The Inconvenient Truth About Cryptocurrencies

Published on: January 20th, 2021

This article is the accumulation of Raoul’s thinking around the Digital Asset space as he has become more deeply involved and begun to understand the different assets and narratives that drive them. His feeling is that the narratives in the space are behind the times, and stem from the world of 2017 when the adoption of bitcoin was just taking hold and every other digital asset was a threat. After 2017, we saw the crypto winter, where the entire space fell nearly 90%. People are scarred by those events. Many people made a lot of money and many people lost a lot of money in 2018 and 2019. In this article, Raoul tries to bring the narrative forward and bring some clarity on how to address the space that is based less on tribalism and emotion and more on a pragmatic approach to the entire subject.


  • BP
    Brett P.
    2 February 2021 @ 05:21
    I'm late to the party here, but since adoption seems to be such a key driver, I'd really consider anyone reading to brush up on Proof of Work vs Proof of Stake. I think eventually only Proof of Stake systems will survive due to the massive efficiency wins.
  • JD
    James D.
    22 January 2021 @ 02:09
    The issue I have with applying Metcalfe’s law here is that the value of crypto networks does not necessarily rise with the number of users. Blockchains by design have scalability bottlenecks (see the scalability trilemma), which means their feasible use cases change as they grow in size and popularity. Let’s look at Ethereum for example. As the number of active users rise, gas fees also go up due to competition for limited block space. Additionally, gas prices go up significantly as the price of ETH rises. As gas fees go up, the utility of the network actually goes *down*. There are many types of defi transactions that might be worth spending $0.40 on, but will not be worth spending $40 on. For Bitcoin this is fine, because the killer use case for BTC is to hold it. It’s digital gold, a store of value. You don’t need to transfer your gold often. So the increase in transaction fees doesn’t limit Bitcoin much for its core use case. Unless your thesis is that ETH will compete with BTC for the store of value narrative, the value of Ethereum (as a network) is in using the dapps on its network, which requires spending ETH as gas. And thus as more and more dapps are priced out of being usable due to a rise in gas prices, the value of the network actually goes down as the price of ETH goes up. This means that either a) the decline in network usability will naturally have a price-suppressive effect on ETH that prevents its price from getting too high, b) the use-case of Ethereum will evolve to only involve high-value transactions (much like Bitcoin going from a daily payments narrative to a store of value narrative), or c) Ethereum will need to scale and increase throughput proportionally in order to keep gas prices down as the price of ETH goes up. For this reason, although I think Ethereum is a really interesting technology, I don’t think a bet on ETH rising in value is nearly as surefire a bet as BTC. It’s possible Ethereum as a network could be wildly successful, and ETH could not appreciate all that much (since its price needs to stay low for the network to be useful). Otherwise, it relies on a lot of future assumptions that all have to work out perfectly — that developers will be able to build ETH 2.0, a completely different blockchain, that scales the network along to keep pace with its adoption. The other issue I have with your analysis is that you’re using USD pairings for ETH and XRP. If you look at ETH/BTC and XRP/BTC, you’ll see that their price graphs have been more or less flat against BTC over the past 5-7 years, with a few temporary spikes. Thus the price relationship you’re attributing to Metcalfe’s law on those networks may simply be due to the exponential rise of the price of BTC, and the fact that the rest of the crypto market tends to track the BTC price. (And you could have the causation backward — the rise in price of these assets attracted more users to them, and not vice versa). ETH very well might outperform BTC, as might any of these other alts. But I think it’s just as likely that it underperforms, as most alts have over the past 4 years. BTC seems like a sure bet, while ETH feels closer to an angel investment to me. So my crypto allocation is around 93% BTC, 7% ETH.
    • NH
      Nathan H.
      22 January 2021 @ 03:54
      I've been following the ETH/BTC relationship for a few months and it is anything but flat. It's in constant flux with large movements. So I dont understand when you say it is flat. Perhaps you could explain your definition of flat.
    • JD
      James D.
      22 January 2021 @ 05:51
      @Nathan H: Zoom out to "all": I don't see a convincing trend that ETH has been appreciating vs BTC over the long-term. If you bought at any time since March 2017, you could be up 100% on your investment vs BTC if you managed to buy at the absolute bottom, but you also could be down 73% if you happened to buy at the ATH (when it probably looked like it had a really convincing upward trend). Over the next year, it might go up vs BTC, but I think it's also just as likely that it goes down vs BTC. My point isn't that ETH is bad, I just think it's a lot more speculative than BTC, so I'd size positions accordingly. Sure ETH *might* see 2x or 4x or 10x the gains that BTC does on this bull run — but it also might just drag, and you'll get only 50% of the returns you would have gotten if you left your money in BTC.
