cannot conclude that because of their speculative behavior today, they will not become adept at leveraging compounding in the future. I understand their situation: they have relatively little capital, lack long-term job security, and may not even have time for long-term investments. Therefore, to some extent, their investment behavior resembles betting in a casino. But I believe that over time, they will gradually learn how to invest more rationally. Yes, compounding is indeed a process that requires patience and may seem a bit "boring." But once people experience the process of making money and then losing it, they will be more cautious next time. In fact, you are a good example of this.

Time itself is also a form of leverage. I have used leverage in assets with volatility ranging from 70% to 90%, and even in assets with higher volatility. Ultimately, every time, problems arise.

Raoul's Investment Portfolio for 2026

Host: The last time we talked about your portfolio, you mentioned that some people concentrate their investments to an extreme degree. So, now that it is December 2025, what does your portfolio look like?

Raoul Pal:

To be honest, I have hardly made any trades since the adjustment three weeks ago. I did buy some NFTs, but aside from that, there have been no other operations. I have not reallocated assets or made significant changes. I share my investment configuration because it is my choice. I will also share my confidence in certain things, but I hope everyone understands not to directly copy my investment approach. My risk tolerance is different from yours. I just want to share my strategy as authentically as possible. This is not to tell you how to do it but to hope you can make decisions based on your situation. So, those who edit the podcast, please do not take things out of context or use my words to create misleading content.

Raoul's True Views on SUI at the End of 2025

Host: Please tell me your true views on SUI at the end of 2025. What keeps you firmly believing in SUI despite the market's volatility?

Raoul Pal:

SUI's performance has not been significantly different from other tokens; it remains at a high point on the risk curve, which is an important signal. We have noticed that its overall performance has been ahead of Ethereum and Solana in terms of timing, although its recent performance has lagged slightly, but the overall trend remains upward, and performance is gradually improving.

The core issue with SUI is whether it can prove the practical application value of its excellent technology. The technology itself is undoubtedly excellent, but the key is whether it can be widely adopted. This is also the core issue we all focus on. So, how is SUI's adoption? We need to see user growth. Currently, their user growth rate has surpassed Solana's performance in the last bull market and is faster than most layer one blockchains. Although SUI started later and has a smaller user base, this also means it has greater growth potential.

The next key is value creation on the network. We need to focus on the total value of transactions. We can see that SUI is trying some new directions; some projects may fail, but there are also some successful cases, such as holding a large amount of Bitcoin on-chain. This is a very important value driver because Bitcoin, as a large-scale asset, adds value to the entire network through its transfer.

In addition, the stablecoin ecosystem on SUI is performing well and growing very quickly. The performance in the DeFi space is somewhat in the middle and appears a bit scattered. This is because SUI is still in its early development stage. They have only been promoting to the general public for about three years, and it has only been two and a half years since the market began to truly notice them. Therefore, from a business development perspective, SUI is still a very young project.

When I break down this data and input it into ChatGPT and my other analytical tools while comparing it with Real Vision's chief crypto analyst Jamie Coutts, we arrive at similar conclusions. If you use Metcalfe's Law and user adoption models while avoiding being misled by surface-level active user metrics, the results will be clear. I found that SUI's valuation is about 80% lower than Solana's. Although SUI has not yet reached Solana's level in terms of user numbers, this also indicates it has tremendous growth potential. Therefore, we need to see the overall market rise and push SUI to break through higher price levels.

Next, we need to observe whether SUI will gain more adoption and higher activity as expected. This remains to be verified, but the indicators so far show that as an L1 chain, SUI's development speed is faster than any other project, and each active, verified user is creating considerable value for the network.

Where Do SUI Network Users Come From?

Host: Where do you think these users of SUI mainly come from?

Raoul Pal:

I am not entirely sure about the specific sources of users, but generally speaking, these users mainly come from the Web3 community. Additionally, whenever a breakthrough application can attract Web2 users to transition to Web3, such as through blockchain games, these users will become new active users. They may use blockchain technology, but since these actions usually involve small transactions, their contribution to the network's value is relatively limited. To truly create value, what is needed is a large number of small transactions, not relying on the contributions of single users.

