Original title: (Pantera Bitcoin Fund Hits 1,000x)
Original author: Dan Morehead, founder of Pantera
Original translation: Wu Says Blockchain
The post-election surge has further increased the fund by 30%. The fund's total return has now reached 131,165% (net of fees and expenses).
I want to share the initial logic—because it still feels very compelling to me today.
The day we chose to launch the Pantera Bitcoin Fund was actually the lowest point in the past eleven years.
The initial investment memo still reads clearly to this day.
From 2013 to 2015, we purchased 2% of the world's Bitcoin.
Appendix: If Pantera bought 2% of the world's Bitcoin from 2013 to 2015, that estimates to about 280,000 Bitcoins. In comparison, as of November 24, 2024, MicroStrategy holds 386,700 Bitcoins.
Even after eleven years, Bitcoin continues to be squeezed up like a watermelon seed.
Frankly, I can't help but think that we still have many years of very attractive returns ahead of us.
Gold from 1000 B.C.
My core point was written down a month later:
"Yesterday, when I was discussing Bitcoin with an investor, he somewhat condescendingly replied, 'This is like buying gold.' No, no, this is like buying gold in 1000 B.C. 99% of financial wealth has yet to touch Bitcoin. When they start participating, Bitcoin will either become worthless or [soar to astronomical heights]."
As an industry, we have made some progress. Now, only about 95% of financial wealth has yet to be fully allocated.
The change catalyst from 5% in 2024 to a higher proportion has just occurred: regulatory clarity in the U.S. Large institutional managers like BlackRock and Fidelity now offer extremely cheap and efficient Bitcoin investment channels for anyone with a brokerage account. This new convenience will ultimately allow tens of millions of investors and individuals to access this important new asset class.
We believe the entire industry will greatly benefit from the first pro-blockchain U.S. president taking office. In our view, the success of blockchain aligns with the national interest, and we believe everyone in Congress will ultimately take a neutral or supportive stance on blockchain—this trend has already begun. The regulatory headwinds of 15 years for blockchain are turning into tailwinds.
I still eagerly believe in the viewpoint I wrote down eleven years ago:
"I believe the possibility of global adoption of a global currency/payment system is over 50%, in which free cryptographic technology replaces the high 'trust' fees charged by institutions like banks, Visa-Mastercard, Western Union, and PayPal. Bitcoin replaces cash, electronic fiat currency, gold, bearer bonds, and big stones, among other things. It can do all of these things. It is the first global currency since gold. It is the first borderless payment system ever."
The price of Bitcoin at this moment was $104.
This still feels like my sentiment. We are still in the early stages. 95% of financial wealth has yet to touch blockchain. They are just beginning this massive transformation. When they participate, Bitcoin could reach levels like $740,000/BTC.
The market has indeed experienced a rapid rise. It reached $1,000 in less than a month—and has now risen three orders of magnitude.
11-year compound annual growth rate of 88%
I can imagine that some investors might think: 'Bitcoin has doubled this year. Well, I probably missed it.' And then give up.
No, that mindset is wrong. Bitcoin's average performance is nearly doubling every year. Since we launched the fund eleven years ago, its compound annual growth rate has been 88%.
Astronomical growth
Bitcoin has experienced three orders of magnitude growth. Another order of magnitude increase seems possible. If Bitcoin reaches $740,000/BTC, it would mean a market cap of $15 trillion. Compared to a total financial asset amount of $500 trillion, this number is not unimaginable.
Although past performance may not predict future results, if this trend continues, Bitcoin could reach $740,000 in April 2028.
I think it might take a few more years, but I do believe that possibility exists.
This has always been my mindset: I won't bet my entire fortune, nor am I 100.00% sure that blockchain assets will grow, but when you multiply the likelihood of it rising by the number of magnitudes it could increase or more—this result is far better than the expected returns of other investable assets. In my nearly forty years of investment career, the expected value of this trade is the most attractive I've ever seen.
Not easy
It may seem obvious now, but it was very difficult at that time.
After an 87% crash that began in December 2013, Bitcoin gradually lost attention. The market had still not recovered more than three years later. By 2016, nearly everyone had lost confidence in Bitcoin. Investors showed no interest.
That year, I flew around the world, conducting 170 investor meetings. The end result of all this effort—we raised only $1 million.
The management fee for this fund is $17,241. Earning $100 per meeting on average.
We could have bought hotels!!!
I am naturally a loyal team player. I have always wanted the Bitcoin team to succeed. Over the years, we have tried to help this community. So when Expedia announced it would accept Bitcoin in 2014, we paid for all our travel expenses in Bitcoin.
