Article reprinted from: Yuliya
Original text: Bankless
Compiled by: 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 offers deep insights into the future of the cryptocurrency market, with PANews providing a written compilation 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 starts back in March 2013. My two friends Pete Briger (Co-CEO of Fortress) and Mike Novogratz (founder of Galaxy Digital) approached me to discuss Bitcoin. (We all came from Goldman Sachs; they later founded Fortress Investment Group.) Actually, my brother had introduced me to Bitcoin before this, but I hadn’t paid much attention.
A brief meeting with Pete and Mike unexpectedly turned into a four-hour in-depth discussion. The ideas behind 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 trading macros at Tiger Management, I learned one thing: to look for opportunities where potential returns far outweigh the risks. Although investing always carries risks, the key is to find those that could yield enormous returns.
For example, before investing in Bitcoin, we held Tesla stock. Interestingly, in 2013, the prices of Tesla and Bitcoin were quite similar. In the end, we made a bold decision - to sell all Tesla stock and fully bet on Bitcoin.
Bankless: You mentioned that Bitcoin is like a "serial killer"; what does this mean?
Dan Morehead:
In the tech space, we often use the term "category killer" to describe disruptive innovations. Bitcoin goes further; it is a "serial killer" because it disrupts not just one field but reshapes multiple industries. However, this process is gradual.
For instance, while blockchain technology has shown advantages in certain areas now, it may take another decade 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 experiencing so many years of market fluctuations, has your view on Bitcoin changed?
Dan Morehead:
Although Bitcoin has already seen incredible increases, 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 hard to find such assets in traditional investment areas.
This is also 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 still many opportunities ahead.
Asymmetric investment opportunity
Bankless: Between 2013 and 2015, you purchased 2% of the global Bitcoin supply; many investors hope to buy Bitcoin early and recognize such asymmetric return opportunities. How did you build this conviction? Some may say it's just luck; what do you think?
Dan Morehead:
I agree with you using the term "pattern" because this is indeed a form of pattern recognition. I have worked on Wall Street for 36 years, starting in 1987, experiencing the savings and loan crisis, the financial crisis, investing in commodities in the 1980s, and investing in emerging markets in the 1990s. These experiences give me an advantage when investing in cryptocurrencies compared to younger investors, because I feel I've seen similar situations before.
Let me give some examples:
I participated in the GSCI (Goldman Sachs Commodity Index) while at Goldman Sachs, and now commodities have become an acknowledged 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 its first Western fund investing in the 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 era and participated in the privatization of Russian gas industry stocks
Bankless: So you've always 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 Argentina's penultimate crisis.
Speaking of blockchain, it's interesting to note that it remains a frontier asset class. This is unusual - an asset with a market cap of $3 trillion is still seen as a frontier asset; I have never seen such a situation.
In the investment memos I wrote in the following months, I listed various application scenarios for blockchain:
Competing with gold (which is happening)
In the future, competing with Visa and Mastercard
Competing with remittance companies that charge high fees to migrants, while Bitcoin can complete cross-border transfers 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 that when I first bought cryptocurrency in 2014, it felt very unreliable; I had to open accounts at multiple exchanges, and the websites looked very rudimentary. For many investors, these are reasons that deter them. How did you build confidence in such an environment?
Dan Morehead:
The trading environment back then was indeed very primitive. For instance, platforms like localbitcoins.com required face-to-face transactions, which were too risky; we never considered this method. Ironically, however, this was one of the most mainstream ways to trade at that time.
Initially, we planned to operate this fund with a large publicly traded company. We conducted extensive system testing, but that company ultimately pulled out. At that time, Bitcoin had already dropped 50%, and we had to quickly pivot to operate independently under the Pantera brand.
Bankless: What difficulties have you encountered during the actual purchasing process?
Dan Morehead:
I remember when we started taking action during Independence Day weekend, we first tried a small platform (which later turned out to be Coinbase). We found out that they could only buy $300 worth of coins per day, while we wanted to invest millions. At that time, Coinbase had only one employee and took four days to reply to emails. At this rate, it would take nearly 20 years to complete our plan.
Finally, we turned to Bitstamp in Slovenia. When handling a wire transfer at the bank, the branch manager inquired in detail about what Bitcoin is, and the entire process took an hour to explain. To be honest, I was worried about the safety of the funds at that time. Interestingly, we later became major shareholders in Bitstamp, and I served as chairman 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 flew to Tokyo to meet with the two heads of Mt. Gox. Although I only stayed for two days, their performance made me uneasy. Their explanations lacked logic, giving the impression that either they were incompetent or committing fraud. Ultimately, we decided not to work with them, and that decision proved correct.
