Pantera Bitcoin Fund Hits 1000x
Author: Dan Morehead, founder of Pantera Capital; Translated by: 0xjs@Golden Finance
1,000x: Pantera Bitcoin Fund
Pantera Bitcoin Fund recently achieved a crazy milestone - 1,000x return.
The post-election surge in bitcoin prices gave the Pantera Bitcoin Fund a further 30% gain. After fees and expenses, the Pantera Bitcoin Fund’s lifetime return is now 131,165%.
I wanted to share the original logic – because it’s just as compelling to me today.
The day we chose to launch the Pantera Bitcoin Fund was actually the lowest point in the last eleven years.
That first investment memo still reads just as well written.
In 2013, we bought 2% of the world's Bitcoin at the time.
Even after eleven years, Bitcoin is still squeezing up like a watermelon seed.
Honestly, I just can't help but think that we can still get very good returns for many years to come.
Gold in 1000 BC
My core idea was written a month later:
“I was discussing Bitcoin with an investor yesterday and he responded somewhat dismissively ‘it’s like buying gold’. No, it’s like buying gold in 1000 BC, 99% of financial wealth has yet to touch Bitcoin. When they do, Bitcoin’s value will either be zero or [go up by orders of magnitude].”
As an industry, we have made some progress, but there is still probably 95% of financial wealth that has not yet deployed their positions.
The catalyst for this change—from 5% in 2024 to a higher number—has just happened: regulatory clarity in the U.S. Large institutional managers like BlackRock, Fidelity, and others now offer extremely cheap, efficient services to anyone with a brokerage account. This new convenience will ultimately make this important new asset class accessible to tens of millions of investors and individuals.
We believe the entire industry will benefit greatly from the first pro-blockchain president in the U.S. We believe that blockchain’s success is in the best interest of the United States, and we believe everyone in the U.S. Congress will eventually take a neutral or pro-blockchain stance — which is already starting to happen. Blockchain’s 15-year regulatory headwind is now turning into a tailwind.
I still believe what I wrote eleven years ago:
“I give a greater than 50% chance that the world adopts a global currency/payment system where free crypto replaces the very expensive ‘trust’ charged by banks/VISA-MasterCard/Western Union/PayPal/etc. Bitcoin will outperform cash, electronic fiat, gold, bearer bonds, large stone disks, etc. It can do all of those things. It is the first global currency since gold. It is the first borderless payment system ever.”
[When Bitcoin price is $104]
I still feel the same way. We are still in the early stages. 95% of financial wealth has not yet touched the blockchain. They are just now starting this massive transition. When they start the transition, the price of Bitcoin will probably be $740,000 per BTC.
[When Bitcoin price is $254]
The market did explode. In less than a month, the price of Bitcoin reached $1,000, and now it has risen another three orders of magnitude.
The compound annual growth rate in 11 years reached 88%
I can imagine an investor thinking, “Bitcoin has doubled this year. Well, I guess I missed out,” and then giving up.
No, that's the wrong mindset. On average, it's almost doubled every year. Since we launched the Pantera Bitcoin Fund 11 years ago, it's grown at a compound annual rate of 88%.
Increase by another order of magnitude
Bitcoin has already grown by three orders of magnitude (1,000x). Another order of magnitude (10x) seems feasible. If Bitcoin reaches $740,000 per BTC, the market cap would be $15 trillion. This is not an incredible number relative to $500 trillion in financial assets.
While the past does not necessarily predict the future, if this trend continues, Bitcoin will reach $740,000 by April 2028.
I think it's still a few years away, but I do think there's a good chance it will happen.
This is my mentality: I wouldn’t bet my life on it, I’m not 100.00% sure that blockchain assets will go up, but when you multiply the probability of going up by the order of magnitude or more that the industry could go up, the results end up being much better than other assets you can invest in. The expected value of Bitcoin trading is the most compelling I’ve seen in nearly four decades.
It’s not easy
This may seem obvious now, but it is actually very difficult.
After an 87% plunge beginning in December 2013, Bitcoin slowly lost relevance. More than three years later, the market remains depressed. By 2016, almost everyone had given up on Bitcoin. Investors had no interest.
I flew around the world that year and attended 170 investor meetings. And for all that effort, we only raised $1 million.
Administrative fees are $17,241. Each meeting is $100.
We can buy the hotel!!!
I am a loyal team player by nature. I always want the Bitcoin team to win. Over the years, we have done everything we can to help the community. So when Expedia announced in 2014 that they would accept Bitcoin, all of our travel expenses on Expedia were paid in Bitcoin.