In 2015, our team was away on business for 59 nights—averaging 1.5 BTC per night, totaling 88 Bitcoins.
That's equivalent to $8,683,136 today!?!
We could have bought two hotels!
The amazing growth of the blockchain industry
In 2013, when we were preparing to launch the Pantera Bitcoin Fund, I opened accounts at several exchanges and transferred funds to get ready. When I first walked into Wells Fargo from our office on Market Street in San Francisco to wire money to Ljubljana, Slovenia, I didn't even know how to spell Ljubljana. Everything seemed very suspicious. So much so that the bank manager came over to interrogate me for a long time, asking me what I was doing.
(Now I know Slovenia is a lovely country located right next to Venice and below Austria.)
But at the time, I wondered if I was crazy. Another remittance was sent to a similarly suspicious small startup.
At that time, Bitcoin was priced around $130. Over the next few days, I witnessed Bitcoin's price drop from $130 to below $100. It's interesting to reflect that this "fear, uncertainty, and doubt" (FUD) is still a common phrase among skeptics in today's Bitcoin bear market. Even in the face of all these issues, when it dropped to $65, I decided to go all in—launching the Pantera Bitcoin Fund. 30 years of trading intuition led me to believe that was the opportunity.
I sent the aforementioned email to a small list of Bitcoin enthusiasts, which probably had only about twenty people, saying: "I just want to get involved."
(Today, this list has grown to hundreds of thousands, and subsequent letters have been read 2.7 million times.)
I logged onto a startup called Coinbase, trying to purchase 30,000 Bitcoins. A pop-up appeared, notifying me that the fund's daily limit was $50—this was not the "$500,000" of Wall Street slang, but a real $50 bill featuring Ulysses S. Grant. I almost had a heart attack.
Since it was a trendy startup with no address or phone number, I hurriedly sent an email—its subject was unexpectedly in all caps: "I want to buy $2 million worth of Bitcoin!" Four days later, their only employee—someone named Olaf—replied, "Okay, your limit is now $300." Even with my expanded trading limit, it would take 6,667 days to complete this transaction.
At this rate, I still have 2,522 days to trade!
Fortunately, I bought those Bitcoins on Bitstamp while the industry was gradually growing. Today, the cryptocurrency market has a daily trading volume of $130 billion. The industry's development to date is indeed amazing.
Blockchain as an asset class
Sometimes I feel like a gorilla discovering a shiny object in the forest... picking it up... turning it... curious about what it is...
Bitcoin!
I certainly don't fully understand all the nuances of the incredible tech projects in this field, but I feel like I've seen similar scenes before.
I was the first asset-backed securities (ABS) trader at Goldman Sachs. Today, everyone views ABS as an asset class. I was involved in the creation of the GSCI (Goldman Sachs Commodity Index). Now, commodities are seen as an asset class. In the 90s, I invested in emerging markets. Today, emerging markets (EM) are viewed as an asset class.
The same will happen with blockchain. I believe that in the near future, every investment firm will have a blockchain team and allocate a significant and long-term investment to blockchain.
Asymmetric trade
My global macro background was the reason I first got into blockchain. The asymmetry of this trade—operating in the world's largest market—made this opportunity far exceed the trades we had previously chased globally. I believe this is the most asymmetric trade I've ever seen.
The best example of this theme comes from a comparison at the second Pantera Blockchain Summit in March 2014:
"At a dinner before a late-night poker game, Morehead jokingly mentioned that at the time, the total value of all Bitcoin in the world was roughly equivalent to a company that sold ripped jeans and dorm decor, Urban Outfitters—around $5 billion. 'That's crazy, right?' Morehead said.
"I think that centuries from now, when they dig up the remnants of our society like in (Planet of the Apes), Bitcoin might have a greater impact on the world than Urban Outfitters."
—Nathaniel Popper, 2015, (Digital Gold)
When I updated this statement in November 2020, Bitcoin's market cap was comparable to L'Oréal. Waterproof mascara is undoubtedly an amazing invention, but I still believe Bitcoin has asymmetry.
Digging deeper...
"At L'Oréal, our mission is to democratize the best and most accessible beauty products in the fields of skincare, makeup, hair care, and hair coloring."
This is great. And Bitcoin's mission sounds surprisingly similar: to achieve the democratization of financial access.
I believe the democratization of finance will ultimately be more important.
Bitcoin has recently surpassed Meta (formerly Facebook). Photo sharing is indeed cool, but I believe achieving financial inclusion for every person on Earth with a smartphone would be more meaningful.
Five more goals to surpass...
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