Raoul Pal Profile picture
22 Feb, 12 tweets, 2 min read
Hopefully this is useful for people who struggle with BTC's price action. To most is looks like a bubble because we are trained in mean-reversion (i.e. this time is not different) of linear-trend assets. 1/
A classic example would be the 1980 silver bubble that eventually reverted back to price trend.
But digital assets are EXPONENTIAL trends driven by network effects. These are powerful long-term secular shifts are very different in nature to linear trends. As investors, we really aren't experienced in this, in general. So we apply our old bubble framework and it doesn't work
This is why you'll see lots of experienced investors hop off the trend early and look for bearish outcomes. Its normal behaviour even in highly experienced investors.
But Exponential trends revert back to their exponential moving average, not price trend. This is crucial to understand. Because BTC is the network effect of money, it gets speculative and overshoots and corrects to 300 week EXPMA, before rising again.
BTC is currently nearly 600% above its 300 week EXPMA. It normally hits 1000% or more when all said and done, before correcting (and that's a long way from here considering the EXPMA is rising now too and will continue to do so).
People find it extremely hard to hold onto exponential trends because we are programmed to think it mean-reverts, but it doesn't. Upside price dislocations are the norm when network effects take hold and bring speculation with it (that fuels the bear markets)
But, the trend actually keeps rising...there is no reversion to a linear trend unless the digital asset fails to gain network effects (and many will fail to).
Digital assets are so damned unique in that the users and the owners of the asset are the same, so users get rewarded as owners of the network effects, making them super powerful network effect multipliers.
Everything in the digital asset space is driven by network effects and all those individual networks create a super network effect all the entire space.

DA's = $1.7tn right now. There is room for a 100x or 200x increase over the next 10 years (with big ups and owns on route).
I've written a whole piece on this for Real Vision Pro. The narratives on all sides are so far behind how fast things are moving and how many network effects are combining.

I've literally never seen anything like it...

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More from @RaoulGMI

23 Feb
When @JuliaLaRoche discovered me on twitter languishing with less than 1000 followers I explained I was on a mission to democratise the kind of financial information only hedge funds and others got. The world I exclusively lived in.
But I felt people needed and wanted more. They wanted the paying field levelled so they could take control, with confidence and knowledge.
I didn't quite imagine it would blow up like this with 400,000 friends on Twitter. You helped create Real Vision and I can't thank you enough. Hopefully we've paid you back for being part of this incredible journey. Even if just on FinTwit.
Read 11 tweets
16 Feb
Do we have the wrong denominator?

Many of us believe that Fed money printing is creating an asset bubble. But when we switch the denominator to the Fed balance sheet equities looks fairly priced...
When we look at SPX vs M2, the other measure people look at, equities are expensive but not wildly so...(its sort of just earning growth)
Gold has done less well but ok (sort of equities minus the earning growth). Here it is versus the Fed balance sheet:
Read 24 tweets
9 Feb
Still #irresponsbilylong but feeling rather responsible now!

Pro tip - scrunch the Y-axis for perspective 1/
And use regression channel for perspective...
And seasonality for conviction...
Read 7 tweets
8 Jan
There is a phenomena that I have observed over the last 30 years in markets...

The New Year Head Fake. 1/2
Hedge funds and asset managers start the year with zero P&L and new risk buckets to allocate.

After a 2-week break they want to get some trades on their shiny new books.

Wall St tends to publish a bunch of consensus Year Ahead trades. So, people pile in...
Then, once everyone is in, the trend often reverses or has a massive correction, taking everyone back to flat or negative on the year and they begin the P&L grind again...

I write about this almost every year in GMI to warn people not to pile into new risks in Jan and wait
Read 7 tweets
7 Jan
Ok, looks like I need to explain this tweet...
Its just a thought but...

Let's say there is a $100bn of institutional money ready to come into BTC in the next 6 months and $XX bn retail.

Crypto is impossible to buy for some and hard(ish) for others.
Then imagine an equity is launched that is worth $60bn on the grey market. If you are a fund manager, then why not just own Coinbase to get exposure? Easy.

No, it ain't bitcoin, but it will move sort of like it and you don't have to beg your investment committee or trustees.
Read 6 tweets
7 Jan
Crypto Bomb:

Ok, I'm leaking some GMI early... (not published yet - tomorrow a.m.)

I will eventually publish in Real Vision too (this article only). I push back strongly the Pfeffer view and the "shitcoin" view.

It's all Metcalfe's Law, baby... and ETH = BTC, like it or not.
You are your behavior....
Network value...(Metcalfe's Law)
Read 14 tweets

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