GM, this is the Milk Road. The daily email that tells you what’s going on in crypto, in less than 5 minutes.
In Today’s edition:
🤔 Raoul Pal moved 100% of his liquid net worth into crypto
📊 An interesting chart
🥛 Five Nuggets you'll wanna read
🤣 A meme
Lets talk to Raoul Pal
Who is Raoul Pal?
An Ex-Goldman Sachs derivatives trader
Hedge fund manager
Retired at age 36
In 2020, he announced that he moved 90%+ of his liquid net worth into crypto (!)
He’s big on Twitter (~900k followers) and on his network, Real Vision
We chatted for an hour and I’m going to summarize our Q&A here (his answers are my summary, not exact quotes).
Raoul..how did your career start?
I’m an ex-finance guy. Working late nights and early mornings at Goldman Sachs.
How much were you making there?
I was doing well, making over $1M+ per year
That’s tough to walk away from… but you did. How did you go from there to Bitcoin?
When Lehman Brothers went bust in 2008 and people lost money they thought was “safe”.
And then I had first hand experience during the European Crisis. I was in Spain, and had to go get a generator and food and take cash out of the bank. The banking system was close to going under.
So – I quit Goldman to try and build “the world’s safest bank for the wealthy.” No leverage. Just a safe haven for assets. (this was after Cyprus had all their money taken).
At the same time, a friend told me to check out Bitcoin. So I did, and was fascinated.
I ended up creating one of the first financial models for Bitcoin back in 2013 – using a stock to flow style valuation method (comparing it to gold and other commodities).
Wow, can we see this?
Yea – I tweeted it out here.
Bitcoin can be valued like other commodities (e.g. gold)
If you value Bitcoin, supply adjusted, each coin would be worth ~$700k-$1M
Even if you discount 90% for risk, that still leaves 500x upside at that time
He gave it a BUY recommendation even though it sounded dumb for a macro investor to say that about Bitcoin at the time.
Wow. That’s a big call for 2013/2014. Did you hold?
Well. That’s the problem. I sold 4 years later with a 10x profit. Felt good about it.
I was getting spooked by all the fork wars going on, and decided to sell.
In many ways, it was a great trade to buy…but also one of my worst trades to sell, at that time.
I kind of stopped thinking about it, until 2019/2020 right before COVID
Amazing timing. What did you see?
It looked like a recession was coming, and inflation. So Bitcoin seemed like a useful tool.
But at first I owned other assets too (bonds, gold etc.). But when I was charting Bitcoin, it was outperforming all the other assets so dramatically, it didn’t make sense to hold anything else (even considering its volatility).
Why did you switch from Bitcoin to ETH?
At some point, I realized that Metcalfe’s Law is the primary driver of crypto networks.
Take Facebook. The shareholder value grew exponentially. But users just got the utility of the app. They didn’t benefit from the growth in share value.
With crypto, the users are also shareholders. It’s combined. So they are incentivized to shout from the rooftops to their friends to go use this thing.
It’s like religion.
Even better. It’s Religion meets Capitalism.
So – why did you change your investments from Bitcoin to Ethereum?
I mentioned Metcalfe’s Law. It uses a formula that shows the value of a network growing V=n^2
And Bitcoin was growing, but ETH was growing faster. Bitcoin wasn’t doing as good of a job at attracting new members to the network (and that’s the main job of a network!)
You are friends with the rich hedge fund types. I hear a lot about them buying bitcoin. Less about ETH. Is that happening too?
Oh yea. It’s just more under the radar.
The narrative went from “it’s just Bitcoin” to “Ethereum is an interesting technology” to “wow DeFi is cool” to “how do we invest in web3??”
Do you do anything with your ETH? Staking? DeFi?
No. Once you win the game, you don’t let somebody take it from you, haha!
I place macro bets.
I don’t chase yield. I’ve never chased yield my whole career. You can, it’s just not been my style. I don’t look for the 10% a year, I look for the 10x.
What about NFTs?
NFTs are big. They're clearly going to be bigger.
Social tokens as well, but those are less talked about.
But I just don't have the time or desire to figure out WHICH project is going to win in NFTs. I don’t want to crawl around discords.
So I just buy ETH and I get to ride the wave of NFTs without picking an individual winner.
I like your vibe. You seem happy. And you live in the Cayman Islands. How did you decide to do this with your life?
“My meta narrative is the game of life itself. The game is not money. The game is quality of life and how you live it.”
I was working in London at Goldman, waking up at 5am and going to work and I wanted out of the rat race.
One day I was on vacation, and saw a big table of family & friends, drinking wine, eating seafood, and laughing up a storm.
I looked at that and said, I want that. This is the life I want.
I’ve always done that. Some people get stuck thinking “what should I do next?” I figure out “what do I really want?” then I work backwards to figure out how to get there.
So I saw that group laughing and eating on the beach. 6 months later, I bought a 6-bed house and moved to the Spanish coast of the Mediterranean sea.
I love it. Thanks for doing this Raoul. Really appreciate it
Chart Of The Day 📊
Yesterday we mentioned that Ukraine had received over $35M+ in crypto donations.
Then they made a smart move by confirming an “airdrop” for those who contributed
And check out what happened, over $3M more got donated almost immediately. They even got a CryptoPunk (worth $200k+) sent to them.
Then this morning, they announced that there will be no Airdrop after all
Even though Ukraine isn't gonna actually do an airdrop, funding via a crowdfund and airdrop might just be the modern day "war bond."
Nick Tomaino (early Coinbase employee + early OpenSea investor) broke down his take on why in a great thread.
Five Nuggets 🔍
16% of Americans own crypto according to Coinbase’s COO.
Consensys Controversy: An ex-employee is suing Consensys because they allegedly moved their most valuable assets (Metamask and Infura) into a separate company in a sketchy transaction in 2017. By moving the assets, employees no longer owned a piece of them. And they were moved at a very low price (eg. Metamask for $4.4M) even though the assets are now worth billions. Consesys says this was fair value back then. Now, we await the findings of a legal audit.
Is the Metaverse’s Killer App, Poker? Poker was a huge hit in the early days of the internet, until it got banned. Now, it’s making a comeback in the metaverse. 30% of the the daily active users in Decentraland are there to play poker in the Decentral Games casino
How one of the best crypto VCs makes investment decisions: This is a great thread that walks through how Paradigm decides what to invest in
The hottest trends in DeFi: dive into this thread
Now, a word from our partner, Outer 🛋️
Working from home is great… I don’t miss the cubicle at all. But it does get pretty stuffy in my house all day. That’s why I spend a ton of time in my backyard on my outdoor sofa by Outer.
They have awesome styles, and it’s super durable & weather-proof.
P.S. I can't get enough of this three-seater
Meme of the day 😂
Thanks to Flyosity for this one!
Alright, that's all we got for hump day!
What'd you think of today's email?