    • NH
      Nathan H.
      22 January 2021 @ 18:58
      It's still an upward sloping line no matter where you start
    • NH
      Nathan H.
      27 January 2021 @ 04:54
      Sorry, I didn't explain myself well. If you draw a line from the low points and ignore the spikes ETH appears to be appreciating over the long run...
    • BP
      Brett P.
      2 February 2021 @ 03:01
      Great overall summary James! I'd be curious on your thoughts on the future of crypto in terms of proof of work vs proof of stake.
  • RK
    Roger K.
    25 January 2021 @ 09:57
    2% addresses own 95% of all available bitcoins. This FACT is missing in this comprehensive report...
  • AT
    Aleem T.
    25 January 2021 @ 09:38
    I read this report, watched the investigation into ETH video & read Lyn Alden's article on ETH and concluded I don't really understand the investment proposition. Was up over 100% on my ETH Long position, so have sold half and taken my capital out so its a free option. BTC I can get my head around so kept the full allocation.
  • RG
    Rob G.
    25 January 2021 @ 05:18
    Great work Raoul
  • JB
    Jason B.
    24 January 2021 @ 20:15
    All I know is that people will move out the risk curve at the end of the bull run simply keep the serotonin flowing. With the crypto market likely being $3 trillion by the end of this bull run as opposed to the 350 billion at the beginning of 2018, this alt season will have the gas to go down as the mother of all alt seasons. Also, with the learning curve clearly being too much for many people sites like coin base pro and Gemini likely hold the strongest and fastest bulls to choose from as people search for more returns. CBP and G are doing a fantastic job of following the path that internet created as it was built out to select the coins they list along with the necessary, but further out the development curve, selections in defi. Honestly, the kraken is there too but the security is so serious that they have unintentionally created annoying hurdles for use with their excellent security. This was an excellent article that is doing what was clearly intended. People are having to think outside the box which makes the box bigger. Love it!!!
  • CH
    Charlie H.
    23 January 2021 @ 02:40
    The elephant in the room hasn't been mentioned much in this article vis-a-vie Bitcoin versus ETH versus other coins, that is institutional adoption. This cycle may play out differently with BTC dominance overpowering ETH and the other alts ultimately as big money (corporate treasury's, family offices, etc.) look to buy and "HODL" Bitcoin as the price rises and liquidity increases. Basically there's so much upside in BTC and it's not a given that ETH or a basket of alts will outperform this cycle (with more downside risk) it's hard just not keep it simple and go 100% BTC for a crypto allocation or something like 90/10 (80/20 at the very most). In short I agree with James D. Lyn Alden and Michael Saylor also makes good points with regard to BTC versus ETH versus "the others". Also I would argue Santiago Velez's point about switching costs versus BTC. Mechanically there is not switching costs outside of exchange trading fees, but potentially you lose out tremendously on price as you did if you got caught bag holding during a crypto winter or correction. Upside rip and lock out rally in BTC is far more likely given ultimately BTC is the base currency in the crypto space. So maybe the Bitcoin Maxis have it right (but maybe for the wrong reasons)? This would change once another coin outside of BTC to me proves its utility.
  • RR
    Robert R.
    22 January 2021 @ 09:19
    On balance, a great piece Raoul though I have to subside with James D's arguments. Despite ETH's current valuation, if you look at the daily transactions as ratio to the market cap and contrast this to many other projects out there you can see how overvalued the project is (of course, I'm discounting ETH2.0 here which we have no idea when or if it will actually happen). Like you as professional macro investor I too resonate with principals of risk and reward, probabilities etc It is wise to assume that there will not be one or two that necessarily reign supreme but there certainly will not be dozens also. With that said, at the risk of sounding like a broken record given how often this project has been echoed by the evangelists on twitter, I see something special and unique in Hedera Hashgraph that I have not seen in any project to date (and I have been around the space for a while) and its one of my picks that I think warrants at least 2% in any serious crypto investor's portfolio betting on the future. There are two great links which I will share with group here (I'm not affiliated with these people in any way) as I think their fantastic primers. I would start in this order: 1. 2. Raoul, I'm particularly interested to hear your views on this project and I look forward to discussing it with fellow members also.
  • LS
    L3O S.
    21 January 2021 @ 21:17
    Raoul, I have been following you recently on Twitter and reading the tribalism playout. I can see how it can be off putting to some when new to crypto, which I am. This is an excellent piece and the bridge you are building between these camps is timely, necessary and welcome. As always, great stuff.
