Source: Bankless
Organizer: Yuliya, PANews
Finding the next 'Bitcoin' in the cryptocurrency market is a dream for many investors. As one of the most influential investment institutions in the industry, Pantera Capital bought Bitcoin at $65 in 2013, and to date, the fund's returns have exceeded 100 times. In this episode of Bankless, founder Dan Morehead shares how he identifies assets with asymmetric return potential and provides deep insights into the future of the cryptocurrency market. PANews has compiled a text version of this podcast.
Bitcoin investment in 2013
Bankless: Let’s talk about that famous email from July 5, 2013. In the email, you suggested buying Bitcoin at $65 and planned to invest 30,000 BTC. Can you share your thoughts at that time?
Dan Morehead: This goes back to March 2013. Two of my friends, Pete Briger (Co-CEO of Fortress) and Mike Novogratz (founder of Galaxy Digital) approached me to discuss Bitcoin. (We all left Goldman Sachs, and they later founded Fortress Investment Group.) Actually, my brother had introduced Bitcoin to me before, but I hadn’t paid much attention.
A brief meeting with Pete and Mike unexpectedly turned into a four-hour in-depth discussion. The concept of Bitcoin opened my eyes. Later, I accepted Pete's invitation and worked for them for a full six years.
Bankless: You mentioned this is an asymmetric trading opportunity; could you elaborate?
Dan Morehead: During my time at Tiger Management doing macro trading, I learned one thing: look for opportunities where potential returns far exceed the risks. While investing always carries risk, the key is to find those that might provide massive returns.
For example, before investing in Bitcoin, we held Tesla stocks. Interestingly, the prices of Tesla and Bitcoin were quite similar back in 2013. In the end, we made a bold decision — to sell all our Tesla stocks and bet everything on Bitcoin.
Bankless: You mentioned that Bitcoin is like a 'serial killer'; what does that mean?
Dan Morehead: In the tech sector, we often use the term 'category killer' to describe disruptive innovations. Bitcoin goes a step further; it’s a 'serial killer' because it disrupts multiple industries, not just one. But this process is gradual.
For example, while blockchain technology has shown advantages in certain areas now, it may still take ten years to truly challenge payment giants like Visa and Mastercard. Just like the internet, which is now 50 years old, Bitcoin is still in its 'teenage' phase.
Bankless: After so many years of market ups and downs, has your view on Bitcoin changed?
Dan Morehead: While Bitcoin has seen incredible gains, I still see it as an asymmetric opportunity. We have experienced three downturns of over 85%, but each time has resulted in new highs. It is difficult to find such an asset in traditional investments.
That’s why I have focused nearly all my energy on the crypto market since 2013. We are still in the early stages of this financial revolution, and there are immense opportunities ahead.
Asymmetric investment opportunities
Bankless: Between 2013 and 2015, you purchased 2% of the global Bitcoin supply. Many investors wish they had bought Bitcoin earlier and hoped to identify such asymmetric return opportunities. How did you build this conviction? Some might say it was just luck; what’s your take?
Dan Morehead: I agree with your use of the term 'pattern' because it truly is a form of pattern recognition. I have been working on Wall Street for 36 years since 1987, experiencing the savings and loan crisis, the financial crisis, investing in commodities in the 80s, and emerging markets in the 90s. These experiences give me an advantage when investing in cryptocurrencies compared to younger investors because I feel I have seen similar situations before.
Let me give a few examples:
I participated in the GSCI (Goldman Sachs Commodity Index) at Goldman Sachs, and now commodities have become a recognized asset class.
In the 1990s, I invested in emerging markets, and now emerging markets are also a standard asset class.
In 2006-2007, Pantera launched the first Western fund to invest in Gulf Cooperation Council countries (UAE and Saudi Arabia). Many thought it was crazy at the time, but now the Middle East has become a completely normal investment destination.
I invested in Russia during the Gorbachev era and participated in the privatization of Gazprom.
Bankless: So you are always looking for these cutting-edge investment opportunities?
Dan Morehead: Yes, we are always looking for those non-mainstream or unconventional opportunities. In 2000, we even established a fund to invest in local farmland following Argentina's penultimate crisis.
Interestingly, when it comes to blockchain, it remains a frontier asset class. This is unusual — an asset class with a market value of $3 trillion is still considered frontier; I have never seen such a situation.
