Original source: Bankless
Organization and compilation: Yuliya, PANews
In the cryptocurrency market, finding the next 'Bitcoin' is the dream of many investors. As one of the most influential investment institutions in the industry, Pantera Capital bought Bitcoin at $65 in 2013, and the fund's returns have exceeded 100 times to date. In this episode of the Bankless podcast, founder Dan Morehead shares how he identifies assets with asymmetric return potential, as well as in-depth thoughts on 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. You suggested buying Bitcoin at $65 in the email and planned to invest in 30,000 BTC. Can you share your thoughts at that time?
Dan Morehead:
It all started in March 2013. My two friends, Pete Briger (co-CEO of Fortress) and Mike Novogratz (founder of Galaxy Digital), reached out to me to discuss Bitcoin. (We all came from Goldman Sachs; they later founded Fortress Investment Group.) In fact, my brother had introduced Bitcoin to me earlier, but I didn’t pay much attention.
A brief meeting with Pete and Mike unexpectedly turned into a four-hour deep discussion. The idea of Bitcoin opened my eyes. Later, I accepted Pete's invitation and worked in their office for a full six years.
Bankless: You mentioned this is an asymmetric trading opportunity; can you elaborate on that?
Dan Morehead:
While doing macro trading at Tiger Management, I learned one thing: look for opportunities where potential returns far exceed risks. Although investing always carries risks, the key is to find those that could yield massive returns.
As an example, before investing in Bitcoin, we held Tesla stock. Interestingly, in 2013, Tesla and Bitcoin were priced similarly. In the end, we made a bold decision — to sell all Tesla stock and go all-in on Bitcoin.
Bankless: You mentioned Bitcoin as 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 is a 'serial killer' because it disrupts not just one sector but reshapes multiple industries. However, this process is gradual.
For example, although blockchain technology has now shown advantages in certain areas, 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' stage.
Bankless: After so many years of market ups and downs, has your view on Bitcoin changed?
Dan Morehead:
While Bitcoin has already seen astonishing gains, I believe it is still an asymmetric opportunity. We have experienced three declines of over 85%, but each time we reached new highs. It is difficult to find such an asset in traditional investment fields.
This is also why I have focused almost all my energy on the crypto market since 2013. We are still in the early stages of this financial revolution, and there are still great opportunities ahead.
Asymmetric investment opportunities.
Bankless: From 2013 to 2015, you purchased 2% of the global Bitcoin supply, and many investors hope to have bought Bitcoin sooner and are looking to identify these asymmetrical return opportunities. How did you build this belief? Some might say it was just luck; what do you think?
Dan Morehead:
I completely agree with you using the term 'pattern' because it is indeed a form of pattern recognition. I have been working on Wall Street for 36 years, starting in 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 edge over younger investors when investing in cryptocurrencies because I feel I have seen similar situations before.
Let me give you a few examples:
· When I was at Goldman Sachs, I participated in the GSCI (Goldman Sachs Commodity Index), and now commodities have become a recognized asset class.
· In the 90s, I invested in emerging markets; 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). At that time, many thought it was crazy, but now the Middle East has become a completely normal investment destination.
· I invested in Russia during Gorbachev’s time, participating in the privatization of the Russian gas industry.
Bankless: So you have been looking for these frontier investment opportunities?
Dan Morehead:
Yes, we have always been looking for those non-mainstream or unconventional opportunities. In 2000, we even established a fund to invest in local farmland after the second-to-last crisis in Argentina.
Speaking of blockchain, it's interesting that it remains a frontier asset class. This is unusual — an asset with a market value of $3 trillion is still considered frontier; I have never seen such a thing.
In the investment memos I wrote in the following months, I listed various application scenarios for blockchain:
· Competing with gold (this is happening) will be the future.
· Competing with Visa and Mastercard.
· Competing with remittance companies that charge high fees to migrants for transferring money across borders, which Bitcoin can do easily and at low cost.
When you add up all these use cases, 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 buy a large amount of Bitcoin in 2013? I remember when I bought cryptocurrency for the first time in 2014, it felt very unreliable, needing to open accounts on multiple exchanges, and the websites looked very rudimentary. For many investors, these were reasons that deterred them. How did you build confidence in such an environment?
Dan Morehead:
At that time, the trading environment was indeed very primitive. For example, platforms like localbitcoins.com required face-to-face transactions, which were too risky, and we never considered that method. Ironically, it was one of the most mainstream ways to trade back then.
