Macro Master Raoul Pal Interview: The Economic Singularity is Approaching – Don’t Exit the Market in the Next Four Years

Original Source: 《When Shift Happens》

Compiled by: Felix, PANews

Macro investor and Real Vision co-founder Raoul Pal returns to the "When Shift Happens" podcast to delve into why the AI race is the largest capital event in human history, and why cryptocurrency holders are in an advantageous position. Raoul Pal explains the economic singularity, why traders consistently lose to long-term holders, and why he continues to buy during pullbacks.

PANews has compiled the interview highlights.

Host: A few weeks ago, you shared and commented on an interesting video. It satirically suggested that the US stock market keeps going up, you just need to "buy the dip" to make money, and if you have no money, borrow to buy. It's not a pyramid scheme; it's a "buy the dip" plan. What is really going on with the stock market?

Raoul Pal: There are mainly two reasons. The first is obviously liquidity; we are witnessing an expansion of liquidity. The other thing is that we are experiencing the most extraordinary period in human history, and nothing else matters. All capital is flowing into the field of artificial intelligence; this is the greatest race ever. It's a race between nations, a race between companies. Therefore, of course, it will suck up every bit of capital, because you can't slow it down.

Host: Tell me about this race.

Raoul Pal: In this world, no one is going to allow a single superpower to monopolize AGI (Artificial General Intelligence), so there must be at least two, and globally, only the US and China can afford this race. Game theory shows that no country will stop now, because stopping means the other side gains an advantage. Even in a scenario like OpenAI going bankrupt and running out of funds, the US government would immediately auction off its assets to companies like Microsoft and Google, never allowing a single company to hold all the advantages. The scale of this game is too immense; no one will stop. It's a game of "converting units of energy into units of intelligence."

Host: Too big to fail. So, should we just "buy the dip" forever? Will there be an end?

Raoul Pal: I wrote about this in Global Macro Investor; it won't end until we reach the economic singularity. The economic singularity is when the system can no longer cope with the speed of technological development. You know the magic formula: population growth + productivity growth + debt growth. When you count AI and robots as population, our current maximum human population is 9 billion, but we can reach 18 billion, 100 billion, or even a trillion intelligent agents. With 10 billion or 50 billion agents, the economic system simply cannot function as it did before; it runs too fast.

Almost all past technology adoption followed Metcalfe's Law (PANews note: The value of a network is proportional to the square of the number of connected users), showing logarithmic growth. But AI is the first observable case of "Reed's Law" in human history (PANews note: The value of a network scales not just with user growth, but exponentially due to group-forming networks), which is exponential growth on top of exponential growth. It's estimated that by 2028, AI will produce more text annually than all the text produced by humanity from Gutenberg's printing press to the present day combined.

Host: An interview with Anthropic today also said that in Q1 they originally expected 10x growth, but they actually grew 80x. That's incredible.

Raoul Pal: Yes, the economic singularity is what happens when you have economic agents (agents) capable of instant capital formation. That's the significance of Memecoins: instant capital formation and capital destruction. They can build a digital business instantly, dominate a market quickly, and exit when the opportunity disappears. In this economy, what is the role of large traditional enterprises? Who are the workers? The system can no longer function properly. Because carbon-based lifeforms (human neurons) operate at about 1 millisecond, whereas now we're passing electricity through sand (silicon, the second most common element on Earth) to create intelligence that is six orders of magnitude faster (a million times faster) than human neurons. This is insane.

Host: Since AI is exploding exponentially, many people in the crypto space want to jump ship to AI. They find the crypto industry boring now, or even fear being left holding the bag. How do you view the investment choice between AI and cryptocurrency?

Raoul Pal: Despite the intense heat in the AI industry, I still believe that, over the long term, cryptocurrency remains one of the best risk-reward investments. However, it's hard to compete with chip companies like Nvidia because they are the core component converting energy into intelligence. But cryptocurrency has an "unlimited TAM (Total Addressable Market)." Around October last year, we witnessed the birth of the agent economy (AI Agents). When these agents start scaling massively, they will have their own wallets and conduct business on-chain. Previously, we estimated the crypto market could reach $100 trillion based on human users. Now, with unlimited AI agents, this completely changes the game. Furthermore, central banks, like the Fed in the Greenspan era, will run the economy, relying on productivity miracles to reduce debt-to-GDP ratios. The debasement of fiat currency won't stop, and the entire financial system is migrating to blockchain infrastructure, so you just need to front-run the institutions. The worst is over because global liquidity is accelerating.

Host: So for you, Bitcoin dropping back to $60k from its recent peak isn't a bear market?