In the investment memo I wrote in the following months, I listed various application scenarios for blockchain:
Competing with gold (which is happening)
In the future, it will compete with Visa and Mastercard.
Competing with remittance companies that charge high fees to migrants, while Bitcoin can easily and cheaply complete cross-border transfers.
When you put all these use cases together, you will find that the ultimate value of cryptocurrencies far exceeds today's levels. That's why we are so optimistic about this field.
Experience of buying Bitcoin in 2013
Bankless: Can you describe what it was like to purchase a large amount of Bitcoin in 2013? I remember when I first bought cryptocurrency in 2014, it felt very unreliable. I had to open accounts on multiple exchanges, and the websites looked very rudimentary. For many investors, these were the reasons that deterred them. How did you build confidence in such an environment?
Dan Morehead: The trading environment back then was indeed very primitive. For example, platforms like localbitcoins.com required face-to-face transactions, which posed too much risk, and we never considered that method. Ironically, that was one of the most mainstream trading methods at the time.
Initially, we planned to operate this fund through a large publicly listed company. We conducted thorough system testing, but that company ultimately withdrew. At that time, Bitcoin had already dropped by 50%, and we had to quickly pivot to operate independently under the Pantera brand.
Bankless: What difficulties did you encounter during the actual purchasing process?
Dan Morehead: I remember when we started taking action over the Independence Day weekend, we first tried a small platform (later realized it was Coinbase). We found out they could only buy $300 worth of coins per day, while we were looking to invest millions. At that time, Coinbase had only one employee and took four days to respond to emails. At that rate, it would take nearly 20 years to accomplish our plan.
Finally, we turned to Bitstamp in Slovenia. When handling wire transfers at the bank, the branch manager asked detailed questions about what Bitcoin was, and the whole process took an hour to explain. To be honest, I was worried about the safety of funds at that time. Interestingly, we later became a major shareholder of Bitstamp, and I served as the chairman of Bitstamp for 6-8 years (PANews note: LinkedIn information shows he served as Bitstamp's chairman from 2014 to 2018).
Bankless: You mentioned that you visited many exchanges, including Mt.Gox?
Dan Morehead: During that period, I felt it was important to personally investigate exchanges. I flew to Tokyo to meet with two heads of Mt.Gox. Although I only stayed for two days, their performance made me uneasy. Their explanations lacked logic, giving the impression of either incompetence or fraud. Ultimately, we decided not to work with them, a decision that proved to be correct.
The adoption of institutional investors
Bankless: You mentioned that you held 170 investor meetings and ultimately only raised $1 million. During that period, Bitcoin was still viewed as a 'mysterious internet currency' or even a 'drug transaction tool.' How did you pitch to investors? How did those meetings go?
Dan Morehead: If you want to achieve excess returns, you cannot follow the mainstream and invest in projects that every Wall Street firm has 20 analysts tracking. That’s why we specifically emphasize 'making alternative investments even more alternative' in our investor letters.
This idea of mine stems from my hedge fund experience starting in 1991. Back then, hedge funds were truly alternative investments, but they have now become a mainstream industry worth trillions of dollars, with almost all funds employing very similar strategies. This experience has made me more convinced that blockchain should be an important part of the portfolio because it still retains its true alternative characteristics.
Interestingly, the 170 meetings you mentioned actually took place in 2016, three years later than 2013. That was during the 'cryptocurrency winter' when Bitcoin prices plummeted by 90%, and the general sentiment was that 'blockchain is what matters, not Bitcoin,' with hardly anyone optimistic about public chains and Bitcoin as an asset.
Bankless: How many times has this market downturn occurred?
Dan Morehead: Bitcoin has gone through three cycles of 85% declines. In the first cycle, we started investing at $65, and after the price rose to $1,000, it crashed again, remaining depressed from 2014 to 2017.
During this tough period, even though hardly anyone was paying attention to this field, our team kept working every day. The fundraising situation in 2016 illustrates the issue — 170 meetings ultimately raised only $1 million, resulting in a management fee income of only $170,000 for the entire year.
Even today, although our fundraising scale has improved, to be honest, it feels like we are still in the early stages. Institutional investors are still very cautious about cryptocurrencies, with most institutions either completely not allocating or only allocating a very small portion.
Bankless: Have your pitches on cryptocurrency and blockchain changed from 2013, 2016, to now?
