Author: Raoul Pal, Founder of Real Vision
Compiled by: Chopper, Foresight News
Scroll through your feed right now, and you’ll find market sentiment overwhelmingly pessimistic. The cycle is over, the crypto industry is dead, the four-year bull-bear cycle has been declared invalid, and everyone who told you to buy was wrong. When price action deviates from public expectations and moves beyond their understanding, pessimism spreads. History keeps repeating itself.
I’ve witnessed this cycle countless times and know exactly how the story ends. Having been in the crypto industry for thirteen years, I’ve made almost every mistake possible. Before I explain my rationale for being consistently bullish, let me first talk about the pitfalls I’ve encountered. True experience always comes from failure.
In 2013, I entered the market when Bitcoin was priced at $200. But the timing of the buy-in isn’t the main point. Before purchasing my first Bitcoin, I wrote the first-ever macro valuation analysis for Bitcoin.
By today’s standards, this valuation model was very crude. I borrowed the valuation framework from commodities, calculated the total above-ground and below-ground gold reserves, and then applied this framework to Bitcoin. The conclusion was: if Bitcoin could become digital gold, with the gold price remaining at current levels, the value of a single Bitcoin could reach $1 million.
This article quickly spread through Silicon Valley and financial circles. At that time, no one had built a valuation framework for Bitcoin from a macro perspective. I didn’t just publish my views; I also recommended Bitcoin to all GMI subscribers, including numerous hedge funds and family offices. Recommending a $200 Bitcoin to such investors in 2013 required immense courage.
My core conclusion at the time was: “Bitcoin is currently priced at $200, and the long-term target price could potentially reach $1 million. Considering the high probability of my own misjudgment, I’ll actively give a 10% discount and set a ten-year target price of $100,000.”
The final result roughly aligned with the prediction; Bitcoin did reach that price level.
However, correctly predicting the destination and understanding the fluctuations along the way are two entirely different things.
Looking back on this journey, I entered at an excellent price. The price doubled, tripled, and then crashed 84%. I comforted myself that this was a long-term bet and required no action. Then, the market surged again in late 2017. One day, staring at the screen, the price climbed to what seemed like an unbelievable number, so I chose to sell.
Why? Fear, Uncertainty, and Doubt (FUD) took over. There were endless debates about forks, and “bubble theories” were everywhere. A voice inside kept telling me: Book your 10x gains and take profits now; don’t let all your profits slip away.
I sold everything. But after I sold, Bitcoin continued to rise another tenfold.
I tried hard not to show regret, but deep down I knew I had made a huge mistake. To make matters worse, when prices crashed again during the pandemic, I re-entered the market, thinking I was brilliantly buying the dip. That wasn’t the case: I sold at $2,000, only to buy back around $8,000 or $9,000. Frequent trading, selling highs, short-term speculation around positions… all these actions prevented the only correct long-term strategy from working.
I once roughly calculated that if I had simply held onto my initial $200,000 investment, it would be worth around $100 million today. That’s the power of compounding, and it also proves how easy it is for people to make foolish decisions. The asset itself was continuously appreciating, but I kept artificially interrupting that process.
Losing out on such massive unrealized gains was an expensive lesson that taught me one thing: Zoom out, ignore the noise, and hold for the long term. For any brokerage, “dormant accounts” often yield the best returns because the holders don’t actively trade the assets.
That’s my reflection. Now, let’s talk about the logic I understand today but didn’t fully grasp back then.
Bitcoin is a Vault for Value Storage
I’ve been writing about currency debasement over the past few weeks, and all analysis points back to this. Demographics create debt, debt drives continuous currency debasement, and the purchasing power of cash shrinks by about 8% annually compared to long-term assets. To fully understand this transmission mechanism, you can read my previous article. Simply put: holding cash is like holding a melting block of ice; the rational choice is to hold an asset whose total supply cannot be artificially increased.
Bitcoin is the purest form of such an asset. Its total supply is permanently locked at 21 million; there’s no committee vote to increase it. It’s the hardest money ever created by humanity, serving as a store of value layer, a digital vault.
But a vault has a growth ceiling, and understanding this is crucial. Bitcoin’s target market is global savings capital seeking a safe haven. It’s roughly equivalent to the ~$35 trillion gold market, plus a portion of other assets used for wealth preservation. In my judgment, Bitcoin will continue to capture allocation from this capital. Its only real competitor is Zcash, a privacy-focused cryptocurrency that might eventually capture 10% of this market, with Bitcoin taking the rest.
So, the digital vault logic holds; Bitcoin is a great asset. But a vault is only half the story, perhaps even a small half.
The Economic System Built on the Vault
Bitcoin is not programmable. By design, it excels at one thing and doesn’t take on other functions. Smart contract public chains are a completely different track. There are many public chains on the market, but I’m consistently bullish on three: Ethereum, Solana, and Sui. The most common mistake people make is lumping them together with Bitcoin as “cryptocurrencies” and debating which coin will ultimately win.
People ignore a key fact: their purposes are fundamentally different. Bitcoin solves for value storage; smart contract platforms solve for multi-party coordination and collaboration.
The Exponential Age framework I proposed suggests: AI, robotics, energy, and crypto technology are all experiencing simultaneous explosive growth. The future economy will no longer be driven by human labor but dominated by machines. Billions of AI agents will conduct transactions around the clock, buying compute power, settling with each other, at speeds far exceeding human capability.
This leads to an obvious question: What will they use to transact? The traditional banking system is not suitable. A machine economy cannot tolerate three-day settlement cycles, reliance on correspondent banks, or clearing institutions that close on weekends. Smart agents need programmable, instant, 24/7 settlement rails — and that’s precisely the value of smart contract public chains. They will become the settlement layer for the machine economy of the Exponential Age.
