In-depth conversation with the founder of Pantera: From buying BTC at US$65 to now, the encryption revolution has only been 15% complete

Original text: Bankless

Organized 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 a price of $65 in 2013. So far, the fund's return has exceeded 100 times. In this episode of the Bankless podcast, founder Dan Morehead shared how he identifies assets with asymmetric return potential and his in-depth thoughts on the future of the cryptocurrency market. PANews compiled the text of this podcast.

Bitcoin Investing in 2013

Bankless: Let’s talk about that famous email from July 5, 2013. In your email, you suggested buying Bitcoin at $65 and planned to invest 30,000 BTC. Can you share with us your thoughts at that time?

Dan Morehead:

This starts from March 2013. Two friends of mine, Pete Briger (Co-CEO of Fortress) and Mike Novogratz (Founder of Galaxy Digital) approached me and wanted to discuss Bitcoin. (We both came from Goldman Sachs, who later founded Fortress Investment Group.) In fact, my brother had introduced Bitcoin to me before this, but I didn’t pay much attention.

A brief meeting with Pete and Mike unexpectedly turned into an in-depth four-hour discussion. The idea of ​​Bitcoin lit up my eyes. I later accepted Pete's invitation and worked in their office for six full years.

Bankless: You mentioned that this is an asymmetric trading opportunity. Can you explain it in detail?

Dan Morehead:

While doing macro trading at Tiger Management, I learned one thing: look for opportunities where the potential returns far outweigh the risks. While investing will always have risks, the key is to find those that have the potential to deliver huge returns.

For example, before investing in Bitcoin, we owned Tesla stock. Interestingly, in 2013, the prices of Tesla and Bitcoin were about the same. In the end we made a bold decision - to sell all our Tesla shares and bet all on Bitcoin.

Bankless: You mentioned that Bitcoin is like a "serial killer." What do you mean?

Dan Morehead:

In the field of technology, we often use "category killers" to describe disruptive innovations. Bitcoin goes one step further. It is a "serial killer" because it will not only subvert one field, but will reshape multiple industries. But the process is gradual.

For example, although blockchain technology has now shown advantages in some areas, it may still take ten years to truly challenge payment giants such as 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, have your views on Bitcoin changed?

Dan Morehead:

Even though Bitcoin has had incredible gains, I think it remains an asymmetric opportunity. We have experienced three major declines of more than 85%, but each time we reached new highs. In the traditional investment world, it is difficult to find such assets.

This is why since 2013, I have focused almost all of my energy on the crypto market. We are still in the early days of this financial revolution, and the opportunities ahead are huge.

Asymmetric investment opportunities

Bankless: From 2013 to 2015, you purchased 2% of the world’s Bitcoin supply. Many investors hope they can buy Bitcoin earlier and hope to identify this opportunity for asymmetric returns. How did you develop this belief? Some might say it 's just luck, what do you think?

Dan Morehead:

I agree with your use of the word "pattern" because this is indeed pattern recognition. I have been working on Wall Street for 36 years. Since 1987, I have experienced the savings and loan crisis and the financial crisis. I invested in commodities in the 1980s and emerging markets in the 1990s. These experiences give me an advantage over younger investors when investing in cryptocurrencies because I feel like I have seen similar situations before.

Let me give a few examples:

• I was involved in the GSCI (Goldman Sachs Commodity Index) when I was at Goldman Sachs, and commodities are now a recognized asset class
• I invested in emerging markets in the 1990s, and now emerging markets are a standard asset class
• In 2006-2007, Pantera launched the first Western fund to invest in the GCC countries (UAE and Saudi Arabia). Many people thought this was crazy at the time, but now the Middle East has become a completely normal investment destination.
• I invested in Russia during the Gorbachev period and participated in the privatization of Gazprom.

Bankless: So you 're always looking for these cutting-edge investment opportunities?

Dan Morehead:

Yes, we are always looking for those opportunities that are not mainstream or unconventional. We also established a fund in 2000 to invest in local farmland after Argentina's penultimate crisis.

Speaking of blockchain, what’s interesting is that it’s still a cutting-edge asset class. That's unusual - an asset with a market capitalization of $3 trillion is still considered a frontier asset, and I've never seen that happen.

