RealVision Founder: Market Pessimism is Widespread, How Can Investors Keep Their Cool?

Original Article Title: Where Crypto Fits in the Exponential Age
Original Article Author: Raoul Pal, Founder of Real Vision
Original Article Translation: Chopper, Foresight News

Opening up the information flow today, you will find a prevailing sense of pessimism. The cycle has ended, the crypto industry is dead, the four-year bull-bear cycle is declared defunct, and everyone who advised you to buy was wrong. When the price action deviates from mainstream expectations and moves beyond comprehension, pessimism spreads. History always repeats itself.

I have witnessed numerous such cycles and know well the conclusion of this story. With thirteen years in the crypto industry, I have experienced almost every mistake one can make. Before delving into the logic behind my continued bullish view, let's talk about the pitfalls I have encountered because real experience always comes from failures.

In 2013, I entered the market when Bitcoin was priced at $200. However, the timing of my entry was not the key point. Before buying my first Bitcoin, I wrote the first-ever macro valuation analysis for Bitcoin.

By today's standards, this valuation model was quite rudimentary. Drawing inspiration from commodity valuation approaches, I calculated the total above-ground and below-ground gold reserves and applied this framework to Bitcoin. The conclusion was: If Bitcoin could become digital gold, with the gold price staying at its current level, the value of a single Bitcoin could reach $1 million.

This article quickly circulated in Silicon Valley and financial circles, as at that time, no one had built a valuation system for Bitcoin from a macro perspective. I not only expressed my views but also recommended Bitcoin to all subscribers of GMI, including several hedge funds and family offices. In 2013, recommending Bitcoin at $200 to such investors required immense courage.

My core conclusion at the time was: "With Bitcoin priced at $200, the long-term target price could potentially reach a million dollars. Considering the high probability of error on my part, I took the initiative to discount and gave a ten-year target price of $100,000."

The eventual outcome broadly aligned with the prediction, with Bitcoin indeed reaching this price level.

However, foreseeing the destination and understanding the fluctuations along the way are entirely different matters.

Reflecting on this journey, I entered at an excellent price point, saw the price double and triple, and then witnessed an 84% crash. I reassured myself that this was a long-term bet and required no action. Later, as the market surged again in late 2017, one day, staring at the screen, the price soared to an unbelievable number, so I chose to sell.

Why? The Fear, Uncertainty, and Doubt (FUD) took hold. Fork disputes were rampant, and everywhere was filled with the "bubble theory," constantly hinting to oneself: seize the tenfold price increase and secure the gains in time, not allowing all profits to be lost.

I liquidated all my positions and exited. But after I sold, Bitcoin continued to rise tenfold.

I tried hard to pretend not to regret, but deep down, I knew I had made a huge mistake. To make matters worse, during the pandemic, the price of the coin plummeted again. I re-entered the market, thinking I was brilliantly buying the dip. The reality was different: I sold at $2,000 but bought back at eight to nine thousand dollars. Frequent trading, selling at highs, repeatedly day trading around my position... all these actions were hindering the only correct long-term strategy.

I once roughly calculated that if the initial $200,000 principal had been held without moving, it would be worth approximately a billion dollars today. The power of compounding is here, but it also proves how easily one can make foolish decisions. The asset itself continues to appreciate, while I keep interrupting this process.

Losing out on significant unrealized gains, this expensive lesson taught me one thing: extend the time horizon, ignore the noise, and hold for the long term. For any trader, a "dormant account" often performs the best because the holder does not casually trade the assets.

That is my retrospective. Next, let's talk about the logic that I now understand but failed to fully grasp back then.

Bitcoin Is the Gold Standard of Value Storage

Over the past few weeks, I have been consistently writing about the issue of currency devaluation, and all analyses ultimately point here. Demographics give rise to debt, debt drives continuous currency devaluation, and cash, compared to long-term assets, loses about 8% of purchasing power yearly. To fully understand this transmission logic, you can read my previous articles. In a simple summary: holding cash is like holding a melting ice cube; the rational choice is to hold an asset with a fixed total supply.