Dan Morehead: My core view has remained the same, possibly because these ideas have stood the test of time. When I explain to people the fixed supply characteristic of Bitcoin and how it won't be diluted by fiat inflation, I often hear the question, 'Isn't this just like gold?' But my answer is: it's more like investing in gold in 1000 B.C. While gold has indeed served humanity for 5,000 years, in the digital age, we need a new version — digital gold.
That’s exactly why I have maintained my enthusiasm since 2013: I firmly believe that Bitcoin will gradually replace traditional gold, reform the cross-border remittance system, and innovate the payment systems of Visa and Mastercard. Of course, this process takes time, potentially up to 20 years, rather than happening overnight.
I am so confident because the development of blockchain technology is an unstoppable trend. While the timeline might take longer than expected and some startups may run out of capital in the process, certain changes are inevitable: five years from now, it will be impossible for migrant workers to pay a month’s salary for cross-border remittances, and you can’t continue to pay a 3% fee for using credit cards.
Whether this transformation takes a decade or 1-2 years, I cannot predict accurately. But because I am convinced this change will inevitably happen, I will continue to hold and invest in this field.
The global adoption of cryptocurrencies.
Bankless: Many people see Bitcoin doubling this year and feel like they 'missed out,' thinking it’s too late to buy now. How do you view the upside potential of Bitcoin and the entire category of crypto assets? Are we now at a 20% or 50% global adoption rate?
Dan Morehead: In any ordinary asset class, if an asset doubles in one year, you really shouldn’t buy it because that could indicate overvaluation. But Bitcoin is different. The Pantera Bitcoin fund has had an annual compound growth rate of 89% over 11 years, meaning it doubles on average every year. A simple investment logic is: if it doubles again, you’ll make 100%.
However, there is a very important investment principle: your investment amount should be controlled within a range that would not affect family stability even if you lose 85%. In simple terms, do not bet your marriage on this asset class. As long as you can keep your investment scale at this level, you can hold it long-term with peace of mind.
Bankless: So how much more upside do you think Bitcoin has?
Dan Morehead: Bitcoin has indeed reached a considerable scale; we can no longer expect a 1,000-fold increase, as that would consume all energy on Earth. However, a further 10-fold increase to a market cap of $15 trillion is entirely possible compared to the global total of $500 trillion in financial assets.
I won't predict what things will look like 50 years from now, but within our current investment cycle, say a 5-10 year time frame, it is entirely reasonable for Bitcoin to rise 10-fold from its current position; it won’t seem crazy or overvalued.
Bankless: From an adoption rate perspective, what stage are we currently in?
Dan Morehead: I believe we are still in the early stages. Statistics show that about 300 million people globally hold cryptocurrencies. Although this number is difficult to estimate accurately, and many holders may not have started using it meaningfully yet.
Let me analyze from the perspective of technology adoption: using Bitcoin requires only a smartphone, and currently, there are 4 billion people globally who own smartphones. Some innovative projects, like KaiOS, which we are engaging with, are working to bring this functionality to feature phones. Assuming the number of smartphone users grows from 4 billion to 5 billion over the next 10 years, most of these users may likely use digital currency on their phones.
Just think, half of the people share photos on Facebook. If photo sharing is so popular, digital currencies will be even more popular. I believe it is entirely plausible that in about 10 years, 3 billion people will use cryptocurrencies. Once they start using it, more use cases will emerge, and people will use it more in their daily lives.
Overall, I estimate that we have only completed about 15% of this cryptocurrency blockchain revolution. Not only are the number of participants relatively low, but existing users have also not fully tapped into its potential.
Bitcoin's 'escape velocity'
Bankless: In 2013, people worried about the government cracking down on Bitcoin; in 2024, the situation is completely different. Has Bitcoin reached 'escape velocity'?
Dan Morehead: Bitcoin has indeed reached escape velocity and will not regress.
In 2013, media coverage was largely negative, focusing on the Silk Road incident and ignoring the positive impacts. While the U.S. once banned gold, now 50 million Americans hold cryptocurrencies.
Bankless: What impact does this change have on the political landscape?
Dan Morehead: This involves an interesting phenomenon. Most Americans are under 40, yet over the past three years, 90% of the wealth created by the Federal Reserve and Congress's monetary policy has flowed to those over 70. This represents a massive wealth transfer from the younger generation to the older generation.