  • JS
    Jim S.
    21 January 2021 @ 20:00
    If you are placing any bets on XRP then listening to Laura Shin's Unchained podcast on this would be useful:
  • GS
    Garrett S.
    21 January 2021 @ 19:30
    In the bitcoin space, the tribalism is most fierce. It is so fierce that it has a name – Bitcoin Maximalism. I found that to be particularly interesting and instantly made me think of the Apple and Tesla fan boys. I wonder if we could dig more into that and see the comparisons to some of the greatest innovative creations and the tribalism that it creates. This makes me believe that Bitcoin is truly destined for greater things. Excellent read, thnx again Raoul
  • FK
    Firoze K.
    21 January 2021 @ 17:04
    A-Level Maths taken 25 years ago not really helping me understand the formulae Raoul! :)
  • JW
    J W.
    21 January 2021 @ 08:52
    I like the cold hard look at the facts. I do not think it makes sense to mix a belief system (what I call the 'Citadel Argument' surrounding Bitcoin) with an investment strategy or economic reality. Important narrative. Thanks for writing it.
  • OH
    Omar H.
    21 January 2021 @ 07:49
    Brilliant! Thank you Raoul for helping us become wise investors. An open mind sees the possibilities and potential indeed.
  • RC
    Raul C.
    21 January 2021 @ 05:08
    Thank you, I can tell you for someone new to the space it is a rollercoaster of emotions. But the learning curve has been amazing.
  • JM
    Jake M.
    21 January 2021 @ 02:15
    Hi Raoul, right now we haven't seen any real use case on ethereum yet except early recent DeFi protocols. It seems as though there are serious competitors like Polkadot and Cardano to ethereum. Just like the early Internet, we had several protocols but eventually we only collapse to one (http over TCP/IP). Are you looking into hedging your ethereum position by buying some Polkadot / Cardano? If not, what makes you much more bullish in ethereum against its other competitors?
  • SB
    Steve B.
    21 January 2021 @ 01:48
    I may have missed this in the report, but what about the whole tether argument with it dramatically affecting btc price, etc
  • SB
    Steve B.
    21 January 2021 @ 01:48
    I may have missed this in the report, but what about the whole tether argument with it dramatically affecting btc price, etc
  • SB
    Steve B.
    21 January 2021 @ 01:48
    I may have missed this in the report, but what about the whole tether argument with it dramatically affecting btc price, etc
  • DW
    Dean W.
    21 January 2021 @ 00:54
    Brilliant and much appreciated! 👏👏👏 🚀🚀🚀
  • AP
    Adam P.
    20 January 2021 @ 22:56
    Love this. Thanks a bunch, Raoul!
  • SH
    Stu H.
    20 January 2021 @ 22:10
    Incredible, as always. It'll take several reads to absorb fully. Thanks Raoul.
  • MJ
    Mike J.
    20 January 2021 @ 21:55
    Thanks Raoul, Your thoughtful interviews and reports have given me courage to buy and hold through dips and has changed my life. Thanks for the extra few million dollars in my account, so far!
  • CR
    Chiel R.
    20 January 2021 @ 21:40
    Awesome piece & perfect timing...fingers crossed.
  • CS
    Chuck S.
    20 January 2021 @ 21:37
    Great piece, Raoul! I second Michael H.'s request for updates on the BTC/ETH weightings in your crypto allocation.
  • HS
    Haythim S.
    20 January 2021 @ 21:28
    Thank you Raoul. I’ve been eagerly waiting for this report.
  • DF
    David F.
    20 January 2021 @ 20:58
    Thank you Raoul, very insightful indeed and well timed too. I'm one of those that the FCA has nobbled, but I will find a way forward.
  • KH
    Kevin H.
    20 January 2021 @ 20:53
    I’ve been eagerly waiting for this report since you mentioned it on Twitter. Thank you for sharing! It is very helpful with filtering out all the noise; especially Santiago’s contribution. He nailed it!
  • MD
    Michael D.
    20 January 2021 @ 20:48
    What remarkably clear thinking by Santiago. Very impressive. Oh, yeah, by Raoul as well --- but we're accustomed to his brilliance and clarity of thought. Many thanks Raoul. I have never regretted being a Pro member.
  • JW
    John W.
    20 January 2021 @ 20:45
    Wow! A Tour de Force! From your lips to God's ears my friend.
  • ip
    ivo p.
    20 January 2021 @ 20:32
    I love it Raoul! Always appreciate your take on things! More or less have been going along the same road; BTC; ETH: large alts; small alts. The more I read and investigate, the more it all blows my mind. Some use cases are truly brilliant. Also the staking, lending and earning possibilities with coins are amazing.
  • KA
    Kelly A.
    20 January 2021 @ 20:19
    excellent. thank you.
  • JA
    Joseph A.
    20 January 2021 @ 20:15
    What do you hypothesise happens to Bitcoin in terms of it price/value when all 21 million coins are mined? I appreciate that by then some different uses for it may very well have evolved.
  • MH
    Michael H.
    20 January 2021 @ 19:43
    Agreed, thank you for clarifying so much I see on Twitter about crypto tribalism. Question, will you update the Trade Portfolios when you move to a heavier ETH weighting and other alternative ideas when you think it's time?
  • JR
    Jason R.
    20 January 2021 @ 19:37
    Thanks, Raoul. This may be one of the most important pieces you've written. Appreciate you sharing this.