Initially, we planned to operate this fund relying on a large publicly listed company. We did thorough system testing, but that company eventually withdrew. At that time, Bitcoin had already dropped by 50%, and we could only quickly pivot to operate independently under the Pantera brand.
Bankless: What difficulties did you encounter in the actual purchasing process?
Dan Morehead:
I remember when we started acting on Independence Day weekend, we first tried a small platform (which turned out to be Coinbase). We discovered they could only buy $300 worth of coins a day, while we wanted to invest millions. At that time, Coinbase had only one employee, and it took four days to get an email response. At that pace, it would take nearly 20 years to complete our plan.
Finally, we turned to Bitstamp in Slovenia. When handling wire transfers at the bank, the branch manager inquired in detail about what Bitcoin is, and the whole process took an hour to explain. To be honest, I was worried about the security of the funds myself at that time. Interestingly, we later became a major shareholder in Bitstamp, and I served as Chairman of Bitstamp for 6-8 years (PANews note: LinkedIn information shows he served as Chairman of Bitstamp from 2014 to 2018).
Bankless: You mentioned visiting many exchanges, including Mt.Gox?
Dan Morehead:
At that time, I thought it was important to personally inspect exchanges. I made a special trip to Tokyo to visit the two heads of Mt.Gox. Although I only stayed for two days, their performance made me very 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.
Institutional investor adoption status
Bankless: You mentioned holding 170 investor meetings, ultimately raising only $1 million. At that time, Bitcoin was still seen as a 'mysterious internet currency' or even a 'drug transaction tool.' How did you pitch it to investors? How did those meetings go?
Dan Morehead:
If you want to achieve excess returns, you cannot follow the mainstream; you cannot invest in projects that have 20 analysts tracking them at every Wall Street firm. That’s why we specifically emphasize 'making alternative investments more alternative' in our investor letters.
My belief comes from my hedge fund experience that started in 1991. At that time, hedge funds were truly alternative investments, but now they have become a mainstream industry worth trillions of dollars, where almost all fund strategies are quite similar. This experience has made me more convinced that blockchain should be an important part of any investment 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. At that time, it was the 'crypto winter,' and Bitcoin's price had collapsed by 90%. The market generally believed that 'what matters is blockchain, not Bitcoin,' and almost no one was 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, the price rose to $1,000, and then it crashed, remaining depressed from 2014 to 2017.
During this challenging period, although almost no one paid attention to this field, our team persisted in working every day. The fundraising situation in 2016 illustrates this well — 170 meetings ultimately raised only $1 million, leading to an entire year's management fee income of only $170,000.
Even today, although our fundraising scale has improved, to be honest, it feels like we are still at the starting stage. Institutional investors are still very cautious about cryptocurrencies; most institutions either do not allocate at all or allocate only a very small portion.
Bankless: Have your pitches on cryptocurrencies and blockchain changed from 2013 to 2016 and now?
Dan Morehead:
My core point has always been consistent, possibly because these ideas have stood the test of time. When I explain Bitcoin's fixed supply characteristic and that it will not be diluted by fiat currency inflation, I often hear the question, 'Isn’t this just like gold?' But my answer is: this is more like investing in gold in 1000 BC. Although gold has indeed served humanity for 5000 years, in the digital age, we need a new version — digital gold.
This is exactly why I have remained enthusiastic 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 and may take as long as 20 years, rather than happening overnight.
I am so confident because the development of blockchain technology is an unstoppable trend. Although the implementation time may take longer than expected, and some startups may run out of funds in the process, some changes are inevitable: in five years, it will be impossible for migrant workers to pay a month’s salary to transfer money across borders, and you can no longer continue to pay a 3% fee for swiping credit cards.
I cannot accurately predict whether this transformation will take 10 years or 1-2 years. But because I am convinced that this change is inevitable, I will continue to hold and invest in this field.
Global adoption of cryptocurrencies.
Bankless: Many people see Bitcoin doubling this year and feel like they've 'missed out,' believing it's too late to buy now. How do you view the upside potential for Bitcoin and the entire category of crypto assets? From a global adoption perspective, are we at 20% or 50% now?
Dan Morehead:
In any ordinary asset class, if an asset doubles in a year, you definitely should not buy it, as that may indicate an overvaluation. But Bitcoin is different. The Pantera Bitcoin fund has 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 can earn 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 it loses 85%. In simple terms, do not bet your marriage on this asset class. As long as you can keep the investment scale at this level, you can hold it long-term with confidence.