And these young people love cryptocurrencies, and they will vote. We have observed a remarkable shift in voting behavior among voters under 40 compared to the 2020 presidential election. The term 'young Republicans' hasn’t been heard in many years.
Trump expressed strong support for cryptocurrencies this May, and all the cabinet members he nominated are very supportive of cryptocurrencies. He even wants to establish a cryptocurrency ambassador. I think when future doctoral theses are written about this election, they will find that cryptocurrency was a key factor in changing the election results.
Bankless: Is this change reflected at the congressional level as well?
Dan Morehead: Yes, many anti-cryptocurrency senators and congress members have lost their seats. According to what I’ve read:
House of Representatives: 274 in favor, 122 against
Senate: 20 in favor, 12 against
I predict that four years from now, those congressional members who oppose cryptocurrencies may not remain in office because that’s simply not a wise stance. They will either change their views or may lose their seats in the midterm elections of 2026 or the 2028 presidential election.
It’s quite strange to see the Democratic Party shift to an anti-cryptocurrency stance. I’ve been thinking that maybe I’ve missed some strategic consideration because it clearly seems to be a lose-lose strategy.
The U.S. government's shift in attitude towards cryptocurrencies
Bankless: In 2025, the first administration and Congress that support cryptocurrencies will emerge. After experiencing the SEC's crackdown during Biden's term, what impact do you think a pro-crypto White House will have? Especially regarding the establishment of a strategic Bitcoin reserve?
Dan Morehead: The executive branch can directly decide to stop selling seized Bitcoin, which is within their authority. We participated in the first Bitcoin auction by the U.S. Marshals Service back in 2013-2014.
The U.S. government currently owns 1% of the global Bitcoin supply. If it stops selling, it will have a significant impact. Because the actual circulation of Bitcoin is not large, many holders never sell.
Bankless: Senator Lummis mentioned accumulating a reserve of 1 million Bitcoins. Do you think it's possible to at least retain the existing 200,000 Bitcoins and establish a custody structure?
Dan Morehead: This is likely to happen. Stopping government transfers and sales of Bitcoin will have a positive impact on the market. When you remove a seller, it naturally helps the price go up.
As the issuer of the world’s reserve currency, the U.S. cannot hold other countries' currencies like other nations do. Storing gold in Fort Knox has become outdated. The U.S. should increase its holdings of digital gold, and even consider selling traditional gold.
Singapore has held cryptocurrencies for 5-7 years, which is not an aggressive idea.
Bankless: This issue seems to have become very partisan.
Dan Morehead: Yes, it’s strange. As Ro Khanna said, it's like a mobile phone — why make it a partisan issue? In fact, the Democratic Party should support Bitcoin more because it represents the dreams of progressives.
The global Bitcoin reserve race
Bankless: Suppose Trump retained the existing 200,000 Bitcoins in the U.S. (about 1% of the global total) and publicly announced it. China also has about 200,000 Bitcoins that were seized; how do you think they would respond? Would other countries start hoarding them in secret?
Dan Morehead: A strategic Bitcoin arms race could last for 10 years. The U.S. and China might each maintain 1% of the global Bitcoin reserves.
It’s quite ironic: why would countries competing with the U.S. store their wealth in dollars and U.S. treasury bonds? Under the U.S. sanction system, their transactions could be monitored.
For countries that are at odds with the West, storing part of their wealth in Bitcoin is an obvious choice. Neutral countries will do the same — just like using gold, because Bitcoin offers an option that does not rely on the dollar system.
Bankless: The stablecoin bill has received bipartisan support, which can help maintain the dollar's status as the world’s reserve currency. Will these bills pass?
Dan Morehead: As Bismarck said, 'There are two things you should never watch being made — laws and sausages.' I don’t pay much attention to Congress because it is a machine that is difficult to understand and influence.
Institutional adoption of cryptocurrencies
Bankless: In 2024, there was a significant breakthrough in institutional adoption, such as Larry Fink admitting that his views on Bitcoin in 2021 were wrong. ETF products have achieved remarkable success. Compared to 2022, when Mike Novogratz predicted a 'wave of institutional investors,' it has finally materialized. So what is the current level of institutional adoption? How far have we progressed?
Dan Morehead: The industry has indeed experienced some significant setbacks:
The collapse of FTX, BlockFi, Celsius, and Terra Luna
The discount issue of GBTC
The SEC's lawsuits against companies like Coinbase and Ripple
These events have indeed affected institutional participation. Imagine a public pension plan manager trying to propose investing in Bitcoin in such an environment to the state legislature.
