Bitcoin is crushing all the other assets on the market with its explosive growth, according to famous investor Raoul Pal.
Talking during the MoneyWeek podcast episode published on Feb. 5, Pal said that the institutional attention that Bitcoin attracted is unlike anything he has experienced before. He said:
“Bitcoin is destroying all other assets in the world, and I have never seen this before in my career where an asset has drawn the attention of the likes of Elon Musk and mainstream institutions like no other asset.”
Compared to gold, he added, Bitcoin’s “fixed supply along with its scarcity and its behavioral incentive explains its growth.”
Pal’s belief that Bitcoin has features that make it a potentially better store of value compared to gold is not new. For instance, SkyBridge Capital’s Anthony Scaramucci famously said last month that “Bitcoin is better at being gold than gold.” And, an executive at asset management firm CCB International Securities revealed that the company had sold one-third of its gold to buy Bitcoin.
But Pal’s approach is even more aggressive. “I sold all of my gold and have become irresponsibly long Bitcoin, Ethereum and a few other cryptocurrencies,” he said. Mainly I’m 65% Bitcoin and 30% Ethereum.” He added:
Bitcoin is basically eating the world, it’s destroying all other assets in terms of performance. So, you and I know that once people see that, it tends to become self-fulfilling, it becomes a reflexive loop… I’ve literally never seen this in my whole career, where something is so dominant as a trade.”
Pal explained that gold and Bitcoin both have a narrative of being a store of value, with gold’s long-proven and BTC’s emergent. Still, he pointed to the network effect calculable through Metcalfe’s law, which brings a strong growth potential and advantage to the so-called digital gold. According to this theory, the value of a network is equal to the value of the nodes that are involved in it.
Pal, the CEO and co-founder of news source Real Vision and head of market research firm The Global Macro Investor, retired from fund management in 2004. He is famous for being one of the few investors to predict the mortgage crisis of 2008–2009.
As Modern Consensus reported at the end of January, tech mogul Elon Musk, the world’s richest person, joined the ranks of Bitcoin proponents by changing the status of his Twitter to “#Bitcoin” and tweeting: “In retrospect, it was inevitable.”
This was apparently his reaction to the restrictions imposed—and lifted—by crypto-friendly trading app Robinhood on buying shares of gaming retail chain GameStop (GME). This is widely believed to have been done to prevent retail traders from continuing a short squeeze killing major hedge funds, including a Robinhood investor.
Pal also referred to the fight, noting that “[r]etail investors pushing hedge funds into bankruptcy… is a new thing. You know, hedge funds did it to each other, but retailers generally have not done it—but what it exposed was that there were weaknesses in the system.”
Furthermore, Pal pointed to record-high levels of risk in the market, describing the situation as “concerning.”
He said: “At every level, everyone’s on the same side of the boat and the kindling that may have started sparking last week, on Wednesday Thursday, Friday of the Robinhood situation, was just showing us how fragile this is: that something relatively small could be the butterfly wing that causes the hurricane.
Saying he referred to that as “a cascade of risks,” Pal added:
“People [are] at record long risk in every way, shape. or form, and that is terrifying.”