What can truly bring enormous value to the network is a user base similar to that of the Bitcoin network. These users are not only numerous but also engage in large-scale value transactions. Especially when you attract institutional investors like sovereign wealth funds, they can hold substantial assets, or super investors like Michael Saylor, who personally holds billions of dollars in Bitcoin assets. This scale of user base is the core strength that the network truly needs.

How to Ensure On-Chain Data is Not Fabricated?

Host: In the cryptocurrency space, how can we ensure the authenticity and accuracy of on-chain data? This issue is not limited to SUI but pertains to the entire cryptocurrency ecosystem. How do you verify and ensure that the data you use is reliable?

Raoul Pal:

You cannot ensure it completely, so what you can do is maintain consistency in your analysis. When measuring SUI's active users, the standards and methods we use should remain consistent with those used for measuring Solana, Ethereum, or Bitcoin. This consistency can help us minimize errors and ensure the relative reliability of the data.

From existing analyses, blockchains like Avalanche, Near, and SUI appear to have relatively low valuations. This situation is actually understandable because these chains are currently experiencing significant user activity growth, and many new application scenarios are emerging, and to some extent, they have already achieved a certain scale. From this perspective, their valuations do have a certain rationality.

Stay Vigilant About Cryptocurrency Data

Host: Last time we talked about this topic, you mentioned that one must always remain vigilant in the cryptocurrency space. I completely agree with this. Clearly, some people have not experienced similar events, such as the Luna collapse. Now, regardless of asset prices, I always remain skeptical of any data in the cryptocurrency space; everything seems gamified.

Raoul Pal:

One factor I use to filter is the sustainability of active users. There are usually some gaming activities on Telegram that seem to attract many users, but in reality, it is the developers of these games manipulating the system. They attract people to participate once, and then these users disappear, so they are not truly active users. Although the data looks good, this activity has no real value.

Host: Are you saying that some blockchain protocols may have motives to fabricate data, such as to raise funds? I also think there may be some foundations that have similar incentive mechanisms because it all looks like a game.

Raoul Pal:

Yes, they want the data to look better to drive prices up, and that is the problem; we cannot fully trust these numbers. Therefore, we need to look for some comparable metrics to observe the sustainability of the data and whether it has reasonable explanatory power. This is what is known as the "smell test": can these user data be reasonably explained? After that, we can verify through charts.

So, how do we interpret charts? First, we need to analyze the charts individually, looking at long-term trends and short-term trends. In the short term, you can observe daily charts, while for the long term, you need to focus on weekly or monthly charts, using logarithmic charts to better understand data changes. Next, compare the asset with other assets to see if it exhibits abnormal trends. Usually, this kind of comparison will send signals, such as showing certain data anomalies. This may just be noise, but it may also indicate deeper issues.

In summary, there is a lot of work to be done, but this analysis is necessary. Because you can never be completely sure of your specific position on the risk curve. As an investor, your task is to remain vigilant at all times, ensuring your asset allocation does not expose you to excessive risk or poor performance. You need to constantly reflect and ask yourself: Am I making a wrong judgment?

How Does Raoul Handle His Monthly Income?

Host: What do you do with the money you earn from your business each month?

Raoul Pal:

Before answering your question, I want to take a step back and talk about it. In fact, we often do not realize how lucky we are. Whether it is you or me, we can earn returns by putting in time through work, which is a wonderful thing; all work is essentially like this. But more importantly, we build networks through this work, and this may be one of the most valuable things humans can do.

Through this network, you can communicate with people like Hunter Horsley, reach out to Haseb at any time, and even find Brian Armstrong. That is the greatest value. What truly matters is not how much money you earn from your business, but what this network can bring you, or more importantly, what you can contribute to this network. Because only when you continuously provide value to the network will it continue to create returns for you. If you only take without giving, then this will eventually stop.

Host: After earning income each month, how do you usually handle that money?

Raoul Pal:

My cash flow is mainly used for investments and daily living expenses, which is actually similar to what most people do. For investments, I mainly invest in digital art and artworks.

As assets continue to grow, you will want to upgrade your life a bit. For example, you might buy some new things, like upgrading your sound system or getting a new car. These updates are not only for enjoying life but also to maintain the quality of your assets. Because if you do not maintain and update, the value of your property will decline over time. For example, cars will age and break down, eventually requiring frequent repairs, which can be quite bothersome. So, I will regularly do some of these things to ensure my asset base remains high quality.