But people may not realize how quickly things can change. If by 2025 we have a Congress, president, and at least neutral regulators supporting cryptocurrencies, everything could undergo a radical transformation. That’s why you’re seeing prices soar now, with massive inflows into ETFs.
Speaking of ETFs, this is indeed a significant breakthrough. We launched the first cryptocurrency fund in the U.S. 11 years ago, initially as a Cayman hedge fund, as we believed it might take years to get ETF approval. Now it seems the waiting time has far exceeded expectations.
Bankless: Can you specify the data regarding these inflows?
Dan Morehead: The current capital inflow situation:
Bitcoin ETF: $35 billion net inflow
MicroStrategy and similar ETF products: $18 billion
Total inflow exceeding $50 billion into ETFs or similar ETF products
An interesting comparison:
During the same period, the net inflow of all gold ETFs globally was zero.
Funds shifting from traditional gold to digital gold (Bitcoin)
Bankless: While it’s fascinating to see people like Larry Fink change their stance, institutions like Vanguard still do not allow the inclusion of ETFs or crypto assets in their ecosystems. So what is the actual level of institutional adoption now?
Dan Morehead: Here’s an interesting point: many say Bitcoin is a bubble, but the median institutional holding is zero. How can it be a bubble? Most institutional investors, including insurance companies, pension funds, and endowments, have virtually zero direct investments in blockchain. They may have indirectly invested in some blockchain companies through certain aggregate venture funds, but direct investments are almost nonexistent.
That’s why I am so optimistic about the future. We are actually just getting started. When you see institutions like BlackRock, the largest asset management company in the world, publicly supporting and having an excellent blockchain team, along with institutions like Fidelity that have been laying out blockchain strategies since 2014, it is very encouraging.
Previously, many institutions used compliance as an excuse not to invest in cryptocurrencies, but now institutions like BlackRock and Fidelity are selling highly regulated quality products, making that excuse untenable. Even Vanguard's stance may become difficult to maintain as the market evolves.
Bankless: It sounds like there is still an opportunity to position crypto assets ahead of institutional investors?
Dan Morehead: That's right, it definitely applies. There is indeed still an opportunity to enter before institutional investors.
The cyclicality of cryptocurrencies
Bankless: You’ve gone through multiple cycles, and now Bitcoin has reached a new high of $100,000. We are clearly in a bull market. Do you think the cryptocurrency market will continue to follow the four-year cycle pattern? Traditional views suggest this is related to Bitcoin halving, while others believe it is related to global liquidity. When fiat liquidity is abundant, cryptocurrencies go through bull markets, then peak and fall back. Will this four-year cycle pattern continue indefinitely?
Dan Morehead: Yes, I believe this cyclical pattern will continue.
Bankless: Is this your basic prediction? Do you not believe in the supercycle theory or the possibility of breaking this pattern?
Dan Morehead: Let me explain with an interesting analogy. When I was in college, there was a professor who wrote the famous book 'A Random Walk Down Wall Street,' which articulated the theory of market efficiency. Buffett once said a thought-provoking statement: 'The difference between the market being always efficient and often efficient is worth $80 billion.'
Regarding the halving cycle, my understanding has evolved:
Initially, I was also skeptical — if everyone knows a halving is going to happen, then that event should already be fully priced in.
But after experiencing the halvings of 2013 and 2016, I am completely convinced of the validity of this pattern.
Why is halving so important? It starts with miner behavior:
Miners will sell almost all the Bitcoin they acquire to pay for operational costs.
It’s like the copper mine market — if half of the copper mines were announced to be closing one day, copper prices would inevitably rise.
Bitcoin halving has this effect — every four years, the output halves, and when demand remains constant while supply is halved, prices naturally rise.
However, the cyclical characteristics are gradually evolving:
The amplitude of cyclical fluctuations is gradually decreasing. When the first halving occurred, the reduced output accounted for 15% of the circulating supply.
As the circulating supply increases, the impact of the next halving drops to a third of the original.
By the final halving in 2136, the impact will be negligible.
Our data analysis shows a clear pattern:
The halving effect begins to show 400 days before the actual date.
Reaching the cycle peak 480 days after halving.
This pattern has maintained an astonishing accuracy.