In the investment memo I wrote in the following months, I listed various application scenarios of blockchain:

• Rivaling Gold (This Is Happening)
• Will compete with Visa and Mastercard in the future
• Competing with remittance companies that charge exorbitant fees to immigrants, Bitcoin makes cross-border transfers easy and cost-effective

When you add up all these use cases, you see that the ultimate value of cryptocurrency is much higher than it is today. That's why we are so bullish on this space.

My experience buying Bitcoin in 2013

Bankless: Can you describe to us what it was like to buy large amounts of Bitcoin in 2013? I remember when I first bought cryptocurrencies in 2014, I felt it was very unreliable. I had to open accounts on multiple exchanges and the websites all looked crude. For many investors, these are the reasons that put them off. How did you build confidence in this environment?

Dan Morehead:

The trading environment at that time was indeed primitive. For example, platforms like localbitcoins.com require face-to-face transactions, which is too risky and we have never considered this method. But ironically, this turned out to be one of the most mainstream trading methods at the time.

Initially we planned to rely on a large listed company to operate this fund. We did extensive system testing, but that company eventually dropped out. At that time, Bitcoin had fallen by 50%, and we had to quickly switch to operating independently under the Pantera brand.

Bankless: What difficulties did you encounter during the actual purchasing process?

Dan Morehead:

I remember when we started moving over Independence Day weekend, we tried a small platform first (which we later found out was Coinbase). It turns out they could only buy $300 worth of coins a day, while we were investing millions of dollars. Coinbase had only one employee at the time, and it took four days to respond to the email. At this rate, it will take nearly 20 years to complete our plan.

Finally we turned to Slovenia’s Bitstamp. When making the wire transfer at the bank, the branch manager asked in detail what Bitcoin was and the whole process took an hour to explain. To be honest, even I was worried about the safety of my funds at that time. Interestingly, we later became the majority shareholder of Bitstamp, and I also served as the chairman of Bitstamp for 6-8 years (PANews note: LinkedIn information shows that he served as the chairman of Bitstamp from 2014 to 2018).

Bankless: You mentioned that you visited many exchanges, including Mt. Gox?

Dan Morehead:

During that period, I thought it was important to examine the exchange in person. I made a special trip to Tokyo to visit the two leaders of Mt. Gox. Even though I only stayed for two days, their behavior made me very uneasy. Their explanations lack logic and give the impression that they are either incompetent or committing fraud. Ultimately we decided not to work with them, a decision that turned out to be the right one.

Institutional investor adoption

Bankless: You mentioned that you did 170 investor meetings and only raised $1 million in the end. At that time, Bitcoin was still regarded as a "mysterious Internet currency" and even a "drug trading tool." How did you promote it to investors? How did these meetings go?

Dan Morehead:

If you want to get excess returns, you can't follow the mainstream and invest in projects that are followed by 20 analysts at every Wall Street firm. This is why we specifically emphasized "making alternative investments more alternative" in our investor letter.

This concept of mine stems from my hedge fund experience starting in 1991. Back then, hedge funds were truly alternative investments, but now they have become a mainstream multi-trillion dollar industry, and nearly all funds have similar strategies. This experience has reinforced my belief that blockchain should be an important part of investment portfolios, as it retains its truly alternative character.

Interestingly, the 170 conferences you mentioned were actually in 2016, three years later than 2013. At that time, it was the "cold winter" period of cryptocurrency, and the price of Bitcoin plummeted by 90%. The market generally believed that "the important thing is the blockchain, not Bitcoin", and almost no one was optimistic about the public chain and Bitcoin as an asset.

Bankless: How many times has this market downturn occurred?

Dan Morehead:

Bitcoin has experienced three cycles of 85% declines. In the first cycle, we started investing at $65, the price rose to $1,000 and then crashed, remaining in the doldrums from 2014 to 2017.

During this difficult time, our team continues to work every day even though almost no one is paying attention to this area. The fundraising situation in 2016 is very telling - 170 meetings ultimately raised only $1 million, resulting in management fee income of only $170,000 for that entire year.

Even today, while our fundraising has increased, it honestly feels like we're still in the early stages. Institutional investors remain very cautious about cryptocurrencies, with most institutions either not allocating at all or allocating only a very small amount.