Bankless: So how much more upside do you think Bitcoin has?
Dan Morehead:
Bitcoin has indeed developed to a considerable scale. We cannot see a 1000-fold increase again, as that would consume all the energy on Earth. However, it is entirely possible to increase tenfold to a market value of $15 trillion compared to the total global financial assets of $500 trillion.
I won't predict what will happen in 50 years, but within our current investment cycle, for example, a time frame of 5-10 years, it is entirely reasonable for Bitcoin to increase tenfold from its current position; it wouldn’t seem crazy or overvalued.
Bankless: What stage are we at in terms of adoption rate now?
Dan Morehead:
I believe we are still in the early stages. According to statistics, approximately 300 million people globally own cryptocurrencies. Although this number is difficult to estimate accurately, and many holders may not have started using it in earnest.
Let me analyze it from the perspective of technological adoption: Using Bitcoin only requires a smartphone, and currently, there are 4 billion people in the world who own smartphones. Some innovative projects, like KaiOS, are working to bring this functionality to feature phones. Assuming in the next ten years, smartphone users grow from 4 billion to 5 billion, most of these users may use digital currency on their phones.
Think about it, 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 conceivable that in about 10 years, 3 billion people will be using cryptocurrencies. Once they start using it, more use cases will emerge, and people will use it more in their lives.
Overall, I estimate that we are only about 15% through this cryptocurrency blockchain revolution. Not only are the number of participants relatively small, but existing users have not fully explored its potential.
Bitcoin's 'escape velocity'
Bankless: In 2013, people worried about the government banning Bitcoin; by 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 reports were mostly negative, focusing on the Silk Road incident and ignoring the positive impacts. Although the US once banned gold, there are now 50 million Americans holding cryptocurrencies.
Bankless: What impact does this change have on the political landscape?
Dan Morehead:
This involves an interesting phenomenon. Most Americans are under 40, but in the past three years, 90% of the wealth created by the Federal Reserve and Congress's monetary policy has flowed to those aged 70 and above. This is effectively 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 an astonishing change in voting behavior among voters under 40 compared to the 2020 presidential election. The term 'young Republicans' has not been heard for many years.
Trump expressed strong support for cryptocurrencies in May this year. All the cabinet members he nominated are very supportive of cryptocurrencies, and he even wanted to establish a cryptocurrency envoy. I believe that when someone writes a doctoral thesis about this election in the future, they will find that cryptocurrencies were a key factor in changing the election results.
Bankless: Has this change been reflected at the congressional level?
Dan Morehead:
Yes, many anti-cryptocurrency senators and congress members have lost their seats. According to what I have read:
· House: 274 in favor, 122 against
· Senate: 20 in favor, 12 against
I predict that four years from now, those members of Congress opposing cryptocurrencies may not even remain in Congress, as that is simply not a wise position. They will either change their views or possibly be voted out in the 2026 midterms or the 2028 elections.
It is strange to see the Democrats turning against cryptocurrencies. I have been wondering if I missed some strategic consideration because it clearly seems like a lose-lose strategy.
The US government's shift in attitude towards cryptocurrencies
Bankless: In 2025, there will be an administration and Congress that support cryptocurrencies for the first time. After experiencing the SEC's repression 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 Bitcoins, which is within its authority. We participated in the first Bitcoin auction by the US Marshals Service in 2013-2014.
The US government currently holds 1% of the world's Bitcoin. Stopping sales would have a significant impact because the actual circulation of Bitcoin is not large and many holders never sell.
Bankless: Senator Lummis mentioned accumulating a reserve of 1 million Bitcoins. Do you think it is feasible to at least retain the current 200,000 Bitcoins and establish a custody structure?
Dan Morehead:
This is likely to be realized. 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 rise.
As the issuer of the world’s reserve currency, the US cannot hold foreign currencies like other countries. The practice of storing gold in Fort Knox is outdated. The US should increase its holdings of digital gold and even consider selling traditional gold.
Singapore has held cryptocurrencies for 5-7 years; this is not a radical idea.
Bankless: This question seems to have become quite partisan.
Dan Morehead:
Yes, it’s strange. As Ro Khanna said, it’s like a mobile phone; why turn it into a partisan issue? In fact, Democrats should support Bitcoin more because it represents the dreams of progressives.