Mark Yusko

Morgan Creek Capital Management, Co- Founder, CEO, & CIO

Mark Yusko is the Founder, CEO and Chief Investment Officer of Morgan Creek Capital Management. He is also the Managing Partner of Morgan Creek Digital Assets.

Morgan Creek Capital Management was founded in 2004 and currently manages close to $2 billion in discretionary and non-discretionary assets. Prior to founding Morgan Creek, Mr. Yusko was CIO and Founder of UNC Management Company (UNCMC), the Endowment investment office for the University of North Carolina at Chapel Hill. Before that, he was Senior Investment Director for the University of Notre Dame Investment Office. Mr. Yusko has been at the forefront of institutional investing throughout his career. An early investor in alternative asset classes at Notre Dame, he brought the Endowment Model of investing to UNC, which contributed to significant performance gains for the Endowment. The Endowment Model is the cornerstone philosophy of Morgan Creek, as is the mandate to Invest in Innovation.

Mr. Yusko is again at the forefront of investing through Morgan Creek Digital Assets, which was formed in 2018. Morgan Creek Digital is an early stage investor in blockchain technology, digital currency and digital assets through the firm’s Venture Capital and Digital Asset Index Fund.

Mr. Yusko received a BA with Honors from the University of Notre Dame and an MBA in Accounting and Finance from the University of Chicago.

