Recently, Coin Bureau hosted a deep conversation between Arthur Hayes and Raoul Pal, discussing market risks, aggressive investment strategies, and annual predictions. Arthur emphasized the strategy of holding Bitcoin and altcoins, sharing the successful experience of their family office in the Ethena project and the liquid staking token ecosystem. Raoul shared his investments in Solana and high-end NFTs, pointing out that not trading is the best strategy this year. Additionally, they explored the cultural value and market potential of memecoins, predicted that Dogecoin may receive an ETF, and discussed the impact of the US election on the market and potential future risks.
Podcast: https://www.youtube.com/watch?v=0cX1Huf89PE
Investment Strategy Advice: Hold firm, don’t fear; not trading is the best trade
Arthur: My investment strategy is simple – hold, don’t sell, don’t be scared, and don’t use too much leverage. It’s straightforward, we all know what we should do, but we often don’t because YOLO (You Only Live Once) is fun. But ultimately, it’s simple. If you believe that central banks and governments are heavily indebted, will continue to accumulate debt, print money, and offer welfare for votes or public support, then cryptocurrencies are the answer. Obviously, Bitcoin is the elder statesman, and I hold a significant amount of Bitcoin. Then, when you want to increase potential returns as you move up the risk curve, you enter the realm of altcoins.
For our family office, the standout project is Ethena, with their team excelling in creating synthetic dollars and aiming to replace Tether and USDC. Ethena currently has a circulating supply of around $3 billion, making it the fourth-largest stablecoin. I believe this is the best thing we’ve done this cycle, and I think we’re just getting started, with Ethena’s impact on the ecosystem just beginning. Secondly, it could be Ethereum and the entire liquid staking token ecosystem. Obviously, EigenLayer will be launching later this year. We have many other investments in that vertical as well. So, I would say these are the two standout highlights in our portfolio this cycle.
Raoul: Not trading is the best trade. You know, 90% of my holdings are in Solana, which is the best choice in this cycle so far. The only meaningful trade I made this year was selling some at a high when Solana went from $150 to $200 and started buying high-end NFTs. I bought almost all available Beeple works and then bought all the X Copy works I could afford to build a long-term investment portfolio. These works were priced low at the time, and my view is that the market value in this sector will reach $10-15 trillion by the end of this cycle, reaching $100 trillion by 2032. This will result in a wealth accumulation of $97 trillion from now, the fastest wealth accumulation in history. Even if I’m completely wrong, it’s still a $50 trillion wealth accumulation, equivalent to the entire historical market value of the S&P 500 index. Therefore, there will be a massive wealth creation in this sector, circling within this sector, whether through venture capital or building application layer opportunities. But in reality, people will pursue iconic assets. So, I’ve been buying as many iconic assets as possible, as I believe this is the last chance to buy them at these prices.
What is the Banana Range? How does it affect cryptocurrencies?
Raoul: We are entering the “Banana Range.” The “Banana Range” is a concept that Arthur and I often discuss. It’s a cyclically strong phase where liquidity enters the market, central banks need to refinance all debt, and sweeten the deal with candy for the people. Typically, cryptocurrencies skyrocket during this phase. It’s a debt-refinancing cycle driven by macroeconomic forces that affect all asset prices, but cryptocurrencies perform exceptionally well. So the simplest way is to not mess it up. Maintain a core investment portfolio, with most assets allocated to major cryptocurrencies. If you can get it right with other assets, you can make a lot of money in that 10-20% portfolio, which carries higher risks but also higher returns.
Looking back at the classic “Banana Range” of the previous cycle, Solana, Avalanche, Luna, and Matic all performed exceptionally well during this phase. In just a year, these four tokens saw amazing performances. We will see this scenario repeat. Who will it be? I don’t know yet. But that’s part of the game of the “Banana Range,” and part of the fun is that you can take risks and feel like you’ve seized opportunities when in reality, most of the time, you’re just watching.
Why are memecoins so popular? What value do they have?