Global Bitcoin reserve competition.
Bankless: If Trump retains the US's existing 200,000 Bitcoins (about 1% of the global total) and announces it publicly, how do you think China, which also has about 200,000 seized Bitcoins, will respond? Will other countries start hoarding in secret?
Dan Morehead:
A strategic Bitcoin arms race could last for 10 years. Both the US and China may maintain 1% of global Bitcoin reserves.
It’s ironic: why would countries competing with the US store their wealth in dollars and US Treasuries? Under the US sanctions regime, their transactions may be monitored.
For countries 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 provides 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 hard to understand and influence.
Adoption of cryptocurrencies by institutional investors.
Bankless: In 2024, institutional adoption made significant breakthroughs, such as Larry Fink admitting that his views on Bitcoin in 2021 were wrong. ETF products have achieved astonishing success. Compared to 2022, when Mike Novogratz predicted the 'wave of institutional investors' finally materialized, how is the level of institutional adoption now? How far have we progressed?
Dan Morehead:
The industry has indeed gone through some significant setbacks:
· The collapses of FTX, BlockFi, Celsius, and Terra Luna.
· The discount issue with GBTC.
· The SEC's lawsuits against companies like Coinbase and Ripple.
These events have indeed affected institutional participation. Imagine a public pension plan manager struggling to propose an investment in Bitcoin to the state legislature in such an environment.
But people may not realize how quickly things can change. If by 2025 we have a Congress and a president that support cryptocurrencies, along with regulatory agencies that at least remain neutral, everything could change dramatically. That’s why you are now seeing prices soar and a flood of funds into ETFs.
When it comes to ETFs, this is indeed an important breakthrough. We launched the first crypto fund in the US 11 years ago, at that time as a Cayman hedge fund, because we thought it might take years to get ETF approval. Now it seems that the waiting time far exceeded expectations.
Bankless: Can you specify the data on these fund inflows?
Dan Morehead:
Current fund inflow situation:
· Bitcoin ETF: $35 billion net inflow.
· MicroStrategy and similar ETF products: $18 billion.
· A total of over $50 billion has flowed into ETFs or similar ETF products.
An interesting comparison:
· During the same period, net inflows into global gold ETFs were zero.
· Funds are shifting from traditional gold to digital gold (Bitcoin).
Bankless: While it’s encouraging to see someone like Larry Fink change his stance, institutions like Vanguard still do not allow ETFs or crypto assets in their ecosystem. So how is the actual level of institutional adoption right now?
Dan Morehead:
Here’s an interesting point: many say Bitcoin is a bubble, but the median held by institutions is zero, so how could it be a bubble? Most institutional investors, including insurance companies, pension funds, and endowment funds, have virtually zero direct investment in blockchain. They may have indirectly invested in some blockchain companies through certain comprehensive venture capital funds, but direct investment is almost nonexistent.
This is why I am so optimistic about the future. We are really just getting started. When you see the world's largest asset management company like BlackRock publicly supporting it, having an excellent blockchain team, and institutions like Fidelity starting to lay out blockchain since 2014, these are very helpful.
In the past, many institutions used compliance reasons 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 a stance like Vanguard's may be hard to maintain as the market evolves.
Bankless: Does it still sound like there are opportunities to position crypto assets ahead of institutional investors?
Dan Morehead:
That's right; this is entirely applicable. There are indeed still opportunities to enter before institutional investors.
The cyclicality of cryptocurrencies.
Bankless: You have experienced multiple cycles, and now Bitcoin is hitting 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 cyclical pattern? The traditional view is that this is related to Bitcoin halving, while others believe it is related to global liquidity. When fiat currency liquidity is abundant, cryptocurrencies enter a bull market, then peak and retreat. Will this four-year cyclical pattern continue?
Dan Morehead:
Yes, I think this cyclical pattern will continue.
Bankless: Is this your basic forecast? Do you not believe in the possibility of a super-cycle theory or breaking this pattern?
Dan Morehead:
Let me explain this through an interesting analogy. During my college years, a professor wrote a famous book (A Random Walk Down Wall Street), outlining the theory that markets are always efficient. Buffett once said a thought-provoking statement: 'The difference between the market always being efficient and often being efficient is worth $80 billion.'
