Crypto Asset Market Could Surge 500x, Investors Don’t Realize Magnitude of What’s Happening

The entire crypto market could increase in size by 50,000%, according to macro investor and Bitcoin advocate Raoul Pal.

In a new interview on the Gestalt University podcast, The Real Vision Finance founder says that the public is generally unprepared for the ways in which digital assets could transform the current financial landscape.

“There is a parallel financial universe being built in front of our eyes and people are slowly migrating across. People have no comprehension yet of how big this is. They’re still bickering over whether Bitcoin is an investment vehicle without realizing the magnitude of what is actually going on.”

Pal remarks that as blockchain technology and the digital asset sector slowly reshape the financial system, the market is set to capture hundreds of trillions of dollars of value.

“This is a multi-quadrillion dollar world that’s being developed in terms of flow. In terms of the stock market, the bond market, the equities markets – all of these things are two, three, four hundred trillion dollar markets each…

Currently the digital asset sector is [$2.26 trillion], so what is it going to be worth? At least 100x from here still, probably 200x maybe even 500x.”

Pal predicts that the digital asset sector will offer Millennials an opportunity to access wealth building opportunities that would otherwise be out of their reach.

“You’re democratizing access to all assets which is a huge game changer. If you are a Millennial, a thirty-year-old now versus the thirty-year-old baby boomer back in 1980, the baby boomer got 7.5 Pe ratio in the equity market, 18% interest on fixed income and the cheapest property in inflation adjusted terms since the war, right… So then the same thirty-year-old now, they’ve come out in debt from university so they’re on the back foot as opposed to their parents who actually ended up in debt…

Suddenly the digital asset world walks onto the scene. Now, I’m talking about a 500x growth potentially over the next 20 or 40 years where they can participate… This is game-changing, it levels the playing field. It’s democratization on mass.”

...also addresses the Bitcoin market and suggests that BTC supplies are virtually non-existent, which may cause the asset to rise further than investors expect during the current bull cycle.

“There is no [BTC] supply. The only supply actually in the market to be truthful is a couple of big funds that rebalance at month end and quarter end because that’s what institutions do, and that’s new for the space, and basically day traders beings topped out or being cleared out of inventory. Because there’s no actual supply…

There is a risk, and I don’t know what the probability is, but it’s higher than most people expect, that we don’t stop at $200,000 at this cycle… but we actually go batshit crazy because of this and we get to half a million or maybe even a million.”

To understand how bitcoin and other cybercurrencies work it helps to understand how modern currencies work.

No major currency today is convertible into gold or otherwise backed by gold or even by holdings of other national currencies. All major national currencies today are fiat currencies backed by legal tender laws and the strength of the underlying national economy and the credibility of the government in paying its debts and maintaining the value of the currency.

When you think about how modern currencies like the dollar work, you will soon realize that most dollars are not even put in the form of paper currency but are in the form of electronic ledger book entries. Spent your recent $1,400 stimulus payment on Amazon, and you get goods, but you never pass any paper currency. It is all done electronically, from the stimulus payment sent from the US Treasury and deposited in your account to the payment you sent to Amazon.

The same holds true for how Amazon pays its employees and suppliers. Most of the dollars involved flow only as electronic entries, with the ledgers involved ultimately tied to the US government's original issuance of electronic dollars. And so also with the billions and trillions of dollars that flow as dollars in the US and global financial systems.

Note that this system requires banks for it to work. In effect, the banks collect and hold on their books dollar credits and debits and can prove through a chain of transactions that every dollar can be traced back to the US Treasury. Customers thus cannot create their own dollars, nor can the banks.

Consider also that in this system customers cannot manage their electronic dollar transactions and holdings without a bank of other financial institution. What the banks provide as an essential function is a may to hold and transfer electronic dollar credits.

In effect, unless you are going to conduct all your business in cash, you need a bank. And since doing everything in cash is impractical, modern fiat currencies need banks, which in turn provide employment for legions of bank employees and executives of all sorts -- all supported by fees and costs paid by customers. So also do modern fiat currencies need governments to issue currency and supervise the banks and other financial institutions.

To be sure, even in a modern nation, paper currency still has a role in many small, face to face transactions. Yet a bank is not needed to get cash, only an ATM or a cash back transaction at a retailer. And cash is a nuisance for retailers and even banks and most are trying to get away from it.

In this context, it is possible to create an alternative currency that exists only as electronic ledger entries without any backing by money of any sort. That is what bitcoin and other cybercurrencies do, with the ledger books maintained by specialized software and by businesses and people who maintain the ledgers in return for new credits.