What is the Current State of NFTs?

Host: Is everything turning into liabilities now? You just mentioned digital art, which refers to NFTs. We briefly talked about this topic before. What is the current state of NFTs?**

Raoul Pal:

Now Art Basel is taking place, and half of the digital art market is there. Although most of the artworks I personally invest in are not digital art. The current situation is that once the price of Ethereum or Solana reaches a certain high point, NFT sales will explode again because people start to convert their wealth into other forms. But when prices drop to low points, everyone lacks the extra funds to buy NFTs because the opportunity cost of converting liquid assets into illiquid assets decreases. In theory, whenever prices reach high points, the art market becomes the focus.

We are starting to see some big investors entering this field. For example, Micky Malka from Ribbit Capital purchased the intellectual property of Crypto Punks and built a large art collection. He also created a permanent exhibition space called "Node" in Palo Alto, California, showcasing these artworks for all visitors to Stanford University and Silicon Valley. There are also investors like Alan Howard, who have invested heavily in this field. We see more and more large investors joining in, establishing large-scale collections.

Although the value of NFTs still fluctuates with the prices of cryptocurrencies, overall, the value of artworks is rising. Even when Ethereum prices are weak, the market may temporarily decline, but over time, it will gradually recover. Many people still have the impression that NFTs are just "APEs" or "JPEGs," thinking they have depreciated and viewing them as a form of foolish speculation. But they do not realize that cryptocurrencies have actually accelerated the process of validating a new idea through speculation.

Speculation indeed proves that digital assets can possess value beyond being mere trading tokens. Take Crypto Punks as an example; it has become one of the most valuable single art collections in history, with a total value reaching $10 billion. However, people do not realize that we are validating other possibilities through NFTs. For instance, the intellectual property (IP) of Pudgy Penguins is an example that proves IP can be on-chain. Another example is Crypto Punks; Jay-Z's social avatar is a Crypto Punk. I know many people who own Punks; Punks have become a social signal and identity symbol in the digital world.

Moreover, all game assets are essentially NFTs or non-fungible contracts, meaning that all future game assets will exist in the form of NFTs. The gaming industry is enormous; although it has not fully exploded yet, it is clear that players want to have real value for their game assets.

Not only that, but in the future, every contract could be digitized and turned into an NFT. This means that every option in the financial industry could be an NFT. For example, every ticket we currently have, whether for sports events or concerts, is essentially a type of contract. If these tickets become NFTs, they can accumulate value due to factors like loyalty. After that, holders can choose to sell these NFTs, transferring value to others, or use this value for other purposes.

Therefore, we have options in the financial industry, relationships between consumers and brands, culture, and interactions between artists or teams and fans, as well as the art market itself. All of these can be realized through NFTs. More broadly, the concept of digital identity can also be realized through NFTs, where everyone's digital identity can become a zero-knowledge proof non-fungible token or contract.

Host: I am thinking that all of this sounds like it will take a long time to realize, right? If we consider long-term trends, it may require underlying chains like Ethereum or Solana to develop further. But on the other hand, if you truly believe in these prospects, it means that these NFTs will bring enormous value to the underlying blockchains, which is evident for the underlying chains, right?

Raoul Pal:

But the problem is that people often do not understand these things because they always want to hear a simple narrative. In fact, the NFT artwork sold for $69 million by Beeple (Mike Winkelmann, an American digital artist) represents one of the most valuable block spaces on the blockchain. This block space does not store ordinary property transactions but unique digital assets like title certificates. Many title certificates are currently stored on centralized servers like AWS, but without NFTs, these assets cannot truly exist.

More importantly, this also demonstrates how digital scarcity maintains value in an increasingly digital world. In the future, artificial intelligence may lead to the cost of knowledge approaching zero, and robots may bring labor costs to zero, but in such a "zero" world, digital scarcity will become the most important manifestation of value.

When discussing the flow of wealth, we find that the source of all wealth ultimately points to art. It has been this way in the past and will continue to be so in the future. Many people may not understand this. They think NFTs are just tokens, but the signals within them are very clear. You can see the value of these transactions and the demographics of those collecting these artworks; this is not merely speculative behavior. On the contrary, this is thoughtful collecting. Those who start building collections now may own artworks worth hundreds of millions of dollars in the future, while their current investment is far below that number.