My understanding of the halving cycle has evolved:
· Initially, I, like many others, was skeptical — if everyone knows that a halving is going to happen, then that event should have already been fully priced in.
· But having experienced the halvings in 2013 and 2016, I am completely confident in the authenticity of this pattern.
Why is the halving so important? It starts with miners' behavior:
· Miners will sell almost all the Bitcoin they acquire to pay operating costs.
· This is like the copper mine market — if you announce that half of the copper mines will close one day, the price of copper will inevitably rise.
· The halving of Bitcoin creates such an effect — every four years, the output is halved, and when demand remains constant while supply is halved, the price naturally rises.
However, the cyclical characteristics are gradually evolving:
· The amplitude of cyclical fluctuations is gradually decreasing. During the first halving, the reduced output accounted for 15% of the circulating supply.
· As circulation increases, the impact of the next halving will drop to one-third of the original.
· By the last halving in 2136, the impact will be negligible.
Our data analysis shows a clear pattern:
· The halving effect starts to show 400 days before the actual date.
· Reaching the cycle peak 480 days after the halving.
· This model 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 halving and then hit $117,000 480 days after the halving (next August). The prediction for the low point was almost precise to the specific date.
During the last halving, we predicted the price for each month on Twitter. We predicted it would reach $62,964 on August 15, 2020, and it did hit that number exactly that day.
Therefore, I still believe that this cyclical pattern will continue. I think we will experience a major bull market followed by a bear market. But the only difference is that after experiencing three 85% declines over the past 12 years, the next pullback may only be 50% or 60%, at least for Bitcoin; smaller coins may still have greater volatility.
2025 Bull Market Outlook
Bankless: If following the four-year cyclical pattern, does this mean 2025 will be a bull market, followed by a decline starting in 2026?
Dan Morehead:
Yes, that is 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; doesn't it seem too simple?
Dan Morehead:
I know it sounds a bit ridiculous, but we have been discussing this topic for 12 years. We have always predicted that the volatility would gradually decrease; the previous halving cycles had more volatility, and this one will be relatively mild. It's not just the halving factor; political and macroeconomic environments are also 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 influence the macro economy or vice versa?
Dan Morehead:
Usually, we discuss the macroeconomic impact 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 indicators would rise to 5% and maintain that level for several years. To this day, I still hold that judgment.
Why? Look at the current economic situation:
· The economy is booming; the crowded airports are the best proof.
· Unemployment rate is at a historical low
· Wage inflation continues to rise
· The stock market continues to set historical highs.
In such an economic environment, I think those who expect the Federal Reserve to cut interest rates are being unreasonable.
The real federal funds rate is only 80 basis points higher than core inflation, which does not count as tightening. The historical average is 140 basis points higher, so it is only slightly tight now.
More concerning is the fiscal situation:
· Even in the best of economic times, the US still has a $2 trillion deficit.
· Even with full employment and various indicators hitting new highs, fiscal balance remains elusive.
· This foreshadows that once the future economy turns, more serious problems may arise.
Macroeconomic environment and cryptocurrencies
Bankless: The US's ongoing deficit, money printing, and expectations of interest rate cuts — what do these macroeconomic signals imply? Do they suggest that commodity and digital asset prices will rise?
Dan Morehead:
The US has developed a dependency on printing money. This trend existed before the COVID-19 pandemic, and after the pandemic, fiscal constraints completely disappeared. For example, multiple cash subsidies directly given to the public have led to inflation and rising prices.
The current fiscal situation is concerning:
· The US continues to run record deficits even during the best economic times.
· Interest expenses have exceeded military spending.
· The government adopts adjustable rate financing methods, increasing future fiscal risks.
· Interest rates are expected to remain at 5% or higher.
This means we will have to refinance all debts at increasingly higher interest rates, which will be very costly.
Although I don't focus much on fiscal and macroeconomic research, one thing I'm sure of is that I'd rather hold Bitcoin than dollars.
Bankless: You mentioned commodities, and now I think of gold hitting new highs, Bitcoin hitting new highs, the stock market hitting new highs, and real estate hitting new highs. How should this phenomenon be interpreted?
Dan Morehead:
The key is to change perspectives:
· These assets are not actually 'rising' but rather the fiat currency is depreciating.
· Attention should be paid to Bitcoin's relative price against gold, stocks, real estate, etc.
· The depreciation trend of the dollar can be clearly seen from the price ratios of various assets against the dollar.
