Former Goldman Sachs exec Raoul Pal says many investors are now betting on Bitcoin thinking: ‘Damn, nothing else has this payoff’.
The founder of Global Macro Investors and Real Vision Group, Raoul Pal, told Stephen Livera on his podcast this week the Bitcoin market cap has the potential to hit $8 trillion or more.
That’s not a prediction by the way – but Pal says the risk/reward ratio of buying Bitcoin means investors can reap a huge payday if everything goes right.
“I know all these macro guys, they’re all in it. They get it. They get the optionality. They may be complete believers, part believers, partial believers. But even then, if it’s a 1% chance of being right and the upside is 100x from here, you’d do this all day.”
Pal bet on Bitcoin at $200
Pal has a long history with Bitcoin and began investing when it was around $200 – intrigued after his friends had made a fortune mining it back when it was trading for 17 cents.
He told Livera he was one of the first people to come up with a stock to flow method of valuing Bitcoin in a similar way to gold.
Pal said many commentators today couldn’t wrap their heads around the potential numbers, but “if you look at PlanB’s stock flow model, stuff like that, you can see the comparative upside.”
Crypto Twitter analyst Plan B has released a couple of different stock to flow models based around the decrease in supply caused by the block reward halvings.
Livera said most people didn’t like risky bets. “But instead, if you’re thinking like a poker player, it might be like, ‘Hey, I’m calling a small amount, to potentially win a big amount.’ And so we view Bitcoin like that, like it’s an asymmetric bet.”
#bitcoin Stock-to-Flow model made with only 2009-2012 data (black):
– correctly predicted $200-800 price after 2012 halving
– predicted $6-10k price after 2016 halving
– predicts $100k after 2020 halving
– $1mln after 2024
Updating model with new data lowers the prediction a bit. pic.twitter.com/hzwEXUN7XJ
— PlanB (@100trillionUSD) May 7, 2019
Back of the envelope Bitcoin calculations
Pal said investors should “try and get your head around an alternative financial system, even if it has a low probability, right? If you recreate a low probability of, let’s say, what’s the global money supply and global debt? It’s something like, I don’t know, call it 80 trillion dollars or something,” he said.
“So if it’s worth 80 trillion dollars, let’s say you have a 10% probability, that’s 8 trillion dollars. It’s currently worth 200 billion dollars. So even if there’s a 1% chance of it working… what it’s telling you is (Bitcoin is) ludicrously underpriced if any of these probabilities play out.”
“So that’s how crazy attractive it is, and that’s why it’s sucking in so many of these macro guys, because they’re like, “Damn, nothing else has this payoff.”
????️SLP93 @RaoulGMI – Global Macro Risks & Bitcoin
– Risks of recession posed by Debt, European Banks, Demographics and more
– Perspectives on Bitcoin
— Stephan Livera (@stephanlivera) July 29, 2019