Adoption status of institutional investors
Bankless: You mentioned doing 170 investor meetings and ultimately raising just $1 million. At that time, Bitcoin was still seen as a "mysterious internet currency" or even a "drug trading 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 and invest in projects that every Wall Street firm has 20 analysts tracking. That’s why we emphasize in our investor letters to "make alternative investments more alternative."
My philosophy stems from my hedge fund experience that began in 1991. At that time, hedge funds were true alternative investments, but they have now become a mainstream industry worth trillions of dollars, with nearly all funds employing similar strategies. This experience has made me even more convinced that blockchain should be an important part of an investment portfolio, as it still maintains its true alternative characteristics.
Interestingly, the 170 meetings you mentioned actually took place in 2016, three years later than 2013. That was during the "crypto winter" period, when Bitcoin's price plummeted by 90%, and the market generally believed "it’s the blockchain that matters, not Bitcoin," with almost no one optimistic about public chains and Bitcoin as an asset.
Bankless: How many times has this market slowdown happened?
Dan Morehead:
Bitcoin has already gone through three cycles of an 85% drop. In the first cycle, we started investing at $65, the price rose to $1,000 before crashing, and it remained sluggish from 2014 to 2017.
Despite almost no one paying attention to the sector during this tough period, our team has continued to work diligently every day. The fundraising situation in 2016 illustrates this well – 170 meetings ultimately raised just $1 million, leading to only $170,000 in management fee income that entire year.
Even today, although our fundraising scale has improved, to be honest, I feel we are still in the starting phase. Institutional investors are still quite cautious about cryptocurrencies, with most institutions either not allocating at all or allocating only a very small portion.
Bankless: Has your pitch for cryptocurrencies and blockchain changed from 2013, 2016, to now?
Dan Morehead:
My core viewpoint has remained consistent, possibly because these ideas have stood the test of time. When I explain the fixed supply characteristic of Bitcoin and how it will not be diluted by fiat inflation, I often hear the question, "Isn't that just like gold?" But my answer is: it is 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 brand new version — digital gold.
This is precisely why I have maintained my enthusiasm from 2013 to the present: I firmly believe that Bitcoin will gradually replace traditional gold, reform the cross-border remittance system, and revolutionize the payment systems of Visa and Mastercard. Of course, this process takes time and could take up to 20 years, rather than happening overnight.
I am so convinced because the development of blockchain technology is an unstoppable trend. Although the realization 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 for cross-border remittances, and you cannot continue to pay a 3% fee for credit card transactions.
I cannot 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 space.
Global adoption of cryptocurrencies
Bankless: Many people feel they "missed out" when Bitcoin doubled this year and think it's too late to buy now. How do you view the upside potential of Bitcoin and the entire crypto asset category? From a global adoption perspective, are we now at 20% or 50%?
Dan Morehead:
In any ordinary asset class, if an asset doubles in a year, you really shouldn't buy it, as that may indicate overvaluation. But Bitcoin is different. The Pantera Bitcoin Fund has had an 89% annual compound growth rate over the past 11 years, meaning it has doubled 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, even if you lose 85%, will not affect family stability. Simply put, do not bet your marriage on this asset class. As long as you can keep your investment size within this level, you can hold it long-term with peace of mind.
Bankless: How much more upside potential do you think Bitcoin has?
Dan Morehead:
Bitcoin has indeed developed to a considerable scale; we cannot expect to see a 1000-fold increase, as that would consume all energy on Earth. However, an increase of tenfold to a market cap of $15 trillion is entirely possible compared to the global total of $500 trillion in financial assets.
I wouldn't predict what will happen in 50 years, but within our current investment cycle, say over a 5-10 year time frame, a tenfold increase in Bitcoin from its current position is entirely reasonable and wouldn't be seen as crazy or overvalued.
Bankless: From an adoption perspective, what stage are we at now?
Dan Morehead:
I believe we are still in the early stages. Statistics show that approximately 300 million people globally own cryptocurrencies. While this number is difficult to quantify precisely, many holders may not have started using it in earnest yet.