In the current fiscal situation, holding fiat currency lacks meaning. Even former cryptocurrency skeptic Ray Dalio has begun suggesting holding gold and Bitcoin to cope with a potential debt crisis.
This shift in viewpoint is important because money is essentially a consensus technology. The change in attitude among top investors indicates that the market's recognition of digital assets is increasing, and the consensus brought by deep liquidity is crucial for the development of an emerging currency.
RWA tokenization trend
Bankless: RWA tokenization seems mainly aimed at institutions. Will all assets eventually go on-chain? Are we experiencing an S-curve development trajectory from stablecoins to government bonds, and then to stocks and bonds?
Dan Morehead:
This is indeed the long-awaited 'killer application' in the blockchain field. Although some early investments were premature, they are finally starting to bear fruit. Take stablecoins, for example; they allow ordinary financial instruments to realize new value on the blockchain. Projects like Ondo are opening the doors to the US financial market for more people.
The significance of moving government bonds onto the blockchain is far greater than it appears. The majority of the 8 billion people globally live outside the US, and they all long for access to dollar-denominated assets and US Treasuries, but traditional channels make this difficult.
Even for US citizens, the existing system has obvious problems. For example, transferring from a Treasury Direct account to a broker can take a year; this inefficiency precisely illustrates our need for blockchain technology.
Bankless: Wait, really? I didn't know that was a thing.
Dan Morehead:
Yes, a stack of withdrawal applications was piled up with some government official, so high that it took a year to transfer your 90-day Treasury bonds from the government to Merrill Lynch. If anything can perfectly demonstrate why we need blockchain and RWA tokenization, this is it. You thought it was smarter to buy directly from the government, and in the end, your funds were locked for a year.
Another good example is Figure Markets, which has handled $10 billion in mortgages on the blockchain. The traditional mortgage market takes 55 days from borrowing to final delivery, with numerous steps in between, each generating 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, which are aimed at accredited investors, already have very well-established operational methods and do not urgently need to go on-chain.
But for assets like government bonds, blockchain does indeed provide an ideal solution. This not only allows more people to participate in investments but also offers the US government an opportunity to expand its financing channels. Through blockchain, they can more easily promote government bonds to global smartphone users, benefiting all parties.
The prospects of the fusion of AI and cryptocurrencies.
Bankless: AI and cryptocurrencies are converging in unique ways. What are your views on the intersection of cryptocurrencies and AI? Are you keeping an eye on AI-related projects?
Dan Morehead:
The fusion of blockchain and AI is inevitable. Fundamentally, AI has a huge influence on society, and decentralized, open AI is more beneficial for everyone than private control. We have invested in some projects in this direction, such as decentralized AI projects like Sahara.
A noteworthy phenomenon is that existing AI models have digested almost all free internet content. The next generation of AI models will need access to paid data, and blockchain happens to excel at providing incentive mechanisms that can solve this issue well.
Regarding the question of AI agents using currency, they clearly cannot open accounts in traditional banking systems. 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 explore solutions outside of blockchain, the solutions offered by blockchain are the most comprehensive.
In the long run, AI seems unlikely to operate independently of blockchain. A significant intersection has emerged between these two fields, and we are likely to see further deep integration in the next 5 to 10 years.
Finding the next Bitcoin.
Bankless: Pantera's initial Bitcoin fund achieved a 130,000% return; is this 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, making it a highly promising career direction for young people. Even if they ultimately choose to pivot to traditional industries, the experience accumulated in the blockchain field will be a valuable career asset. This career choice has asymmetric return characteristics: great upside potential and controllable downside risks.
The current monetary policy and regulatory environment have caused many adverse effects on the younger generation. High entry barriers in the real estate market, inflation pressures, and other factors have made traditional wealth accumulation channels increasingly difficult. In contrast, the blockchain field provides a relatively fair competitive environment for the younger generation.
For young investors, the following investment strategies are recommended:
· Diversify the portfolio and avoid over-concentrating funds in a single crypto asset.
· Emphasize risk management and adjust investment ratios based on personal financial conditions.
· Seizing investment opportunities created by generational cognitive differences.
· Adopt steady investment methods such as dollar-cost averaging.
It is important to note that investment strategies should be adjusted according to changes in personal life cycles. In cases of marriage, mortgages, etc., one should appropriately reduce the allocation of high-risk assets to ensure that the investment portfolio matches personal risk tolerance.
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