Raoul Pal: This is just an agonizing correction within a bull market. I've been in crypto since 2013. A 50% pullback in Bitcoin is normal, followed by even steeper drops in altcoins. For example, Solana in the last cycle dropped 80% before its massive rally. The difference is that the 2021 correction was very fast, a sharp crash followed by a rapid recovery; this correction is more volatile and drawn out over months, which people find painful. But looking at it differently, the longer the consolidation, the potentially longer and larger the subsequent bull run.

Host: The problem is that in 2021, drops were fast and recoveries were fast, but this time the market is choppy and time-consuming. Also, some high-performing projects (like stablecoins, RWA) don't have tokens that retail can invest in. People feel the early promise of getting rich quick is broken.

Raoul Pal: I don't think that's true. Product-market fit is king. Just because your altcoin hasn't gone up doesn't mean the promise is broken. The market doesn't owe you anything. People got used to the easy money days of the past few years, but liquidity in 2024 was still relatively suppressed. We haven't entered the real "Banana Zone" (period of parabolic growth). While the average person might not be able to buy equity in a stablecoin company, that's not a problem at all. You just need to hold the underlying Layer 1 tokens. This is our "Universal Basic Equity". If a huge part of the future economy is dominated by AI and agents, and they use crypto networks, we simply hold Layer 1 tokens and share in their success. We didn't have this opportunity in the internet era. There's no excuse to miss it now.

Host: What did you add to your portfolio during the recent downturn?

Raoul Pal: I bought some Sui, and a little bit of Zcash. I didn't chase Zcash when it surged last year; I started buying during the pullback. In the store of value space, privacy has value. This is a very simple "left curve" trade (intuitive trade): it's Bitcoin with privacy. The "right curve" trade (deliberative trade) considers its quantum-resistant properties. While this might invite government crackdowns, it provides a very important protective attribute in the future.

Host: Could you elaborate on why smart contract Layer 1s will capture the majority of crypto value over time?

Raoul Pal: Layer 1 is the investment-grade infrastructure layer. Just like the operating system market eventually consolidated to three or four main players, Layer 1s will ultimately converge to 3 to 5 core chains. How to understand Layer 1's value? If you unplug Ethereum today, the economic value you destroy is enormous: all Layer 2s, DeFi, NFTs, RWAs would go to zero. ETH might even be undervalued at its current valuation. Bitcoin has a singular function; its goal is to capture a share of global savings. But the scalability of smart contract infrastructure is unlimited.

Host: So which Layer 1s will win?

Raoul Pal: ETH has the densest economic value and developer mindshare (security, Lindy effect, etc.). Like Microsoft, buying it won't be a big mistake. Solana has proven successful; it's more efficient, faster, and cheaper. Sui is very early, but when the market dropped 80%, ETH, Solana, and Sui were the only three tokens that maintained economic density. Sui's programmability within a single block, its ability to handle thousands of transactions, and its finality speed are on a completely different order of magnitude. Valuing blockchains with traditional "Discounted Cash Flow (DCF)" models is nonsense because the network's purpose is to provide the cheapest and fastest service. Valuing it by fees generated is ridiculous. The cheapest, fastest, and most programmable chain will ultimately outperform.

Host: Some people say DeFi is "dead" after all the recent hacking incidents over the past few months. How could traditional financial institutions put their money on DeFi which is easily hacked?

Raoul Pal: But this only forces people to develop better products. Just like we install antivirus software on our computers, hacker attacks are ubiquitous. Every bank internally has teams dealing with hacks and a percentage of stolen funds; they just don't advertise it. I predicted back in 2014 that the entire financial system's infrastructure would migrate to the blockchain. Why? Because it's the most efficient way to output energy. The financial system will always migrate to the most profitable and efficient tracks. Moreover, DeFi is actually more suitable for machines (AI agents) than for humans. Machines don't even need a front-end website; they can perform low-friction asset rebalancing and instant trading across multiple chains using multiple stablecoins in milliseconds. They will be DeFi's largest user base, and we might not even notice these transactions.

Host: Do you think NFTs will gain massive value from the wealth effect mentioned above? My Crypto Punks and XCOPYs are stagnant; I don't even want to look at them.

Raoul Pal: That's because NFT activity is a function of the crypto economy's prosperity. You have to wait until the overall crypto market reaches hundreds of trillions of dollars. When ETH goes from its current price to $5000, or breaks out to the upside, you will see a massive resurgence in NFT activity. Think about it: we are living through the biggest inflection point in human history. We will no longer be the top intelligence on Earth, and art is a vehicle to record the culture of our time. When people make serious money in this massive machine economy, they will naturally buy "trophy assets" (PANews note: referring to top-tier assets that are extremely scarce, prime-located, or possess significant historical and cultural value, thereby showcasing the buyer's social status and bringing immense psychological satisfaction, often sought after but hard to find), just like tech, real estate, and hedge fund tycoons buy art after getting rich.