Bankless: Has your pitch for cryptocurrency and blockchain changed between 2013, 2016 and now?

Dan Morehead:

My core ideas have remained consistent, probably because they have stood the test of time. When I explain to people the fixed supply nature of Bitcoin and the fact that it will not be diluted by fiat inflation, I often hear the question "Isn't it just like gold?" But my answer is: it's more like investing in gold in 1000 BC. Although gold has indeed served mankind for 5,000 years, in the digital age, we need a new version - digital gold.

This is 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 revolutionize the payment system of Visa and Mastercard. Of course, this process will take time, possibly as long as 20 years, and will not happen overnight.

The reason why I am so convinced is that the development of blockchain technology is an unstoppable trend. Although implementation may take longer than expected, and some startups may run out of money in the process, some changes are inevitable: in 5 years, it is unlikely that migrant workers will still have to pay a month's salary for cross-border remittances. You can't continue to pay the 3% fee for credit card payments.

Whether this transformation will take 10 years or 1-2 years, I cannot accurately predict. But precisely because I am convinced that this change is bound to happen, I will continue to hold and invest in this area.

Global Adoption of Cryptocurrencies

Bankless: Many people feel "missed out" when they see Bitcoin doubling this year, thinking it's too late to buy now. What do you think about the upside for Bitcoin and the entire crypto asset class? Looking at global adoption rates, are we now at the 20% or 50% stage?

Dan Morehead:

In any general asset class, if something doubles in a year, you really shouldn't buy it because that could indicate overvaluation. But Bitcoin is different. The Pantera Bitcoin Fund has a compound annual growth rate of 89% over the past 11 years, which means it is doubling every year on average. A simple investment logic is: if it doubles again, you can make 100%.

However, there is a very important investment principle here: your investment amount should be controlled within a range that even if you lose 85%, it will not affect the stability of your family. Simply put, don't bet your marriage on this asset class. As long as you can control the investment size at this level, you can hold it for a long time with peace of mind.

Bankless: So how much room do you think Bitcoin has to rise?

Dan Morehead:

Bitcoin has indeed grown to a considerable scale, and we are unlikely to see another 1,000-fold increase because that would consume all the energy on the planet. However, it is entirely possible to increase another 10 times to a market capitalization of US$15 trillion, compared with the world’s total financial assets of US$500 trillion.

I'm not going to predict what it will be like 50 years from now, but within our current investment cycle, say a 5-10 year time frame, it would be completely reasonable for Bitcoin to rise another 10x from its current position without looking crazy or overvalued. Too high.

Bankless: Where are we now in terms of adoption?

Dan Morehead:

I think we're still in the early stages. According to statistics, approximately 300 million people around the world own cryptocurrencies. Although this number is difficult to accurately count, and many holders may not have started to actually use it.

Let me analyze it from the perspective of technology popularization: using Bitcoin only requires a smartphone, and currently 4 billion people around the world have smartphones. Some innovative projects, such as the KaiOS we are dealing with, are working hard to introduce this functionality to feature phones. Assuming smartphone users grow from 4 billion to 5 billion over the next 10 years, most of these users are likely to use digital currencies on their phones.

Think about it, half of people share photos on Facebook. If photo sharing is this popular, digital currency will be even more popular. I think in 10 years or so, 3 billion people using cryptocurrencies is completely conceivable. Once they start using it, more application scenarios will emerge and people will use it more in their lives.

Overall, I estimate that we are only about 15% of the way through this crypto-blockchain revolution. Not only are there still relatively few people participating, but existing users have yet to fully exploit its potential.

Bitcoin’s “escape velocity”

Bankless: In 2013, people were worried about the government banning Bitcoin. In 2024, the situation is completely different. Has Bitcoin reached "escape velocity"?

Dan Morehead:

Bitcoin has indeed reached escape velocity and will not go back again.

In 2013, media reports were mostly negative, focusing on the Silk Road (Silk Road Dark Web) incident and ignoring the positive impact. Although gold was once banned in the United States, 50 million Americans now 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, but 90% of the wealth created by the monetary policies of the Federal Reserve and Congress over the past three years has gone to people over 70. This is actually a huge transfer of wealth from the younger generation to the older generation.

