Raoul Pal on Ethereum ($ETH): “I Think Everybody’s Underweight the Merge Still”

During an interview on Thursday (August 18), former Goldman Sachs executive Raoul Pal talked about how he expects $ETH to perform (vs USD) both in the short term and in the medium/long term.

Ethereum’s upcoming “Merge” protocol upgrade — expected to take place around September 15/16 — is when the Ethereum network is making the transition from proof-of-work (PoW) to proof-of-stake (PoS).

Here is how Ethereum Foundation explains the Merge, which is expected to take place around September 15:

“The Merge represents the joining of the existing execution layer of Ethereum (the Mainnet we use today) with its new proof-of-stake consensus layer, the Beacon Chain. It eliminates the need for energy-intensive mining and instead secures the network using staked ETH. A truly exciting step in realizing the Ethereum vision – more scalability, security, and sustainability.

“It’s important to remember that initially, the Beacon Chain shipped separately from Mainnet. Ethereum Mainnet – with all it’s accounts, balances, smart contracts, and blockchain state – continues to be secured by proof-of-work, even while the Beacon Chain runs in parallel using proof-of-stake. The approaching Merge is when these two systems finally come together, and proof-of-work is replaced permanently by proof-of-stake.

“Let’s consider an analogy. Imagine Ethereum is a spaceship that isn’t quite ready for an interstellar voyage. With the Beacon Chain, the community has built a new engine and a hardened hull. After significant testing, it’s almost time to hot-swap the new engine for the old mid-flight. This will merge the new, more efficient engine into the existing ship, ready to put in some serious lightyears and take on the universe.“

Prior to founding macro economic and investment strategy research service Global Macro Investor (GMI) in 2005, Pal co-managed the GLG Global Macro Fund in London for global asset management firm GLG Partners (which is now called “Man GLG”). Before that, Pal worked at Goldman Sachs, where he co-managed the European hedge fund sales business in Equities and Equity Derivatives. Currently, he is the CEO of finance and business video channel Real Vision, which he co-founded in 2014.

In the April 2020 issue of the GMI newsletter, Pal explained why he believes that Bitcoin, which he called “the future”, could one day have a $10 trillion valuation. In that issue, Pal said that the idea of a $10 trillion valuation for Bitcoin is not so crazy:

“After all, it isn’t just a currency or even a store of value. It is an entire trusted, verified, secure financial and accounting system of digital value that can never be created outside of the cryptographic algorithm… It is nothing short of the future of our entire medium of exchange system, and of money itself and the platform on which it operates.“

Since then, Pal has provided updates on changes to his crypto holdings, and currently seems a lot more bullish on Ethereum than Bitcoin. For example, on 29 October 2021, he tweeted:

On July 31, Pal took to Twitter to point out that “most people who have a crypto investment mandate are not fully allocated to crypto as they moved to part cash.”

On Thursday (July 18), according to a report by The Daily Hodl, Pal told Scott Melker:

“I think everybody’s underweight The Merge still. People will get into the merge or post-merge, we’ll get this spike [and] we’ll probably get a pullback. A lot of people will say ‘See it’s going back to the low.’ My guess is it corrects sideways, does something, goes back into the range for a bit and then we explode higher. 

“So I’m very bullish right now. Short term, we’re getting close to overbought, but I think we just had a correction, and my guess is we go again. What’s fascinating is to see the forwards market and the futures markets is everybody’s hedging ETH merge risk so that buying ETH and selling futures now, somebody’s going to lift that hedge off at some point. 

“I find that setup really interesting, and know that crypto hedge funds are all underweight because they all got beaten up so badly. So they’ve been buying calls as the way of having something over The Merge so they don’t beaten up by their investors. So when you see that kind of setup, the path of pain is still higher.“

On Friday (August 19), Pal took to Twitter to say that although he does not expect the Ethereum price to reach “new lows” (i.e. go below the June 18 low of $902), there could be a “gut-check quick drop”; however, he also pointed out that for him “new lows” means that he will buy even more $ETH since even now he finds Ethereum’s “2-year risk/reward” quite attractive. Essentially, Pal believes that tat worst, $ETH could fall to the $800-$900 range, but the upside is much bigger since — as he has said in the past — he expects the $ETH price to reach $20,000 in the net couple of years.

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Featured Image via Pixabay