Host: So how do you plan to allocate an NFT portfolio? Are only the top "Holy Grails" worth buying?

Raoul Pal: I am actually in the process of launching an NFT fund. Many high-net-worth individuals, family offices, or even OGs who made money in crypto but never bought digital art don't know how to get in. Our fund will have two parts: one part invests in "Holy Grail" assets (like Alien Punks, XCOPY, Beeple, ranging from hundreds of thousands to tens of millions of dollars), which already have proven social consensus. The other part invests in mid-tier artists with high convexity. For example, "Die with the most likes", who documents the decline of the American middle class with humor and sometimes vulgarity; or German artist Kim Asendorf, who is at the forefront of AI art. If these artists' works reprice from 20 ETH to 200 ETH (5 to 10 times), and ETH itself might also go up 10x in the future, you get an astonishing 100x compound return.

Don't worry about ordinary NFTs. The whole industry is still small; everything will be repriced. Even buying a common Punk from the same collection is a good trade. Furthermore, our fund will also engage in NFT collateralized lending, earning over 15% yields and reinvesting to support the liquidity of the entire art ecosystem.

Host: Is Bitcoin a proxy for investing in AI?

Raoul Pal: To some extent, yes, because AI will drive economic growth, and the debasement of fiat currency due to massive debt will benefit Bitcoin as a digital store of value. However, Layer 1 smart contract platforms are a better and more direct bet.

Host: You mentioned everyone focuses too much on cycles, but the bigger picture is so obvious: unless absolutely necessary, you should never sell.

Raoul Pal: Exactly. In this era of Agents, fiat debasement, and everything moving on-chain, why would you sell? If we know the long-term direction of market value, why sell? This is the pension plan for all of humanity. The economic singularity is roughly 4 years away. You have 4 years to accumulate as many of these assets as possible. They will see you through the greatest uncertainty of the future.

Host: Can you prove with data that "buy and hold" outperforms those trying to trade the cycles?

Raoul Pal: Absolutely. I've modeled it. If you buy when it reaches 1 to 2 standard deviations into oversold territory on the logarithmic trend channel, and then do nothing, the compounding is astonishing. Trying to sell at the top and buy back at the bottom is something 99% of people cannot do; it's too difficult. People tend to chase highs during rallies. I've been in this industry for 35 years, and I don't know anyone who consistently makes significant money through short-term trading. The traders who make real money actually earn management fees.

As it turns out, the people who make the most money in cryptocurrency are those who "do nothing." Why are the most profitable accounts at major brokerage firms often "dead accounts" (forgotten accounts)? Retail tries to buy high and sell low. Not only do they fail, but they also expend immense emotional and psychological energy, getting angry or ecstatic daily over price fluctuations. This is absolutely the most inefficient use of personal energy. If you have spare productive energy, study AI, and then just hold your Bitcoin tightly. If the price reaches 2 standard deviations overbought, you can sell a little to enjoy life; otherwise, shut up, buy the dip, and hold patiently.

Host: How do people maintain conviction when their portfolio is down 60-80% for months?

Raoul Pal: I simply don't care. I live off my salary. If I have spare cash and the market is severely oversold, I keep buying. Because my core thesis hasn't changed: tomorrow will be more digital than today.

Host: Now AI stocks are skyrocketing, many charts are going straight up. Could this lure people away from the boring crypto market to buy AI?

Raoul Pal: Your job is to be a mercenary for your own capital, go where the returns are. But I believe the compound return rate for crypto is higher. Compared to the Nasdaq, Bitcoin is currently in a severely oversold position relative to its long-term trend. This means, relative to the Nasdaq, you should be allocating more to crypto right now.

Host: Finally, give us some optimistic hope for 2026 to 2027 to boost everyone's morale.

Raoul Pal: There's a lot of good news. First, banks are coming in, and stablecoins will see explosive growth in the next two years. The regulatory "Clarity Act" will be signed, allowing almost everyone to start building on the blockchain. On the macro side, the US government has trillions of dollars in debt to roll over and pay interest on; they must keep printing money, so global liquidity will inevitably increase. The business cycle remains strong, and more of people's income will be recycled into speculative assets. Most importantly, current crypto assets, relative to assets like the Nasdaq, are at the cheapest low point in their long-term logarithmic uptrend. We've also experienced the longest and lowest "Extreme Fear" period (Fear & Greed Index below 10) in history, and there's a high probability the Middle East conflict could be permanently resolved. This is a perfect storm of bullish factors. I think the probability of this positive bullish outcome is 70%. The remaining 30% downside risk mainly involves the Middle East conflict being unresolved, leading to inflation and a liquidity crunch, but I don't see signs of that yet.