And these young people love cryptocurrencies, and they vote. We observed a striking shift in voting behavior among voters under 40 compared to the 2020 presidential election. I haven't heard the term "Young Republicans" in years.

Trump expressed strong support for cryptocurrencies in May this year. All of his cabinet nominees are very supportive of cryptocurrencies, and he even wants to establish a cryptocurrency envoy. I think when someone writes a PhD thesis studying this election in the future, they will find that cryptocurrencies were a key factor in changing the outcome of the election.

Bankless: Is this change happening at the congressional level as well?

Dan Morehead:

Yes, many anti-crypto senators and congressmen lost their seats. According to what I've read:

• House of Representatives: 274 support, 122 oppose
• Senate: 20 support, 12 oppose

I predict that four years from now those members of Congress who are anti-cryptocurrency may not be in Congress because it’s simply not a sensible position. They will either change their views or risk losing in the 2026 midterm elections or the 2028 general election.

It’s strange to see the Democratic Party shift to an anti-crypto stance. I've been thinking that maybe I'm missing some strategic consideration, since this clearly seems like a lose-lose strategy.

The U.S. government’s changing attitude toward cryptocurrencies

Bankless: 2025 will be the first year for a pro-cryptocurrency administration and Congress. After experiencing SEC suppression during the Biden era, what impact do you think a pro-crypto White House will have? Especially regarding building a strategic Bitcoin reserve?

Dan Morehead:

The executive branch can directly decide to stop the sale of seized Bitcoins, which is within its purview. We participated in the Marshals Service’s first Bitcoin auction in 2013-2014.

The U.S. government now owns 1% of the world’s Bitcoins. If the sale is stopped, it will have a significant impact. Because the actual circulation of Bitcoin is not large, many holders never sell.

Bankless: Senator Lummis mentioned accumulating 1 million Bitcoin reserves. Do you think it is possible to at least retain the existing 200,000 Bitcoins and establish a custodial structure?

Dan Morehead:

This is very possible. Stopping government transfers and sales of Bitcoin would 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 United States cannot hold other countries' currencies like other countries. Storing gold at Fort Knox is an outdated practice. The United States should increase its holdings of digital gold and may even consider selling traditional gold.

Singapore has been holding cryptocurrencies for 5-7 years and this is not a radical idea.

Bankless: This issue seems to be getting very partisan.

Dan Morehead:

Yes, it's weird. Like Ro Khanna said, it's like mobile phones, why make it a partisan issue? In fact, Democrats should support Bitcoin because it represents the dream of progressives.

Global Bitcoin Reserve Race

Bankless: Suppose Trump keeps the 200,000 existing Bitcoins in the United States (about 1% of the world) and announces it publicly. China also has about 200,000 Bitcoins seized. How do you think they will respond? Will other countries start secretly hoarding?

Dan Morehead:

A strategic Bitcoin arms race could last 10 years. The United States and China are both likely to maintain 1% of global Bitcoin reserves.

This is ironic: Why should countries competing with the United States store their wealth in dollars and U.S. Treasury bonds? Under the US sanctions system, their transactions may be monitored.

Storing part of your wealth in Bitcoin is an obvious choice for countries with antagonistic relations with the West. Neutral countries would do the same -just like with gold, because Bitcoin offers an alternative that is not dependent on the dollar system.

Bankless: The stablecoin bill has bipartisan support, which can help maintain the U.S. dollar’s ​​status as the world’s reserve currency. Will these bills pass?

Dan Morehead:

As Bismarck said: "There are two things you'd better never see how they are made - laws and sausages." I don't pay much attention to Congress because it is a difficult machine to understand and influence.

Cryptocurrency Adoption by Institutional Investors

Bankless: 2024 saw major breakthroughs in institutional adoption, such as Larry Fink admitting he was wrong about Bitcoin in 2021. ETF products have been phenomenally successful. Compare that to 2022, when the "wave of institutional investors" predicted by Mike Novogratz finally came true. So what is the level of institutional adoption now? Where have we progressed?

Dan Morehead:

The industry did experience some major setbacks:

• The collapse of FTX, BlockFi, Celsius, and Terra Luna
• GBTC discount issue
• SEC lawsuits against companies including Coinbase, Ripple

These events do impact institutional incentives to participate. Consider an administrator of a public pension plan. It would be difficult to propose investing in Bitcoin to a state legislature in this environment.

