Real Vision CEO Raoul Pal thinks investors should view crypto projects like digital nation-states rather than assets or tech advancements.
The former Goldman Sachs executive says in a new blog post that crypto ecosystems are networks that produce intrinsic and extrinsic value.
The Bitcoin (BTC) network, he argues, is founded on the principle that BTC is an independent monetary system free from the corrupting influence of governments.
“It is fiercely protective of the integrity of its protocol (how its society functions) and as a result, shuns innovation in the name of purity. Think of the Bitcoin economy as the Catholic Church back in the Dark Ages or the gold bug community. There can only be one God or one asset. In the case of the Bitcoin economy, the only asset that exists is Bitcoin. So, if you wish to allocate capital to this economy, your only choice is to HODL [hold on for dear life] Bitcoin.”
Pal says the Ethereum (ETH) network, by contrast, shares more similarities to the complex US economy.
“In this system, you can start out by buying ETH which has a deflationary supply, meaning there will be less of it as time goes by. Because of this, its ‘central bank’ (the staking) adheres to responsible monetary policy designed to ensure that value is upheld and not debased.”
Pal notes that staking ETH is like purchasing Treasury bonds with the US government and decentralized finance (DeFi) is akin to the riskier banking sector. The Real Vision CEO predicts the Ethereum economy’s greater complexity will make it bigger than the Bitcoin economy over time.
“For example, you could think of XRP as the UK: an old economy that, while important and well established, does not grow very fast because of a lack of innovation.
Solana on the other hand might be South Korea just after the Asian crisis when its currency and equity market came crashing down. It was an unmatched opportunity that outperformed both the USD and SPX for six years. However, it did not stand the test of time. It failed to continue the outperformance. Who knows how Solana will play out.”
He concludes by looking at the total market capitalization of crypto assets, which he says is currently flashing “a perfect setup” as it sits between two long-term support levels.Don't Miss a Beat – Subscribe to get email alerts delivered directly to your inbox
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