Let me analyze from the perspective of technology adoption: using Bitcoin only requires a smartphone, and currently, 4 billion people globally own smartphones. Some innovative projects, like KaiOS that we are engaging with, are working to bring this functionality to feature phones. Assuming smartphone users grow from 4 billion to 5 billion over the next decade, 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 more popular. I think in about ten years, it is completely imaginable that 3 billion people will use 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 have only completed about 15% of this cryptocurrency blockchain revolution. Not only is the number of participants still relatively small, but existing users have not yet 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. Although the U.S. 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 over 70. This is essentially 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 patterns among voters under 40 compared to the 2020 presidential election. The term "young Republicans" hasn't been heard for many years.
Trump expressed strong support for cryptocurrencies this May; all the cabinet members he nominated are very supportive of cryptocurrencies, and he even wants to establish a cryptocurrency envoy. I believe when someone writes a doctoral thesis on this election in the future, they will find that cryptocurrencies were a key factor in changing the election results.
Bankless: Is this change also reflected at the congressional level?
Dan Morehead:
Yes, many anti-cryptocurrency senators and Congress members have lost their seats. According to what I've read:
House: 274 in favor, 122 against
Senate: 20 in favor, 12 against
I predict that in four years, those Congress members who oppose cryptocurrencies may not even remain in Congress, as this is simply not a wise stance. They will either change their views or possibly lose in the 2026 midterms or 2028 elections.
Seeing Democrats shift to an anti-cryptocurrency stance is a strange thing. I have been wondering if I missed some strategic consideration because it clearly seems like a lose-lose strategy.
The U.S. government's shift in attitude toward cryptocurrencies
Bankless: In 2025, we will see the first administrative departments and Congress supporting cryptocurrencies. After experiencing SEC crackdowns during the Biden administration, what impact do you think a pro-crypto White House will have? Particularly 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 U.S. Marshals in 2013-2014.
The U.S. government now owns 1% of the world's Bitcoin. If it stops selling, it will have a significant impact. Because the actual circulating supply 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 current 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 prices rise.
As the issuer of the world's reserve currency, the U.S. cannot hold foreign currency like other countries. The practice of storing gold at 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; this is not an aggressive idea.
Bankless: This issue seems to have become very partisan.
Dan Morehead:
Yes, this is strange. As Ro Khanna said, it’s like with mobile phones; why make it a partisan issue? In reality, the Democrats should support Bitcoin more, as it represents the dreams of progressives.
The global Bitcoin reserve race
Bankless: Suppose Trump retains the current 200,000 Bitcoins owned by the U.S. (about 1% of the global total) and announces it publicly. China also has around 200,000 Bitcoins that were confiscated; how do you think they will respond? Will other countries start secretly hoarding?
Dan Morehead:
A strategic Bitcoin arms race could last for 10 years. Both the U.S. and China may maintain a 1% global Bitcoin reserve.
It’s ironic: why would countries competing with the U.S. store their wealth in dollars and U.S. Treasury bonds? Under the U.S. sanctions regime, their transactions may be monitored.
For countries at odds with the West, storing some 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 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.
Institutional investors' adoption of cryptocurrencies
Bankless: In 2024, there has been 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, the "wave of institutional investors" that Mike Novogratz predicted has finally materialized. So what is the actual level of institutional adoption now? How far have we progressed?
Dan Morehead:
The industry has indeed experienced some significant setbacks:
The collapses of FTX, BlockFi, Celsius, and Terra Luna
The discount problem of GBTC
SEC lawsuit against companies like Coinbase and Ripple
These events indeed affect the enthusiasm for institutional participation. Imagine a public pension plan manager struggling to propose investing in Bitcoin in this environment to the state legislature.
But people may not realize how quickly the situation can change. If by 2025, we have a Congress, president, and regulatory agencies that support cryptocurrencies, everything could change dramatically. This is why you are now seeing prices soar and massive inflows into ETFs.
Speaking of ETFs, this is indeed a significant breakthrough. We launched the first U.S. cryptocurrency fund 11 years ago, initially as a Cayman hedge fund, because we believed it might take years to gain ETF approval. Now it seems the waiting time has far exceeded expectations.
Bankless: Can you elaborate on these capital inflow figures?
Dan Morehead:
Current capital inflow situation:
Bitcoin ETF: $35 billion net inflow
MicroStrategy and similar ETF products: $18 billion
A total of over $50 billion flowed into ETFs or similar ETF products
An interesting comparison:
During the same period, global net inflows into all gold ETFs were zero
Funds shifted from traditional gold to digital gold (Bitcoin)
Bankless: Although it's encouraging to see people like Larry Fink changing their stance, institutions like Vanguard still do not allow ETFs or crypto assets to be included in their ecosystems. So what is the actual level of institutional adoption now?