Bitcoin is the purest asset of this kind. The total supply is permanently capped at 21 million, with no committee voting for issuance. It is the hardest form of money created by humans, serving as the value storage layer, a digital gold vault.

However, the vault has a growth ceiling, and understanding this is crucial. Bitcoin's target market is the global savings funds seeking a safe haven. The size is roughly equivalent to the $35 trillion gold market, plus some other assets used for wealth preservation. My judgment is that Bitcoin will continue to capture a portion of this fund's allocation. Its true competitor is only Zcash, a privacy-focused cryptocurrency that may take 10% of the market share in the future, leaving the remaining share to be dominated by Bitcoin.

So, the Digital Treasury thesis holds, Bitcoin is a premium asset. However, the treasury is only half of the story, or even just a small part.

The Economic System Built on Top of the Treasury

Bitcoin lacks programmability. By design, it is only good at one thing, and it does not take on any other functions. Smart contract blockchains are in an entirely different race. There are many public chains on the market, but I continue to favor three: Ethereum, Solana, and Sui. The most common mistake people make is to lump them together with Bitcoin under the generic term "cryptocurrency" and discuss which coin will ultimately prevail.

People overlook a key fact: their missions are fundamentally different. Bitcoin addresses value storage, while smart contract platforms address multi-party collaboration.

The exponential growth era framework I propose suggests that artificial intelligence, robotics, energy, and cryptographic technology are all experiencing explosive development. The future economy will no longer rely on human labor but will be dominated by machines. Billions of AI agents will continuously carry out transactions, purchase computing power, settle with each other, and trade at speeds far exceeding those of humans.

An obvious question arises: what do they rely on to conduct transactions? The traditional banking system is not suitable. The machine economy cannot tolerate a three-day settlement cycle, reliance on intermediary banks, or settlement institutions that close on weekends. Smart agents require a programmable, instant settlement, and round-the-clock operational underlying channel –– which is precisely the value of smart contract public blockchains. They will become the settlement infrastructure of the exponential era machine economy.

Therefore, investing in such blockchains is not a bet on a particular token but a bet on the infrastructure that the next-generation economy depends on. The token itself is not just a currency but represents the holder's stake in the network, the underlying cooperation of the digital age.

This also means that we cannot apply Bitcoin's valuation model to public blockchains, nor can we measure them using traditional enterprise valuation methods. A public chain is not a company but an economic system. To assess the economic system's value, one must look at the total volume of economic activity taking place on it.

We put the two major race target markets together for comparison, and the core argument is clear. Bitcoin aims at global savings funds, amounting to about $35 trillion, equivalent in scale to gold, making it a worthwhile investment. Smart contract platforms, on the other hand, are expected to handle the settlement needs of global real estate (about $400 trillion), global debt (about $325 trillion), and the global stock market (about $125 trillion). This is not just a larger scale but an order of magnitude larger.

The conclusion is obvious; in the long term, the total market capitalization of high-quality smart contract blockchains will be several times that of Bitcoin. This does not mean that Bitcoin will fail; it will perfectly fulfill its mission of value storage. The reason is that the economic system built on top of the treasury will naturally be larger than the treasury itself. While the treasury holds savings funds, the underlying channels facilitate the flow of the entire economic system.

Counterpoint: Are They Just Utility Tokens?

I can anticipate the mainstream bearish view, which is worth seriously dissecting rather than simply refuting. The argument goes like this: Bitcoin is fundamentally designed to preserve capital, serving as a currency that continuously stores value. Ethereum, Solana, and Sui are merely utility assets and financial infrastructure; infrastructure assets will not appreciate continuously like pure currency assets. No matter how good the technology is, they are not considered high-quality investment targets.