Arthur: I believe memecoins will continue to exist and become even crazier as more funds are printed. I often visit Singapore, a small place with a very homogenized society. Every time I walk through the shopping district on Orchard Road, I always see local Singaporeans lining up at Chanel, LV, Gucci, and other mainstream luxury brands. They are always queuing up to go in and buy what they want, with prices reaching thousands of Singapore dollars, and they do it often. So, if people are willing to queue up to buy leather goods with LV logos, they will definitely sit in front of their computers and trade any popular memecoin.
Because you don’t need to understand cryptocurrencies, just like you don’t need to understand fashion. Everyone likes it, I like it too, it’s very human. So I think memecoins will stick around, and for those just entering the cryptocurrency space, it’s the easiest thing to understand. Oh, this is a cool image, this is an interesting joke I understand, everyone is in on this joke, and I can make money through the spread of this joke, okay, I’ll buy this memecoin.
I don’t need to understand all the underlying technologies like blockchain, artificial intelligence, and cryptography. I just need to know if this is a cool cultural trend, something I’m already doing in real life when I go buy these expensive branded products and queue for hours to put some logos on my chest. So, I believe observing human behavior, why the wealthiest people in the world, if you look at the rich list, many own luxury brands. Memecoins are the luxury brands of cryptocurrencies. It’s easy to get involved because you don’t need to wait in line. You just need to buy online, assuming Solana’s system is working properly. In short, I think memecoins are the luxury brands of cryptocurrencies, and that won’t change.
Raoul: Yesterday, I had coffee with Jupiter’s Miao and we talked about this. The interesting thing about memecoins is that their utility is either zero or very minimal. Bonk has some utility, Shiba Inu also has some utility, but their real cultural value lies in the attention they garner. Attention is everything upstream, and this is very easy to understand. You don’t need to value them, just need to know if they can attract attention, if that attention is sustained, and if owning them can give me a certain feeling or status. It’s the same as Louis Vuitton handbags from LVMH, high-end wines, or the memes you share on the internet. It’s all about attention.
Sharing this year’s market operating strategies and future market predictions
Raoul: I haven’t done many trades, I just don’t have the time. If you notice, a lot of aggressive trades are basically based on attention, and I don’t have enough attention to allocate because I’m too busy. So I’ve stuck to a relatively simple strategy. I have Bonk and Doge because I still think Elon will do something with Doge, that’s it. I observe this space, everyone reads Ansem’s tweets, trying to figure out what’s happening, but I just don’t have enough attention to focus on these things. So you actually need some knowledge to operate in this space.
Arthur: My leisurely life involves running around the tennis court or skiing on the slopes. So I don’t have the attention to keep track of which dog coin is the hottest. I also hold some Dogecoin, and I believe Dogecoin will get an ETF before the end of this cycle because it’s one of the earliest memecoins and is traded on Robinhood. For institutions considering entering the cryptocurrency space, they will apply ETFs to anything with high market value and longevity, and Dogecoin is one of the earliest memecoins.
What are the chances of Dogecoin getting an ETF?
Raoul: Last week, I spoke with Yan from VanEck, and I told him, you have to apply for a Dogecoin ETF. He said he just wants to make sure he doesn’t end up in jail. I told him, you’ll be fine, Dogecoin has been around for a long time and can outperform Bitcoin every cycle, which is amazing. So, I’m working behind the scenes to push this, but I haven’t convinced Yan yet. But it’s all part of the fun and games of the “Banana Range” and the wealth creation that comes with it.I will keep pushing. Either Hunter Horsley or Yan will cross that line. It’s unlikely to be BlackRock, but we will try.
Which memecoins might succeed?
Arthur: In terms of memecoin narratives, I think many memecoins are too specific. Like some political memecoins, they may be amusing for a moment, but lack lasting cultural value. When you talk about a meme like dogwifhat, regardless of whether you are Korean, Chinese, American, or Argentine, you will find it amusing. But when you talk about American politics, first you might offend half of Americans, and secondly, 95% of people elsewhere in the world will feel it doesn’t concern them. So, I think many memes are too specific and don’t resonate globally. Therefore, if someone could create a global memecoin that is inclusive, non-offensive, and fun, it would be successful.