Dan Morehead:
Here’s an interesting point: many people say Bitcoin is a bubble, but the median held by institutions is zero; 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 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 largest asset management company in the world, BlackRock, publicly supporting it, having an outstanding blockchain team, and institutions like Fidelity that have been laying out blockchain since 2014, it’s all very encouraging.
Previously, many institutions would use 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 positions like Vanguard may struggle to sustain as the market evolves.
Bankless: Does it still sound like there are opportunities to position crypto assets before institutional investors?
Dan Morehead:
Exactly, this definitely applies. There is indeed still an opportunity to enter before institutional investors.
The cyclicality of cryptocurrencies
Bankless: Having experienced multiple cycles, Bitcoin is now at 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? The traditional view holds that this is related to Bitcoin halving, while others believe it relates to global liquidity. When fiat liquidity is abundant, cryptocurrencies will experience bull markets, then peak and decline. Will this four-year cycle pattern persist?
Dan Morehead:
Yes, I believe this cyclic 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. During my college years, a professor wrote the famous "A Random Walk Down Wall Street," which discusses the theory that markets are always efficient. Buffett once said a thought-provoking statement: "The difference between markets being always efficient and often efficient is worth $80 billion."
Regarding the halving cycle, my understanding has changed:
Initially, I was also skeptical like many others—if everyone knows halving is going to happen, then this event should already be fully reflected in the price.
But after experiencing the halvings in 2013 and 2016, I completely believe in the authenticity of this pattern.
Why is halving so important? It starts with miner behavior:
Miners will sell almost all the Bitcoin they acquire to pay operating costs
It's like the copper market – if half of the copper mines were announced to be closing one day, the copper price would inevitably rise
Bitcoin halving has this effect – every four years, the output is halved, and when demand stays constant while supply is halved, prices naturally rise
However, the cyclical characteristics are gradually evolving:
The amplitude of cyclical fluctuations is gradually decreasing. The first halving reduced output by 15% of the circulating supply at that time
As circulation increases, the impact of the next halving will drop to one-third of the original
By the last halving in 2136, the effect will be negligible
Our data analysis shows a clear pattern:
The halving effect begins to manifest 400 days before the actual date
Reaching a cycle high 480 days after halving
This pattern has consistently maintained astonishing accuracy
Two years ago, when Bitcoin was priced at $17,700, we predicted it would reach $28,000 at the halving and then hit $117,000 480 days later (next August), and our prediction for the low point was almost precise to the specific date.
During the last halving, we predicted the price every month on Twitter. We predicted it would reach $62,964 on August 15, 2020, and it indeed hit that number on that day.
Therefore, I still believe this cyclical pattern will persist, and I think we will experience a major bull market followed by a bear market. The only difference is that after experiencing three 85% declines in the past 12 years, the next correction may only be 50% or 60%, at least for Bitcoin, while smaller coins may still experience greater volatility.
2025 Bull Market Outlook
Bankless: If the four-year cycle theory holds, does this mean 2025 will be a bull market, followed by a downturn 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; doesn’t that seem too simple?
Dan Morehead:
I know it sounds a bit absurd, but we've been discussing this topic for 12 years. We have consistently predicted that volatility would gradually decrease, with previous halving cycles showing greater fluctuations, while this one will be relatively mild. Not just halving factors, but also the political and macroeconomic environment is creating favorable conditions for cryptocurrencies. So I'm 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 macroeconomy or the other way around?
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 rates. In December 2021, the federal funds rate was zero, and the 10-year Treasury yield was 1.3%. At that time, I predicted these two indicators would rise to 5% and remain there for several years. To this day, I still hold this judgment.
Why? Look at the current economic situation:
The economy is booming, and the crowded airports are the best proof of that
The unemployment rate is at a historical low
Wage inflation continues to rise
The stock market continues to hit historical highs
In such an economic environment, I believe those expecting the Federal Reserve to cut rates are being unrealistic.
The actual federal funds rate is only 80 basis points higher than core inflation, which does not constitute tightening. The historical average is 140 basis points higher, so it is currently only slightly tight.
More concerning is the fiscal situation:
During the most prosperous economic period, the U.S. still faced a $2 trillion deficit
Even with full employment and record highs in various indicators, achieving fiscal balance remains elusive
This suggests that once the economy turns, it may face more severe problems
The macroeconomic environment and cryptocurrencies
Bankless: The U.S. continues to run deficits, print money, and anticipates interest rate cuts; what do these macroeconomic signals mean? Do they imply that the prices of commodities 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 after the pandemic, fiscal constraints have completely disappeared. For example, repeatedly issuing cash subsidies directly to the public has directly led to inflation and rising prices.