In 2015, our team spent 59 nights on the road, spending an average of 1.5 bitcoins per night, for a total of 88 bitcoins.
That’s the equivalent of $8,683,136 in today’s fiat currency!?!?!
With this money, we can buy two hotels!
The blockchain industry’s phenomenal growth
In 2013, when we were preparing to launch Pantera Bitcoin Fund, I opened accounts at several exchanges and wired money for emergencies. When I first walked from my office to Wells Fargo on Market Street in San Francisco to wire money to Ljubljana, Slovenia, I didn’t even know how to spell the word Ljubljana. Everything feels very fishy. So much so that the bank manager came over and asked me what I was doing for a long time.
(I now know that Slovenia is a lovely country located to the right of Venice and below Austria.)
But at the time I wondered if I was crazy. The person I was sending money to, a small, unknown startup, sounded equally suspicious.
The price of Bitcoin was about $130 at the time. Over the next few days, I watched the price of Bitcoin drop from $130 to $100. It’s funny to think back, this is basically the same thing that skeptics talk about during the Bitcoin bear market: “FUD — Fear, Uncertainty, Doubt.” Even with all the problems that arose when Bitcoin dropped to $65, I decided to go all in and launch the Pantera Bitcoin Fund. Thirty years of trading intuition convinced me that that was the day.
I sent the above email to a small group of Bitcoin enthusiasts, maybe twenty people at the time, and they said, “I just want to get involved.”
(The list now numbers in the hundreds of thousands, and the subsequent letter has been read 2.7 million times.)
I logged onto a startup called Coinbase and tried to buy 30,000 bitcoins. A pop-up window said the fund had a daily limit of $50 (bucks)—unlike Wall Street jargon, where "bucks" sometimes mean millions. One Ulysses S. Grant a day. I nearly had a heart attack.
Since this was a hip startup, they had no address or phone number. I sent an email to their support email address with the uncharacteristically all-caps subject line: “I WANT TO BUY TWO MILLION DOLLARS OF BITCOIN”. Four days later, their sole employee—a guy named Olaf—replied, “OK, your limit is now $300.” Even with my newly expanded trading limit, it would take 6,667 days to complete this transaction.
Even if you buy it today, there are still 2522 days!
Thankfully, I was able to buy Bitcoin on Bitstamp, and the industry grew. Today, the cryptocurrency market is trading $130 billion per day. It’s amazing how fast this industry is growing.
Blockchain as an asset class
I sometimes feel like a gorilla in the forest, noticing a shiny object on the ground…picking it up…spinning it…wondering what it is…
Bitcoin!
I certainly don’t understand all the nuances of the incredible technological projects going on in this space, but I feel like I’ve seen this movie before.
I was the first Asset-Backed Securities trader at Goldman Sachs. Now everyone considers ABS an asset class. I was there when they did the GSCI (Note: Goldman Sachs Commodity Index). Now everyone considers commodities an asset class. I invested in Emerging Markets in the 90s. Now everyone considers EM an asset class.
The same is true for blockchain. I believe that in the near future, every investment company will have a blockchain team and a substantial, permanent blockchain fund.
Asymmetric transactions
My global macro background got me into blockchain in the first place. The asymmetric nature of this deal — working in the largest market in the world — makes this opportunity orders of magnitude larger than the deals we typically chase around the world. I believe this is the most asymmetric deal I have ever seen.
This theme is best illustrated by a comparison from the second Pantera Blockchain Summit in March 2014:
Over dinner a few hours before a late-night poker game, Morehead joked that all the bitcoin in the world was then worth roughly the same as Urban Outfitters, a maker of ripped jeans and dorm-room decor — about $5 billion. ‘That’s crazy, right?’ Morehead said.
“I think that centuries from now, when they’re doing an archaeology of our society like in (Planet of the Apes), Bitcoin will probably have a bigger impact on the world than Urban Outfitters.”
– Nathaniel Popper, 2015, (Digital Gold)
When I updated in November 2020, Bitcoin had the same market cap as L’Oréal. Waterproof mascara is undoubtedly a fantastic invention, but I still think there’s an asymmetry.
Digging further…
“At L’Oréal, our mission is to make the most affordable and highest quality beauty products in skincare, makeup, haircare and hair colour available to everyone.”
Awesome. Bitcoin’s mission sounds eerily similar: democratize financial services.
I thought the mission in finance would ultimately be bigger.
Bitcoin has recently surpassed Meta (aka Facebook) in market cap. Photo sharing is cool, but I think financial inclusion will be even greater for everyone on the planet with a smartphone.
There are five left to surpass...