Anthony Scaramucci

SkyBridge Capital, Founder & Co-Managing Partner

Prior to founding SkyBridge in 2005, Scaramucci co-founded investment partnership Oscar Capital Management, which was sold to Neuberger Berman, LLC in 2001. Earlier, he was a vice president in Private Wealth Management at Goldman Sachs & Co. In 2016, Scaramucci was ranked #85 in Worth Magazine’sPower 100: The 100 Most Powerful People in Global Finance. In 2011, he received Ernst & Young’s “Entrepreneur of the Year –New York” Award in the Financial Services category. Anthony is amember of the Council on Foreign Relations (CFR), vice chair of the Kennedy Center Corporate Fund Board, a board member of both The Brain Tumor Foundation and Business Executives for National Security (BENS), and a Trustee of the United States Olympic & Paralympic Foundation. He was a member of the New York City Financial Services Advisory Committee from 2007 to 2012. In November 2016, he was named to President-Elect Trump’s 16-person Presidential Transition Team Executive Committee. In June 2017, he wasnamed the Chief Strategy Officer of the EXIM Bank. He served as the White House Communications Director for a period in July 2017. Scaramucci, a native of Long Island, New York, holds a Bachelor of Arts degree in Economics from Tufts University and a Juris Doctor from Harvard Law School.

Michael Saylor

MicroStrategy, Co-Founder

Mr. Saylor is a technologist, entrepreneur, business executive, philanthropist, and best-selling author. He currently serves as Chairman of the Board of Directors and Chief Executive Office of MicroStrategy, Inc. (MSTR). Since co-founding the company at the age of 24, Mr. Saylor has built MicroStrategy into a global leader in business intelligence, mobile software, and cloud-based services. In 2012, he authored The Mobile Wave: How Mobile Intelligence Will Change Everything, which earned a spot on The New York Times Best Sellers list.

Mr. Saylor attended the Massachusetts Institute of Technology, receiving an S.B. in Aeronautics and Astronautics and an S.B. in Science, Technology, and Society.

Alex Saunders

Nugget's News, Founder & CEO

Alex Saunders is the founder and CEO of Nugget’s News, a digital media company focused on all things crypto. Alex has been captivated by cryptocurrency since 2012 and in 2017 he began educating globally on the benefits of cryptocurrency and how to safely acquireit. Nugget’s News has been listed as a top-20 podcast by Business Insider, ShapeShift and Lifehacker and has over 120k YouTube subscribers with 9 million total views.Alex is also heavily focused on his cryptocurrency education platform Collective Shift which currently serves over 4,500 members. provides his unique perspectives by utilising his expertise in fundamental analysis, technical analysis and market sentiment. He is working towards his mission of making it easier for everyone to understand the financial world.

James Putra

TradeStation Crypto, Inc., Sr. Director of Product Strategy

James helped launch TradeStation Crypto’s offering which utilizes a true online brokerage model that self-directed investors and traders have come to expect for equities, futures, and foreign currency markets. He is a reputed crypto asset specialist and blockchain thought leader focused on helping people find innovative ways to participate in this space. He is active in the blockchain community with speaking engagements, TV appearances and mentoring. James has over 15 years of experience in the Fintech industry.

Raoul Pal

Real Vision, Co-Founder & CEO

Raoul Pal is the Co-Founder and CEO of Real Vision, the world’s pre-eminent financial media platform, which helps members understand the complex world of finance, business, and the global economy.

Real Vision members also have access to Real Vision Crypto, a cryptocurrency and digital assets video channel watched by over 80,000 people. In addition, Raoul has been publishing Global Macro Investor since January 2005 to provide original, high quality, quantifiable and easily readable research for the global macro investment community hedge funds, family offices, pension funds and sovereign wealth funds. It draws on his considerable 31 years of experience in advising hedge funds and managing a global macro hedge fund. Global Macro Investor has one of the very best, proven track records of any newsletter in the industry, producing extremely positive returns in eight out of the last twelve years.

He retired from managing client money at the age of 36 in 2004 and now lives in the tiny Caribbean island of Little Cayman in the Cayman Islands. Previously he co-managed the GLG Global Macro Fund in London for GLG Partners, one of the largest hedge fund groups in the world. Raoul moved to GLG from Goldman Sachs where he co-managed the hedge fund sales business in Equities and Equity Derivatives in Europe. In this role, Raoul established strong relationships with many of the world’s pre-eminent hedge funds, learning from their styles and experiences.