The current fiscal situation is concerning:
The U.S. continues to run record deficits even in the best economic times
Interest expenses have exceeded military spending
The government finances through adjustable-rate methods, increasing future fiscal risks
Interest rates are expected to remain at 5% or higher
This means we will need to refinance all debts at increasingly higher interest rates, and the cost will be very high.
Although I do not focus much on fiscal and macroeconomic research, one thing I am certain of: I would rather hold Bitcoin than dollars.
Bankless: You mentioned commodities, which reminds me that gold is hitting new highs, Bitcoin is hitting new highs, the stock market is hitting new highs, and real estate is hitting new highs. How should we interpret this phenomenon?
Dan Morehead:
The key is to change the perspective:
These assets are not truly "rising"; rather, fiat currencies are depreciating
Attention should be paid to Bitcoin's relative prices against gold, stocks, real estate, etc.
The depreciation trend of the dollar can be clearly seen from the price comparisons of various assets against it
In the current fiscal situation, holding fiat currency makes little sense. Even former cryptocurrency skeptic Ray Dalio has started to suggest holding gold and Bitcoin to hedge against possible debt crises.
This shift in perspective is important because money is fundamentally a consensus technology. The changing attitude of 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.
The trend of RWA tokenization
Bankless: RWA tokenization seems primarily aimed at institutions. Will all assets eventually go on-chain? Are we experiencing an S-curve development from stablecoins to government bonds, and then to stocks and bonds?
Dan Morehead:
This is indeed the "killer application" that the blockchain space has long awaited. Although some early investments were premature, they are finally starting to show results. For example, stablecoins are allowing ordinary financial instruments to create new value 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 on-chain is far greater than it appears. Most of the 8 billion people globally live outside the U.S. and yearn for dollar-denominated assets and U.S. Treasury bonds, but traditional channels make it difficult to achieve this.
Even for U.S. citizens, the existing system has obvious problems. For instance, transferring from Treasury Direct accounts to brokers takes a year, and this inefficiency precisely illustrates our need for blockchain technology.
Bankless: Wait, really? I had no idea that this was happening.
Dan Morehead:
Yes, there's a stack of withdrawal requests sitting with some government official, so high that it takes a year to transfer your 90-day government bonds to Merrill Lynch. If anything perfectly proves our need for blockchain and RWA tokenization, it's this. You'd think it would be smarter to buy directly from the government, yet your funds are locked for a year.
Another good example is Figure Markets, which has processed $10 billion in mortgages on the blockchain. The traditional mortgage market takes 55 days from borrowing to final settlement, 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 aimed at accredited investors already operate sufficiently well 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 for the fusion of AI and cryptocurrencies
Bankless: AI and cryptocurrencies are intersecting in unique ways. What are your thoughts on the intersection of cryptocurrencies and AI? Are you following any AI-related projects?
Dan Morehead:
The fusion 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 the decentralized AI project 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 access paid data, and blockchain is well-suited to provide incentives to solve this problem effectively.
Regarding the use of money by AI agents, they clearly cannot open accounts in the traditional banking system. When interacting between machine agents, they must use some form of digital currency, programmable money (like Ethereum) seems the most natural choice. While some may be exploring solutions outside of blockchain, the solutions provided by blockchain are the most complete.
In the long run, it seems difficult for AI to operate independently of blockchain. Important intersections have already appeared between the two fields, and in the next 5 to 10 years, we are likely to see their further deep integration.
Looking for the next Bitcoin
Bankless: Pantera's initial Bitcoin fund achieved a return of 130,000%; 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 critical development stage, representing a highly promising career development direction for young people. Even if they ultimately choose to shift to traditional industries, the experience gained in the blockchain space will be invaluable career assets. This career choice has asymmetric return characteristics: significant upside potential with controllable downside risk.
The current monetary policy and regulatory environment have created many disadvantages for the younger generation. High barriers in the real estate market, inflationary pressures, and other factors 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, it is advisable to adopt the following investment strategies:
Diversify the portfolio to avoid over-concentration of funds in a single crypto asset
Emphasize risk management and adjust investment ratios according to personal financial conditions
Seize investment opportunities arising from generational cognitive differences
Adopt steady investment methods like dollar-cost averaging
It is important to note that investment strategies should be adjusted with changes in personal life cycles. In cases of marriage, mortgage, etc., the allocation of high-risk assets should be reduced appropriately to ensure that the investment portfolio matches personal risk tolerance.