Bottom Fishing?

Host: In early November, you posted a long tweet. At that time, you mentioned that no one wanted to hear bullish views; everyone was panicking and even attacking each other. But you mentioned that the road to a bright future is approaching. You also explained the liquidity issue and suggested bottom fishing when possible. At that time, you mentioned the total liquidity index. Now it is December 2025; is your advice still to continue bottom fishing?

Raoul Pal:

I believe the market has bottomed out. In October, we experienced a liquidity crisis when the U.S. government withdrew a large amount of liquidity through the Treasury General Account (TGA), leading to a liquidity gap in the market. Later, the government even shut down for a while, further exacerbating the liquidity shortage because the funds in the TGA could not be used.

Cryptocurrency, being the asset class most sensitive to liquidity, exposed the fragility of leverage in the system during this crisis. This has also prompted a rethinking of how to measure and manage leverage. However, the market has now rebounded from its lows; although some asset prices briefly fell below previous lows, the overall market is gradually stabilizing at these levels. Today, the market suddenly experienced a 20% to 30% increase, which may signal a bottom. Since November, the "bottom fishing area" has gradually formed. After the October liquidation, the market experienced a pullback in November and saw the last round of selling at the end of November. From the current perspective, this seems like a good buying opportunity.

If my liquidity analysis is correct, we may soon see a massive influx of liquidity. Currently, the liquidity of funds in the banking system is constrained, leading to fluctuations in the money market and insufficient supply of funds. The Federal Reserve has noticed this issue and has therefore paused quantitative tightening (QT). Next, they also need to address year-end financing pressures. Due to banks lacking sufficient liquidity to handle debt rollovers, the Federal Reserve may inject more funds into the system through the repo market and other means.

Recently, the Federal Reserve announced a policy adjustment regarding the Supplementary Leverage Ratio (ESLR). In simple terms, this policy relaxes the restrictions on banks holding U.S. Treasuries, allowing banks to treat Treasuries as a low-risk asset, thus reducing capital costs. This adjustment is very important because it not only releases more funds for banks but also provides new buyers for government debt financing. Through this policy, banks will be more proactive in purchasing Treasuries, which is exactly what the government needs right now. This mechanism can not only increase market liquidity but also help the government better manage its debt.

Scott Bessent once mentioned that they hope funds will flow not only to Wall Street but also into the mainstream economy. What he means is that we do not want the central bank to continue supporting the market through quantitative easing (QE). Although many people on Twitter say the Federal Reserve is tightening policy and no longer injecting funds, in reality, the government is "printing money" through the Treasury and injecting these funds into the downstream of the banking system. Banks are very good at this; they will use leverage to lend or provide liquidity. Therefore, the current debt management mechanism is shifting from the Federal Reserve to the Treasury. In this way, the government creates buyers for its own debt, which is also a form of indirect currency depreciation.

The adjustment of the Supplementary Leverage Ratio (ESLR) is a key policy change. Since the financial crisis, the financial system has become more complex, leading to reduced operational efficiency. Therefore, this policy adjustment has been very swift. I originally thought they would announce it in January or February, but in fact, they passed it quickly and plan to implement it starting January 1. This indicates that decision-makers have recognized the urgency of the problem and are taking swift action. Steve Mirren, who pushed this policy, published an article on the day of the announcement, stating, "This is an important progress, but further action is needed. We need to reduce the risk of all Treasuries to zero."

This means that the government can purchase bonds without limits when needed, significantly expanding the money supply. As credit flows to ordinary consumers, they will also buy more bonds, which will further lower long-term bond rates, mortgage rates, and the government's financing costs. This is a very important change. We may see a new liquidity injection of $3 to $5 trillion. In addition, the Federal Reserve may also cut interest rates, along with $1.5 trillion in new stimulus funds directly injected into the banking system. These measures will release a large amount of disposable income while driving the recovery of the business cycle.

At the same time, the "Clarity Act" is about to be introduced, which may provide clear rules for the legitimate use of cryptocurrencies by the end of this year or mid-January next year, further promoting the development of this field.