Other stop-off points on the way were NatWest Markets and HSBC, although he began his career by training traders in technical analysis.

Peter McCormack

What Bitcoin Did, Journalist

Peter McCormack is a full time journalist/podcaster covering topics such as Freedom, Human Rights, Censorship and Bitcoin. Peter created and hosts the What Bitcoin Did Podcast, a twice-weekly Bitcoin podcast where he interviews experts in the world of Bitcoin development, privacy, investment and adoption. Launched in November of 2017, the podcast has grown to over 100 episodes with a guest list that is a testament to the diversity of knowledge and opinions that represent the broader Bitcoin community. Expanding his growing list of human interest recordings, documentaries and films Peter has recently launched the Defiance podcast and DefianceTV.

Caitlin Long

Avanti Financial Group, Founder & CEO

22-year Wall Street veteran who has been active in bitcoin and blockchain since 2012. In 2018-20 she led the charge to make her native state of Wyoming an oasis for blockchain companies in the US, where she helped Wyoming enact 20 blockchain-enabling laws. From 2016-18 she jointly spearheaded a blockchain project for delivering market index data to Vanguard as chairman and president of Symbiont, an enterprise blockchain start-up. Caitlin ran Morgan Stanley’s pension solutions business (2007-2016), heldsenior roles at Credit Suisse (1997-2007) and began her career at Salomon Brothers (1994-1997). She is a graduate of Harvard Law School (JD, 1994), the Kennedy School of Government (MPP, 1994) and the University of Wyoming (BA, 1990).

Hunter Horsley

Bitwise Asset Management, CEO

Hunter Horsley is Chief Executive Officer of Bitwise Asset Management. Prior to Bitwise, he was a product manager at Facebook, working on advertiser products including the multibillion-dollar sponsored content ecosystem and ad breaks in videos. Before Facebook, Horlsey was a product manager at Instagram, responsible for multiple advertising products generating several hundred million dollars of revenue. He is a graduate of the Wharton School at the University of Pennsylvania, with a B.S. in economics. Recently, Horsley was named a member of Forbes’ 2019 “30 Under 30” list.

Luke Gromen

Forest For The Trees, Founder & President

Luke Gromen has 25 years of experience in equity research, equity research sales, and as a macro/thematic analyst. He is the founder and president of macro/thematic research firm FFTT, LLC, which he founded in early 2014 to address and leverage the opportunity he saw created by applying what clients and former colleagues consistently described as a “unique ability to connect the dots” during a time when he saw an increasing “silo-ing” of perspectives occurring on Wall Street and in corporate America.

FFTT caters to institutions and sophisticated individuals by aggregating a wide variety of macroeconomic, thematic and sector trends in an unconventional manner to identify investable developing economic bottlenecks for his clients. Prior to founding FFTT, Luke was a founding partner of Cleveland Research Company, where he worked from 2006-14. At CRC, Luke worked in sales and edited CRC’s flagship weekly thematic research summary piece (“Straight from the Source”) for the firm’s clients. Prior to that, Luke was a partner at Midwest Research, where he worked in equity research and sales from 1996-2006. While in sales, Luke was a founding editor of Midwest’s widely-read weekly thematic summary (“Heard in the Midwest”) for the firm’s clients, in which he aggregated and combined proprietary research from Midwest with inputs from other sources.

Luke Gromen holds a BBA in Finance and Accounting from the University of Cincinnati and received his MBA from Case Western Reserve University. He earned the CFA designation in 2003.

Meltem Demirors

CoinShares, Chief Strategy Officer

Meltem Demirors is Chief Strategy Officer of CoinShares, an investment firm that manages billions in assets on behalf of a global investor base, and is a trusted partner to investors and entrepreneurs navigating the digital asset ecosystem. Meltem oversees the firm’s managed strategies group and its New York office and leads corporate development.

Previously, she was part of the founding team of Digital Currency Group. As a veteran investor in the digital currency space, she has invested in over 250 companies in the ecosystem.

Meltem is passionate about education and advocacy, and teaches the Oxford Blockchain Strategy Programme and co-chairs the WEF Cryptocurrency Council.