Raoul Pal, author of The Global Macro Investor, is a highly respected investment strategist, and he just sold all his Bitcoin last week. “It’s in the bubble phase,” Pal explained in an interview at the Mauldin Economics conference. “Anything that moves exponentially always [blows up].” (Pal is a former Goldman Sachs hedge fund sales manager. He knows all about bubbles, risk and volatility.)
Current promoters of Bitcoin — many of whom talk like irrational, self-interested Bitcoin “vigilante” hucksters who desperately need to recruit new buyers to keep Bitcoin prices propped up — are ridiculously trying to argue that Bitcoin will make everybody on the planet wealthy… but only if you buy in now (and hurry, before the price goes up even more!). This is the same delusional argument we heard in the dot-com bubble, of course, when every charlatan on cable news was claiming that everybody could get rich, retire and never have to work again thanks to the predicted perpetual rise in dot com stocks. (“It’s different this time!”)
What was really happening, of course, is that starry-eyed dot-com speculative investors were merely trading pieces of paper with each other that contained higher and higher numbers written on them. This is very similar to how Bitcoin is much like a MMORPG (Massive Multiplayer Online Role Playing Game) where a virtual currency is expressed with higher and higher electronic numbers that have nothing to do with reality. It’s also why Bitcoin is now called the “Tulip bulb mania” of the electronic age.
Anything that moves exponentially always blows up
It’s refreshing to see someone like Raoul Pal addressing the Bitcoin mania with a sense of focus and wisdom rather than the emotionally-charged drivel we keep hearing from Bitcoin hucksters, all of whom are going to end up with serious egg on their faces when Bitcoin implodes. Some of the key points from his interview:
“The explosion is really just a mania,” says Pal, who describes Bitcoin investors as being almost purely speculative. “They worship Bitcoin,” he explains, eluding to the cult-like mentality that now characterizes Bitcoin hucksters.
“Anything that moves exponentially always [blows up]. Its volatility is extremely high.”
Pal says Bitcoin isn’t a “store of value.” “The fact that they could [change it] means it’s not a store of value for me.”
Bitcoin isn’t strictly limited to 21 million coins, so the entire “scarcity” argument becomes a fraud. This is due to talk of a “hard fork” in Bitcoin that would allow millions more coins to be created so that Bitcoin miners can continue to generate Bitcoin currency from nothing — a sort of “quantitative easing” for Bitcoin — and sell it to suckers who are gullible enough to buy in.
The country of India already beat Bitcoin to the punch on a “frictionless payment system” that’s in use for over a billion people. India did this “fifty times faster than Bitcoin,” says Pal.
“Companies have basically decided they don’t want to use Bitcoin because it’s a public ledger system. What they want is their own private ledger system.” Thus the claim that Bitcoin will revolutionize the world with its blockchain is total bunk. Anyone can create a blockchain. Bitcoin has no monopoly over the concept, any more than a single company has a monopoly on “cloud computing.”
“The Bitcoin community only thinks everybody needs to be on this public ledger. They don’t realize they are a solution looking for a problem,” says Pal. “That’s not what everybody needs. The banking system, everybody else, is going to do something different. So that means there’s less demand generally for token-based blockchain systems.”
Pal says blockchain systems and ICOs are now almost a “commodity” item, meaning there’s no special value in Bitcoin because its key features can be easily and cheaply replicated by everyone else. “The architecture itself is basically worth nothing.” (Read that twice to make sure you understand what he’s saying. The architecture of a distributed peer-to-peer blockchain is valueless by itself.)
“It’s not the Bitcoin I first bought into.” This is true among many rational people who are now exiting Bitcoin and eliminating their risk to the volatility that’s now frighteningly evident in Bitcoin. While Bitcoin made a lot of sense for early adopters, it has now become a speculative mania.
Bitcoin won’t magically skyrocket from hedge fund managers suddenly buying in. “I don’t know any hedge fund managers who want to buy into an exponential move,” says Pal, who was a head fund sales manager for Goldman Sachs.
New blockchain-based currencies won’t benefit Bitcoin holders at all. The new blockchains would start from scratch and be their own standalone ledgers.
Watch the full video here, and be sure to check out my new website (launching in 2 days) that aims to document the Bitcoin bubble. It’s called BitRAPED.com.