The CEO of Global Macro Investor, Raoul Pal, says Bitcoin (BTC) is the best reserve and collateral asset ever created.
In a new report on the leading cryptocurrency, the former Goldman Sachs hedge fund manager says he thinks BTC, with its permanently limited supply, is the “hardest” form of money created. He says as a reserve asset, it is superior to gold in every metric due to its decentralized nature and provable transaction history.
Pal, who predicted the 2008 financial crisis, notes that, in the current macroeconomic structure, government bonds serve as the “bottom of the pyramid” in terms of collateral for the world and the U.S. Treasury.
“That used to work just fine until the central banks became fearful of allowing the business cycle to run unimpeded. Thus, when debt loads became unsustainable, meaning that the weakest borrowers couldn’t get access to enough collateral, instead of the price of collateral rising, thus forcing firms to go bust, central banks began to increase the supply of collateral and reserves (quantitative easing).”
However, this devalues the collateral over the longer term and leads to debt spirals, Pal explains.
Bitcoin, however, doesn’t have this problem, according to the investor.
“Bitcoin is pristine collateral. The greatest form of collateral. Its blockchain ownership structure reduces the huge black swan of risk of who owns what. It is all recorded and more importantly, provable.”
Pal notes that all BTC needs to become the preeminent form of collateral is a yield curve indicating future value, something that is already happening with the breakout of decentralized finance (DeFi).
“The revolution in DeFi is doing just that, establishing a forward curve of future value. It is only at the money-market phase right now (short-term yield curve) but over time we will establish the time preference for Bitcoin over 30 years or more, just like bonds.”
Earlier this year, Pal said Bitcoin has the potential to surpass $1 million in the next three to five years, calling BTC the “biggest trade of our lifetimes.”