Raoul: This is actually a good place to test narratives in Singapore because it is a culturally diverse Asian audience, and Asians like gambling and memecoins. They are big buyers of Dogecoin and other dog coins. You just need to see if the narrative can resonate here, as they don’t care about Trump and American politics, they just want something that transcends cultural boundaries.
How might the US election affect the market? How to protect oneself and capitalize on market volatility?
Raoul: In my view, it actually doesn’t have much impact.
Arthur: In fact, all candidates are the same, backed by a group of stakeholders. They will continue printing money after the election, so both the tech stocks and cryptocurrencies will continue to perform well. There may be some fluctuations, especially regarding Trump’s judgment, but ultimately, whoever is elected will print money. So, I think it won’t have much of an impact. They will all vote to support the military budget. The US economy exists for war. So, it’s all the same, just a matter of which candidate you prefer. I don’t care about their slogans; I just know they will print money, so any effective investment strategy now will remain effective after the election.
Raoul: If there is any volatility, it may be due to one candidate dropping out, or a violent incident occurring. But the end result is printing money. So, US election years and the year following are usually very positive for risk assets, as everyone is buying votes.
Arthur: The Fed is not independent now. It’s a false proposition. In fact, the Fed is led by the Treasury Department, and Janet Yellen is the most powerful person. She can do as she pleases, while Jerome Powell is actually powerless. The Treasury Department is the dominant force, they have been operating behind the scenes. If you look at some research papers from the Fed, like a recent one from the Atlanta Fed about central bank swaps, they basically always support international dollar borrowers, detailing every time the Fed prints money and hands it over to foreign institutions.
Raoul: If you look at Arthur’s point, there is indeed a global dollar shortage. We have lost some of the US banks and giant Swiss banks, and the dollar shortage problem is getting worse. Yellen went to China twice, her task was to sell bonds. China is willing to buy bonds, but they don’t have dollars, so we need to find a solution. G20 or G7 meetings will have arrangements to ensure there is enough dollar liquidity in the global system. So, since 2008, there hasn’t been much independence. In fact, the independence between central banks of different countries is also limited, the Bank of Japan and Treasury have not been independent since the 90s.
What are the main risks of the current financial system and the cryptocurrency system?
Raoul: For me, there is a risk that is not so obvious. I think the biggest risk is the emergence of a ridiculous bubble in the next three years. There might be a bubble like in 1999, leading to an overinflated market and then a substantial pullback. That’s the biggest risk.
Arthur: The biggest risk in the previous cycle was the credit issues of centralized counterparties. Usually, in the crypto space, the problem is that we like decentralization, but to make money, we do centralized things, and these centralized things eventually explode because their business models are incompatible with decentralized assets. This situation happens repeatedly. So, how might this cycle evolve? Who are the centralized entities in the market that we trust and promote? ETFs, fund managers, what do they do? They custody their assets, possibly only in Coinbase and a few banks. If a regulation goes through, we will accumulate trillions of dollars of crypto assets, custodied in fewer than 20 companies, which might be custodied in fewer than 5 institutions.
If you’ve worked in a bank, you’d know that the people who earn the least money have the most important jobs, handling things like forex reconciliations or ensuring stock settlements. If you consider custodianship of crypto assets in a traditional financial institution, they want to enter this space now because they see Coinbase making a lot of money from BlackRock and other companies, and regulations force you to custody with a third party. So, they might force you to custody with large institutions like Mellon Bank. Now you have a lot of crypto assets in these companies, and the work might be done by someone earning $50,000 to $60,000 a year, overworked, no respect, and unaware of cybersecurity. This is not their money. If I were to hack cryptocurrency, I’d target these American custodian banks because their cybersecurity is an afterthought. They have no clue what they are doing because they have never custodied these assets. If they lose these assets, they can’t ask the Treasury or the Fed for a bailout. In cryptocurrency, no one can create Bitcoin or Ethereum to compensate for your losses. So, if I consider risks, in 2 to 3 years, I would say a major crypto custodian being hacked, losing $500 billion to $1 trillion in crypto, will be