Two years ago, when the price of Bitcoin was $17,700, we predicted it would reach $28,000 at the time of halving, and then reach $117,000 480 days after halving (next August), with the lowest point prediction being almost accurate to the specific date.
During the last halving, we predicted Bitcoin's price for each month of 2020 on Twitter. We predicted that it would reach $62,964 on August 15, 2020, and it indeed hit that exact number on that day.
Thus, I still believe this cyclical pattern will persist. I think we will experience a major bull market, followed by a bear market. But the only difference is that after experiencing three declines of 85% over the past 12 years, the next pullback may only be 50% or 60%, at least for Bitcoin, while smaller coins may still exhibit greater volatility.
2025 Bull Market Outlook
Bankless: If we follow the four-year cycle pattern, does this mean 2025 will be a bull market, followed by a decline starting in 2026?
Dan Morehead: Yes, that’s my expectation. April 19 of this year is the halving time, and August 2025 should be the peak of this cycle.
Bankless: It feels like everything is moving in this direction; it seems too simple?
Dan Morehead: I know it sounds a bit absurd, but we’ve been discussing this topic for 12 years. We’ve always predicted that volatility would gradually decrease; previous halving cycles saw greater volatility, while this one will be relatively mild. Not only halving factors but also political and macroeconomic environments are creating favorable conditions for cryptocurrencies. So I am quite optimistic about 2025.
Bankless: How do you view the macroeconomic situation? Will it have a positive or negative impact on cryptocurrencies? Does Bitcoin affect the macro economy or vice versa?
Dan Morehead: Usually, we discuss the impact of macroeconomics on Bitcoin. From a macroeconomic perspective, I am skeptical about the possibility of the Federal Reserve cutting interest rates. In December 2021, the federal funds rate was zero, and the yield on 10-year treasury bonds was 1.3%. At that time, I predicted that both would rise to 5% and remain there for several years. To this day, I still hold that judgment.
Why? Look at the current economic conditions:
The economy is booming, and congested airports are the best proof.
The unemployment rate is at a historical low.
Wage inflation continues to rise.
The stock market keeps hitting new all-time highs.
In such an economic environment, I believe that those who expect the Federal Reserve to cut interest rates are being unreasonable.
The actual federal funds rate is only 80 basis points above core inflation, which doesn’t count as tightening. The historical average is 140 basis points higher, so it’s just slightly tight now.
More concerning is the fiscal situation:
During the peak economic period, the U.S. still faced a $2 trillion deficit.
Even with full employment and indicators hitting new highs, it remains impossible to achieve fiscal balance.
This suggests that once the economy turns in the future, it may face more severe problems.
Macroeconomic environment and cryptocurrency
Bankless: The U.S. continues to run deficits, print money, and has expectations of interest rate cuts. What do these macroeconomic signals mean? Do they indicate that prices of goods and digital assets will rise?
Dan Morehead: The U.S. has developed a dependency on printing money. This trend existed before the COVID-19 pandemic, and fiscal constraints have completely disappeared post-pandemic. For example, direct cash subsidies to the public have been issued multiple times, directly leading to inflation and rising prices.
The current fiscal situation is concerning:
The U.S. continues to run record deficits even during the best economic times.
Interest expenditures have surpassed military spending.
The government is financing through adjustable rate methods, which increases future fiscal risks.
Interest rates are expected to remain at 5% or higher.
This means we have to refinance all debts at increasingly higher interest rates, which will be very costly.
While I don't focus much on researching fiscal and macroeconomic issues, one thing I'm sure of: I'd rather hold Bitcoin than dollars.
Bankless: You mentioned commodities, which makes me think about the current highs in gold, Bitcoin, stock markets, and real estate. How should we interpret this phenomenon?
Dan Morehead: The key is to shift perspectives:
These assets are not genuinely 'rising'; rather, fiat currency is depreciating.
Attention should be paid to Bitcoin's relative prices against gold, stocks, real estate, etc.
From the price comparisons of various assets against the dollar, the trend of dollar depreciation is clear.
In the current fiscal situation, holding fiat currency lacks meaning. Even former cryptocurrency skeptic Ray Dalio has begun to suggest holding gold and Bitcoin to cope with potential debt crises.
This shift in perspective is important because currency is fundamentally a consensus technology. The change in attitude among top investors indicates an increasing market recognition of digital assets, and the consensus brought by deep liquidity is crucial for the development of an emerging currency.
