Recently, Coin Bureau hosted in-depth conversations with 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 experiences 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 discussed 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 Sharing: Hold firm, don’t be afraid; not trading is the best strategy
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 in the end, it’s simple. If you believe central banks and governments are heavily indebted, will continue to borrow, print money, and provide welfare in exchange for votes or public support, then cryptocurrencies are the answer. Obviously, Bitcoin is the king, and I hold a significant amount of Bitcoin. Then, when you want to increase potential returns and venture into the risk curve, you enter the realm of altcoins.
Clearly, for our family office, the standout project is Ethena, whose team has excelled in creating synthetic dollars and intends to replace Tether and USDC. Ethena’s current circulation is 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; Ethena’s impact on the ecosystem is just starting. Then, the second could be Ethereum and the entire liquid staking token ecosystem. Clearly, EigenLayer will launch later this year. We have many other investments in that vertical as well. So I would say these are the two standout highlights of this cycle in our portfolio.
Raoul: Not trading is the best strategy. You know, 90% of my position is in Solana, the best choice so far in this cycle. The only meaningful move I made this year was when Solana rose from $150 to $200, I partially sold at the high and started buying high-end NFTs. I bought almost all available Beeple works, and then I bought all the X Copy works I could afford, building a long-term investment portfolio. These works were low-priced 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, rising to $100 trillion by 2032. From now on, this will be the fastest wealth accumulation in history, reaching $97 trillion. Even if I’m completely wrong, it’s still a $50 trillion wealth accumulation. This is the entire historical market value of the S&P 500 index. Therefore, there will be a lot of wealth generated in this sector, circulating within this sector, whether it’s venture capital or opportunities to build applications. But in reality, people will pursue symbolic assets. So I’ve been buying as many symbolic assets as possible because I believe this is the last opportunity to buy these things at this price.
What is the Banana Range? What impact does it have on cryptocurrencies?
Raoul: We are entering the “Banana Range.” The “Banana Range” is a concept that Arthur and I often discuss. It’s a highly cyclical phase when liquidity enters the market, central banks need to refinance all debts, and sweeten the deal with candies for the people. This is when cryptocurrencies usually skyrocket. It’s a debt refinancing cycle driven by macroeconomic forces that impact all asset prices, but cryptocurrencies perform exceptionally well. So the simplest way is not to 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, where the risks are higher but the returns are greater.
Looking back at the classic “Banana Range” of the previous cycle, Solana, Avalanche, Luna, and Matic all performed remarkably well in this phase. In a year, these four tokens had amazing performances. We will see a repetition of this situation. Who will it be? I don’t know yet. But that’s part of the game of the “Banana Range,” and it’s also part of the fun, as you can take risks and feel like you’ve seized opportunities, while most of the time you’re just watching and waiting.
Why are memecoins so popular? What value do they hold?
Arthur: I believe memecoins will continue to exist and become crazier with more money printing. I often visit Singapore, where it’s a small place, and society is very homogenized. Every time I walk through the shopping district on Orchard Road, I always see local Singaporeans queuing up at Chanel, LV, and Gucci stores, all mainstream luxury brands. They are always queuing up, waiting to buy what they want, costing 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 a computer and trade any hot 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 stay, and for those just entering the cryptocurrency field, it’s the easiest thing to understand. Oh, this is a cool picture, it’s a funny joke I understand, everyone is in on this joke, I can make money through the spread of this joke, okay, I’ll buy this memecoin.
I don’t need to understandI will continue to strive. Either Hunter Horsley or Yan will cross this line. It is unlikely to be BlackRock, but we will try.
Which memecoins might succeed?
Arthur: In terms of memecoin narratives, I believe many memecoins are too specific. Like some political memecoins, they may be interesting for a moment but lack lasting cultural value. When you talk about a meme like dogwifhat, whether you are Korean, Chinese, American, or Argentine, you will find it amusing. But if you talk about American politics, firstly, you may offend half of Americans, and secondly, 95% of people elsewhere in the world may not care. Therefore, I think many memes are too specific and may not resonate globally. So, if someone can create a global memecoin that is inclusive, amusing, and does not offend people, it will be successful.
Raoul: This is actually a good place to test narratives in Singapore because it is a culturally diverse Asian audience, Asians like gambling, and they also like memecoins. They are big buyers of Dogecoin and other dog coins. You just need to see if the narrative can resonate here; they do not care about Trump and American politics, they just want something that can cross cultural boundaries.
How might the US election impact the market? How to protect oneself and capitalize on market volatility?
Raoul: In my view, it actually has little impact.
Arthur: In reality, all candidates are the same, supported by a group of vested interests. They will continue to print money after the election, so both the stock market and cryptocurrencies will continue to perform well. There may be some fluctuations, especially regarding Trump’s legal issues, but ultimately, whoever is elected will print money. So, I think it won’t have much impact. They will all vote to support the war budget. The US economy exists for war. So, it’s all the same; the difference is 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 because one candidate drops out or due to violent events. But the end result is printing money. So, US election years and the year after are usually very positive for risk assets because everyone is buying votes.
Arthur: The Federal Reserve is not independent now. This is 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 of the Fed’s research papers, such as 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 banks in the US and also a giant bank in Switzerland, and the dollar shortage issue is getting worse. Yellen has visited China twice; her task is to sell bonds. China is willing to buy bonds, but they do not have dollars, so we need to find a solution. There will be arrangements at G20 or G7 meetings to ensure there is enough dollar liquidity in the global system. So, since 2008, there has been no independence. In fact, the independence between central banks of different countries is also limited; the Bank of Japan and the Treasury Department have not been independent since the 1990s.
What are the main risks of the current financial system and the cryptocurrency system respectively?
Raoul: For me, there is a risk that is not so obvious. I believe the biggest risk is the emergence of a ridiculous bubble within the next three years. There could be a bubble similar to 1999, leading to overexpansion in the market, followed by a significant pullback. This is the biggest risk.
Arthur: The biggest risk in the previous cycle was the credit problems of centralized counterparties. Usually, the problem in the crypto space is that we like decentralization, but to make money, we do centralized things, and these centralized entities eventually explode because their business models are incompatible with decentralized assets. This situation keeps happening. So, how will this cycle evolve? Who are the centralized entities we trust and drive the market now? ETFs, fund managers, what do they do? They custody their assets, possibly only in Coinbase and a few banks. If one regulation passes, we will accumulate trillions of dollars of crypto assets, custody in less than 20 companies, which may be custody in less than 5 institutions.
If you have worked in a bank, you will know that the people who make the least money have the most important jobs; they handle forex reconciliations in the background or ensure stock settlements, etc. If you consider custody of crypto assets in a traditional financial institution, they want to enter this field 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 may force you to custody with large institutions like Bank of New York Mellon. So now you have a large amount of crypto assets in these companies, and the person handling these tasks might be someone making $50,000 to $60,000 a year, overworked, lacking respect, and clueless about cybersecurity. This is not their money. If I were to hack cryptocurrency, I would attack these American custodian banks because their cybersecurity is an afterthought. They have no idea what they are doing because they have never custody these assets before. If they lose these assets, they cannot turn to the Treasury Department or the Fed for help. In cryptocurrency, no one can create Bitcoin or Ethereum to compensate for your losses. So, if I consider the risk, a major cryptocurrency custodian being hacked, losing $500 billion to $1 trillion worth of crypto, will be the