Therefore, investing in these public chains is not a bet on a particular token, but a bet on the infrastructure that the next-generation economy will run on. The token isn’t just money; it’s the holder’s equity in the network, the collaborative foundation of the digital age.
This also means you can’t apply Bitcoin’s valuation model to public chains, let alone traditional corporate valuation methods. A public chain is not a company; it’s an economy. To assess the value of an economy, you look at the total economic activity occurring on it.
When we compare the target markets of these two tracks, the core argument becomes clear. Bitcoin targets global savings capital, corresponding to a market size of roughly $35 trillion, equivalent to gold — worth allocating to. Smart contract platforms, in the future, may handle the settlement needs of global real estate (~$400 trillion), global debt (~$325 trillion), and global equity markets (~$125 trillion). This isn’t just bigger; it’s an order of magnitude larger.
The conclusion is self-evident: In the long run, the total market capitalization of high-quality smart contract public chains will exceed Bitcoin’s by several times. This doesn’t mean Bitcoin will fail; it will perfectly fulfill its role as a store of value. The reason is simple: the economy built on the vault will naturally be larger than the vault itself. The vault holds savings capital, while the settlement rails carry the entire flow of the economy.
Counterargument: Are They Just Utility Tokens?
I can foresee the mainstream bearish argument from the market, and it deserves a serious deconstruction rather than a simple rebuttal. The narrative goes like this: Bitcoin is designed from the ground up for capital preservation, continuously accruing value as money. Ethereum, Solana, Sui are merely utility assets, financial infrastructure; infrastructure doesn’t appreciate like a pure monetary asset does. Good technology doesn’t necessarily make a good investment.
But the flaw becomes apparent when we reverse the logic. The growth ceiling for a pure store of value asset is determined by the total size of savings seeking preservation. That’s a huge size, but it has a clear ceiling. The ceiling for infrastructure assets, however, depends on all the applications that can be built on top of them. Every time a new project is born, the ceiling gets raised. Low transaction fees don’t equate to low value. The underlying network achieves widespread scalability precisely because of its low costs, and its value continues to rise accordingly.
There’s a clear dividing line here. Lending protocols and exchanges built on Ethereum are commercial projects with revenue, competitive moats, and can be valued based on cash flows. Ethereum itself is not a commercial project. Ethereum’s value derives from the sum total of all ecosystems built upon it. If Ethereum were to shut down, it wouldn’t just be one company disappearing; all Layer 2 networks, most of the stablecoin market, and the entire DeFi ecosystem would instantly collapse. That’s its core value. It is the foundational layer upon which all projects depend, not merely one project among many.
This also explains why Layer 2 networks struggle to replicate the value of Layer 1 chains. Layer 2 networks rent security from the base layer, and a significant portion of revenue flows back down. Even if a thriving Layer 2 network emerges on Ethereum, it essentially drives up the value of Ethereum itself. Ultimately, all value accretes to the underlying Layer 1 public chain.
Why is the Market So Pessimistic Right Now?
Let’s return to the market sentiment I mentioned at the beginning. If the long-term logic is so sound, why is the current market so painful? The macro environment of easing liquidity and loosening financial conditions has been in place for a while. The surprise that disrupted the market rhythm was that the expected rally didn’t materialize on schedule. The October 2025 market crash and government shutdown caused a series of disruptions, disrupting the original market rhythm and delaying the start of the uptrend. Many investors misinterpreted “delayed” as “the logic has completely failed.”
The underlying logic has never collapsed. The gap between crypto asset prices and liquidity expectations has persisted longer than I anticipated, but gaps are meant to be closed, not permanently sealed.
Previously, the US Manufacturing PMI was below the breakeven line for an extended period, putting the business cycle in a downturn. The crypto industry is highly dependent on market activity and investment appetite, naturally requiring a macro cycle recovery. For a long time, the macro environment remained under pressure. Besides this, Bitcoin periodically experiences liquidity discount periods, decoupling from overall liquidity trends, a phenomenon that occurs cyclically. Crypto asset volatility is higher than liquidity indicators; gains exceed expectations during overheated markets, and losses exceed expectations during cold markets. Over a long timeframe, the correlation coefficient between them remains around 87%.
We are currently in a cold phase of the market, leading many to conclude the long-term logic is invalid. That is not the case. The business cycle has already bottomed out and is recovering. The Manufacturing PMI has been in expansionary territory for six consecutive months, with the latest July data coming in at 53.3. Historical patterns show that in such a macro environment, the crypto market often enters a warming phase. During the upward phase of the cycle, investor risk appetite increases, leading to divergence within the crypto market: junk bonds outperform treasuries, small-cap assets outperform large-cap leaders; Ethereum and other smart contract public chains outperform Bitcoin. The reason is that economic activity drives demand for blockspace, while savings demand drives Bitcoin’s price.
How to Approach This
I won’t give a fixed portfolio or predict a bottom. Thirteen years in this industry have taught me that no one can consistently time the market perfectly. Forcing a prediction could easily lead to repeating the tragedy of selling Bitcoin at $2,000.
The reflection at the beginning of this article is the most important takeaway. The crypto space is a long-term game, extremely demanding on psychology, and many people have their income and net worth deeply tied to the industry. The ultimate winner will not be the one with the best short-term trading skills. It will be the investor who can clearly understand the essential nature of the assets they hold, believe in the trend of increasing network adoption, and withstand the deep ~50% drawdowns that occur every few years.
Zoom out. Strip away the market noise. Position yourself in both the digital vault (Bitcoin) and the economic settlement rails (high-quality smart contract public chains). Ride the industry’s growth curve without wasting energy trying to beat the cycle.