RWA tokenization trend
Bankless: RWA tokenization seems primarily aimed at institutions. Will all assets eventually go on-chain? Are we experiencing an S-curve of development from stablecoins to government bonds, and then to stocks and bonds?
Dan Morehead: This is indeed the long-awaited 'killer application' of the blockchain space. Although some early investments were premature, they are now finally starting to pay off. Take stablecoins for example; they are bringing new value to ordinary financial instruments on the blockchain. Projects like Ondo are opening the doors to the U.S. financial market for more people.
The significance of moving government bonds onto the blockchain is much greater than it appears. Most of the 8 billion people in the world live outside the U.S. and are eager to access dollar assets and U.S. treasury bonds, but traditional channels struggle to achieve this.
Even for American citizens, the existing system has clear issues. For example, transferring from Treasury Direct accounts to brokers can take a year, and this inefficiency highlights our need for blockchain technology.
Bankless: Wait, really? I didn't know that was the case.
Dan Morehead: Yes, there’s a pile of withdrawal requests sitting with some government official, so high that it takes a year to transfer your 90-day treasury bonds from the government to Merrill Lynch. If anything perfectly illustrates our need for blockchain and RWA tokenization, this is it. You think it’s wiser to buy directly from the government, but your funds get locked up for a year.
Another good example is Figure Markets, which has processed $10 billion in mortgages on the blockchain. The traditional mortgage market takes about 55 days from borrowing to final settlement, with many intermediaries, each incurring costs. Blockchain technology can significantly enhance the efficiency of this process.
However, not all assets are suitable for tokenization. Products like hedge funds and private equity funds aimed at accredited investors already have a well-established operational model and do not urgently need to go on-chain.
But for assets like government bonds, blockchain does provide an ideal solution. This not only allows more people to participate in investment but also offers the U.S. government an opportunity to expand its financing channels. Through blockchain, they can more easily promote government bonds to global smartphone users, which benefits all parties.
The prospects of AI and cryptocurrency integration.
Bankless: AI and cryptocurrency are converging in unique ways. What are your views on the intersection of cryptocurrency and AI? Are you focusing on AI-related projects?
Dan Morehead: The convergence of blockchain and AI is inevitable. Fundamentally, AI has a huge impact on society, and decentralized, open AI is more beneficial for everyone than private control. We have already invested in some projects in this direction, such as decentralized AI projects like Sahara.
A notable phenomenon is that existing AI models have digested almost all free internet content. The next generation of AI models will need to acquire that paid data, and blockchain is particularly good at providing incentive mechanisms to solve this issue.
Regarding the use of currency by AI agents, they clearly cannot use the traditional banking system to open accounts. When interacting between machine agents, they must use some form of digital currency, and programmable currencies (like Ethereum) seem to be the most natural choice. While some may be exploring options outside of blockchain, the solutions provided by blockchain are the most complete.
In the long run, AI seems difficult to operate independently of blockchain. Important intersections have emerged between these two fields, and we are likely to see further deep integration in the next 5 to 10 years.
Looking for the next Bitcoin
Bankless: Did Pantera's initial Bitcoin fund achieve a 130,000% return? Is that a unique 'once in a generation' return rate? Do you think investors will have similar opportunities in the coming decades?
Dan Morehead: Blockchain technology is at a crucial stage of development and is a highly promising career direction for young people. Even if they ultimately choose to transition to traditional industries, the experience accumulated in the blockchain field will be a valuable career asset. This career choice has asymmetric return characteristics: high upside potential with controllable downside risks.
The current monetary policy and regulatory environment have created many disadvantages for the younger generation. High barriers in the real estate market and inflationary pressures have made traditional wealth accumulation channels increasingly difficult. In contrast, the blockchain space offers a relatively fair competitive environment for the younger generation.
For young investors, the following investment strategies are recommended:
Diversify the portfolio to avoid over-concentration of funds in a single crypto asset.
Emphasize risk management and adjust investment proportions based on personal financial situations.
Seize investment opportunities arising from generational cognitive differences.
Adopt robust investment methods such as dollar-cost averaging.
It is important to note that investment strategies should be adjusted as individuals progress through their life cycles. In cases of marriage and mortgage, the allocation of high-risk assets should be appropriately reduced to ensure the investment portfolio aligns with personal risk tolerance.