However, a reverse deduction reveals a loophole. The growth ceiling of a pure store of value asset is determined by the total amount of savings seeking capital preservation. There is a massive scale but a clear ceiling. The ceiling for infrastructure assets, on the other hand, depends on all the applications that can be built on top of them; every time a new project is born, the ceiling is raised further. Low transaction fees do not equate to low value. The scalability of the underlying network relies precisely on low costs, and the network's value continues to rise as a result.

There is a clear distinction here: lending protocols and trading platforms built on Ethereum are commercial projects with revenue and competitive barriers, and can be valued based on cash flow. Ethereum itself is not a commercial project. The value of Ethereum comes from the sum of its entire ecosystem. If Ethereum were to shut down, it would not just be the disappearance of a single company; all layer-two networks, most stablecoin markets, and the entire decentralized finance ecosystem would instantly collapse. This is its core value—it is the underlying foundation on which all projects rely for survival, rather than one of many projects.

Similarly, this explains why it is difficult for layer-two networks to replicate the value of a layer-one public chain. Layer-two networks borrow security from the underlying main chain, and a large amount of revenue ultimately flows back to the base layer. Even if a thriving layer-two network emerges on Ethereum, it fundamentally continues to drive up the value of Ethereum. Ultimately, all value settles on the base layer public chain.

Why Is the Current Market Generally Pessimistic?

Returning to the market sentiment mentioned at the beginning of the article. If the long-term logic is so solid, why is the current market situation so agonizing? A context of sustained liquidity and a gradual easing financial environment has long been established. The unexpected disruption that has disrupted the market rhythm is that the market rally has not materialized as expected. The market crash in October 2025 and the government shutdown have triggered a series of disturbances, disrupting the original market rhythm and delaying the start of the market rally. Many investors interpret this delay directly as a "complete logic failure."

The underlying logic has never collapsed. The duration of the gap between cryptocurrency prices and liquidity expectations has exceeded my expectations, but the gap will only see correction and will not remain permanently closed.

Prior to this, the U.S. manufacturing PMI index was stuck below the growth and contraction line for a long time, with the business cycle in a slump. The cryptocurrency industry is highly dependent on market activity and investment sentiment, naturally requiring a macroeconomic upturn. For a long time, the macro environment has been under pressure. In addition, Bitcoin has periodically experienced liquidity discount trends, decoupling from the overall liquidity trend, a phenomenon that occurs cyclically. The volatility of cryptocurrencies is higher than the liquidity index, with price surges exceeding expectations during market overheating, and price drops equally surpassing expectations during market downturns. Over a longer time frame, the correlation coefficient between the two is approximately 87%.

The market is currently experiencing a downturn, leading many to believe that the long-term thesis is failing. However, this is not the case. The business cycle has already bottomed out and is now recovering. The manufacturing PMI index has been in the expansion zone for six consecutive months, with the latest data for July reaching 53.3. Historical patterns show that in such a macroeconomic environment, the crypto market often sees a resurgence. During an upward cycle, investor risk appetite increases, leading to divergences within the crypto market: junk bonds outperforming government bonds, small-cap assets outperforming large-cap assets, and smart contract public blockchains such as Ethereum outperforming Bitcoin. The reason behind this is that economic activity drives up the demand for block space, while the need for savings fuels the Bitcoin market.

How to Operate

I will not provide a fixed investment portfolio or try to predict the market bottom. Thirteen years of experience in the field have taught me that no one can consistently time the market correctly. Forcing predictions could very likely lead to a replay of the tragedy of selling Bitcoin at $2,000.

Revisiting the introduction of this article is the most important insight. The crypto space is a long-term game that severely tests one's mindset. Many individuals' income and wealth are deeply tied to the industry. The ultimate winners are not necessarily those with the best short-term trading skills, but those who can clearly understand the essence of their assets, believe in the ongoing trend of network adoption, and endure the 50% market drawdowns that occur every few years.

Expand your vision and tune out market noise. Simultaneously, allocate to the digital treasury (Bitcoin) and the foundational layer of the economy (high-quality smart contract public blockchains), aligning with the industry's growth trajectory without wasting energy trying to beat the market cycle.

Original Article Link