The coming year will be a very strong year. Although we are currently experiencing a difficult phase of liquidity tightening, this lays the foundation for future growth. Next, we will see the rapid development of stablecoins. This development will enable the government to issue more bonds because the holders of stablecoins can come from all over the world, and these people will indirectly hold U.S. Treasuries through stablecoins. Meanwhile, China is expanding its money supply, and its balance sheet is growing; Japan is also implementing massive fiscal stimulus. It can be said that the "game" of the global market has officially begun.

Is 2026 a Bull or Bear Market: Insider Information

Host: I heard an insider message from Bitwise that Matt and Hunter hope to renew their sponsorship in 2026 and plan to increase their investment.

Raoul Pal:

I have talked with the Coinbase team and also exchanged views with the Bitwise team. I have not heard anyone among them say the market is over; on the contrary, they all believe everything is just beginning. Don’t forget, if you work at Coinbase, you will know which institutions plan to use your platform for asset tokenization. And if you are at Bitwise, you will know the movements of institutional investors like donation funds and pension funds. Although these institutions usually take a long time to prepare, they have high visibility on future market trends. They know their clients' price sensitivity and when it is most appropriate to act. Coinbase has similar capabilities.

Currently, the "Clarity Act" has not yet passed, but once the bill is enacted, it will open a whole new phase of free development for the crypto industry. This is also why many institutions remain confident about the future.

How to Succeed in the Crypto Space in 2026

Host: How can we succeed in the crypto space in 2026?

Raoul Pal:

The key is to hold the right assets and stick to your beliefs rather than relying on others' opinions. Most importantly, you need to do your own research and find the beliefs that truly belong to you. Do not blindly chase after an asset just because its price is low, and do not be influenced by the "echo chamber" around you (referring to an information environment where you only hear views that align with your own).

We all may have made similar mistakes. You need to honestly ask yourself: How much risk can I bear? What are my goals? Is it to accumulate wealth through long-term compounding, or to quickly earn startup capital and enter higher-risk speculative areas? A smarter approach is to set a realistic time frame but not limit yourself to the short term; these time frames are actually of little significance. I believe that what truly matters is the length of the cycle. I originally thought the crypto market cycle was four years, but as I observed the impact of debt issues, I extended the cycle to five years. Therefore, five years is my core time frame; other short-term fluctuations are merely noise.

Host: Is there something you know you should let go of?

Raoul Pal:

I have always adhered to the idea of helping as many people as possible, but some people do not want to be helped. I see you also trying to do this; in your tweets, I often see you trying to help people understand certain things, like "I hope you can do this," but many choose to ignore it. I have also tried to communicate, but many times people do not listen to what you say, or they are not willing to take the time to watch those two-hour interviews or read the research materials you publicly share. Ultimately, I can only accept the fact that some people do not want to be helped.

This can indeed be frustrating because you try your best to help others, but in the end, you will realize that you cannot help everyone. In the face of this situation, I think the 80/20 rule can be used to adjust your mindset: help as many people as possible who are willing to accept help while accepting the reality that some people do not want to be helped. But when you face negative emotions online, you will ultimately ask yourself: Why is this happening? Why are they angry? In fact, this is not directed at me personally, but because of their own lack of success.

You need to understand that you cannot get everyone on the lifeboat. As much as you wish, the reality is that it is not possible.

Raoul's Thoughts When He Wakes Up Every Morning

Host:

What is the first thought that comes to your mind every morning when you wake up? And what do you think about before going to bed each night?

Raoul Pal:

My thought is "keep moving forward." My job is to constantly think about the future and envision the ideal path of life. So every morning, I remind myself not to worry too much about trivial matters. I have learned not to get caught up in who makes me unhappy or what problems occurred at work today. Most things are not important; what matters is whether you are moving towards your set goals. Of course, as a crypto investor, we also wake up every morning and cannot help but think, "How much has the price of cryptocurrency dropped today?"

But now everyone is less concerned about these things; people have become numb to price fluctuations. Almost no one on Twitter mentions prices anymore; everyone just laughs and says, "Well, this is the state of the market." We have become accustomed to it and do not even care anymore, but the key is to always stay focused, which is the same logic as investing in cryptocurrency. If I believe the total market cap of crypto will reach $100 trillion in the future, then I will focus on that long-term goal rather than worry about Bitcoin dropping 30% last week. Unless there is a problem with my asset allocation, short-term fluctuations are not important at all. For quality assets like Solana, even if their prices drop, I will hold firmly because I value their long-term potential.