Thursday, October 21, 2021

Raoul Pal Ditches Bitcoin, Cites Diminishing Returns

Raoul Pal Ditches Bitcoin, Cites Diminishing Returns

Raoul Pal, well known global macro investor and founder of RealVisionTV, last week sold off his bitcoin holdings. He warned the fundamentals of cryptocurrencies have changed and that a popping bubble will precede big upheavals in the coming years.

Also read: Altcoins, ICOs Just Don’t Work: BnkToTheFuture CEO

Pal originally invested in bitcoin around the $200 USD mark, yet it is his reasoning for exiting his position that is more interesting than the 1000% gain he made on selling. Pal is concerned not only with the threat of a hard fork, but also the competition provided by India’s Aadhaar program and the proliferation of hundreds of cryptocurrencies potentially leading to diminishing returns.

While many Bitcoin holders are similarly worried about the propensity for Bitcoin to split into two chains, not many have heard of India’s Aadhaar program — a government-led initiative that aims to deliver identification to millions of unbanked Indian citizens. Pal has been following the developments closely and has subsequently stated that he is ‘long’ on Indian banks:

Many Bitcoiners took Pal to task over his view, noting how Bitcoin can serve the unbanked and citing the fact that the Aadhaar system will issue identification via a centralized database. This is a storage method that has proven almost impossible to keep secure. Moreover, an identification system like Aardhaar along with the banning of cash may lead the way to a purely digital monetary system where negative interest rates can be imposed at will by the government. Pal agreed, saying:

However he believes the Indian poor are unconcerned about these potential repercussions — and by extension, the benefits of Bitcoin. He is now more excited by the opportunities presenting themselves in India and Iran than with Bitcoin. Perhaps, he mused in a later tweet:

But in announcing his exit, Pal also warned that the massive inflows into cryptocurrencies are inflating a bubble that could rival the collapse of the famous Nasdaq bubble.

h/t @ECantoni

Altcoins Will Create Diminishing Returns, Says Pal

The problem, as he sees it, is the “law of diminishing returns” where the more competitors are developed the less value there is due to the overall capacity increases for distributed ledgers.

For now Pal joins a long list of people who have sold out of their bitcoin positions for different reasons. It remains to be seen if bitcoin will be destroyed by the blockchain monster its innovation enabled, or whether increasing debt levels, capital controls and political turmoil will continue to underpin the use case for widespread adoption.

What do you think of Pal’s stance? Are you still hodling? Let us know in the comments.

Images via ECantoni, BusinessInsider

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