Instead of having a national government and treasury to create and issue currency, bitcoin has encrypted software and bitcoin miners with banks of computers. And without a need for banks, bitcoin can function as electronic cash in which funds are transferred directly from buyer to seller. The key attraction of bitcoin for vendors and customers is that just like cash, it gets fee-charging, IRS reporting banks out of the way.

My guess is that national governments will soon enough move to impede the use of bitcoin and other cybercurrencies to protect tax revenue and their gains from creating and issuing currency known as siegniorage. Indeed, an official dollar cybercurrency could have major advantages for the US Treasury while undermining the attraction of private issue cybercurrencies.

Alternatively, a proliferation of cybercurrencies might limit the credibility and value of such currencies that do not have official approval or major corporate or institutional backing. Could bitcoin survive a blockade by the world's internet service providers? And competition from an official US Treasury cyber dollar and approved corporate cyber currencies like an Amazon cybercurrency? My guess is that is where we are headed eventually.

Great job on your investment! However, you will be trading an asset for a liability when you cash out. You will pay taxes and you lose your assets. If you cash out in under a year, then you pay regular taxes and not capital gains.

Instead let your assets work for you and don’t trade for liabilities. Meaning use them as collateral and borrow money. Why do this? Because it is tax free to borrow money. The reason it is tax free is because it’s not your money and you pay interest on it.

If you borrow you get to keep your assets. So the name of the game is accumulation and never sell. Assets are generally hold their value and go up over time. For instance, land and gold do that very well. So let your crypto work for you. You can use legit places like Block Fi to do this.

https://blockfi.com/

If you are paying taxes on tax day, then you are not doing something right.

Ideally with land you don’t want to borrow more than 30% of your asset value or you risk going upside down if the value drops over 70%.

If you are going to use crypto to get loans, then ideally I would not go over 10%. This is because the last Bear market it was 90% pull back. Which is pretty bad. Although to get the big gains in crypto you also get big pull backs.

We will be in a Bull market for a while. Why do I say this? This is because China is trying to go to a digital currency by the Olympics in 2022. I do not see U.S. just sitting on the sidelines and doing nothing about it. Furthermore, you have web sites like Coinbase going public. More Exchanges and adoptions coming.

Personally, I think we will be in this Bull Market at least 3 years minimum before the bubble pops. I’m thinking it will probably happen in 5 years and 7 years at the latest. It will be sort of like the dot coms initially all boomed, but then the bubble bursted.

As for crypto it is here to stay. Don’t be like that guy who purchased 1,700 Bitcoins for $0.06 cents and sold them at .30 cents.

https://twitter.com/GregSchoen/status/70261648811761665

China allows mining of Bitcoin. They mine most of the worlds Bitcoins in Server farms.

China goes back and forth about Bitcoin like India. In reality if they could shut down Bitcoin, then it would have already happened. By banning it then it will accelerate their demise of their fiats.

China is accelerating going to a digital economy to better track what their citizens are buying.

Here is the issue with that and very few people understand this. People went to Bitcoin and other crpto currencies because they did not like seeing in the current banking system. Most governments around the world think it’s just about the technology and not printing into oblivion that is the issue.

Good luck enforcing it too. Like I said earlier. If they could ban crypto technology, then they already would have done it. In reality they cannot. This is because they do not control it. A computer program does.

There are only 2 ways to shut this down. 1) If you shut down the Internet. 2) If the Earth has a dooms day Astroid hit the planet. Other than that. It’s not happening.

“Back by the government” is actually a negative, not a positive. It hasn’t saved any of the many fiat currencies that have hyperinflated in the last century despite being backed by governments.

On the contrary politicians are strongly incentivized to degrade the value of their currency through deficit spending and attending inflation to make reduce government debts.

Government currency has no controls on scarcity, as we are seeing in spades lately. Whereas cryptocurrency typically has a rock solid definition of its scarcity. That alone makes it tremendously more valuable. While there will be volatility along the way, the simple difference in scarcity is a relentless truth that will destroy government fiat in the years ahead.

They’ve tried bans (and that will increase in the desperate years for fiat ahead), but they will work the way a sieve holds water. The bans will simply confirm to people that government fiat is worthless. If you need to be coerced to use something, that tells you it’s not in your best interest to be using it.

Governments could try living within their means, but I doubt they can make the radical adjustments needed in time. Too much political pain. But once fiat hyperinflates and crypto is dominant they will have no choice but to balance their budgets and justify their taxation honestly. That will be a good thing in the long run.

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