But people may not realize how quickly things can turn. If by 2025 we have a pro-crypto Congress, a president, and regulators that are at least neutral, everything could change dramatically. That's why you're seeing prices surge now and ETFs are seeing massive inflows.

Speaking of ETFs, this is indeed an important breakthrough. We launched the first U.S. crypto fund 11 years ago as a Cayman hedge fund because we thought it might take several years to get ETF approval. Now it looks like the wait will be longer than expected.

Bankless: Can you tell us specifically about the data on these capital inflows?

Dan Morehead:

Current capital inflows:

• Bitcoin ETF: $35 billion in net inflows
• MicroStrategy and other ETF products: $18 billion
• A total of more than $50 billion has flowed into ETF or ETF-like products

An interesting comparison:

• Net inflows into all global gold ETFs during the same period were zero
• Funds shift from traditional gold to digital gold (Bitcoin)

Bankless: While we’ve seen people like Larry Fink shift gears, institutions like Vanguard still don’t allow ETFs or crypto assets in their ecosystem. So what is the actual level of adoption among institutions now?

Dan Morehead:

Here is an interesting point: Many people say that Bitcoin is a bubble, but the median number of institutional holdings is zero. How can it be a bubble? Most institutional investors, including insurance companies, pension funds, endowment funds, etc., have basically zero direct investment in blockchain. They may have indirectly invested in some blockchain companies through some integrated venture capital funds, but there is almost no direct investment.

That's why I'm so bullish on the future. We're actually just getting started. When you see institutions like BlackRock, the world's largest asset management company, publicly supporting it, having an excellent blockchain team, and institutions like Fidelity that have been laying out blockchain since 2014, these are very helpful.

In the past, many institutions would use compliance reasons as an excuse to say they could not invest in cryptocurrencies, but now that BlackRock, Fidelity and other institutions are selling highly regulated and high-quality products, this excuse is no longer tenable. Even Vanguard's position may not be sustainable as the market develops.

Bankless: It sounds like there is still an opportunity to deploy crypto assets before institutional investors?

Dan Morehead:

Yes, this totally applies. There is indeed an opportunity to get in before institutional investors.

Cryptocurrency Cyclicity

Bankless: You've been through multiple cycles, and now that Bitcoin is hitting a new high of $100,000, we're clearly in a bull market. Do you think the cryptocurrency market will continue to follow a four-year cycle? The traditional view is that this is related to the Bitcoin halving, and some believe that it is related to global liquidity. When fiat currency liquidity is abundant, cryptocurrencies will have a bull market, then peak and fall. Will this four-year cycle pattern continue?

Dan Morehead:

Yes, I think this cyclical pattern will continue.

Bankless: Is that your base prediction? Don’t you believe in the super cycle theory or the possibility of breaking this pattern?

Dan Morehead:

Let me explain with an interesting analogy. When I was in college, a professor wrote the famous "A Walk Down Wall Street", explaining the theory that markets are always efficient. Buffett once said a thought-provoking saying: "The difference between the market always being efficient and being efficient often is worth $80 billion."

Regarding the halving cycle, my understanding has undergone a transformation:

• Initially I was as skeptical as many others - if everyone knew the halving was going to happen, then the event would have been fully priced in
• But after experiencing halvings in 2013 and 2016, I completely believe in the authenticity of this law.

Why is the halving so important? This starts with the behavior of miners:

• Miners sell nearly all the Bitcoin they earn to cover operating costs
• This is like the copper mining market - if it is announced that half of the copper mines will be closed on a certain day, the price of copper will inevitably rise
• This is the effect of Bitcoin halving - every four years, production is cut in half, and when demand remains the same and supply is cut in half, prices will naturally rise.

However, the cyclical characteristics are gradually evolving:

• The amplitude of cyclical fluctuations is gradually weakening. During the first halving, the reduced production accounted for 15% of the current circulation.
• As circulation increases, the impact of the next halving drops to one-third of its original size
• By the time of the last halving in 2136, the impact will be minimal

Analysis of our data shows a clear pattern:

• The halving effect starts to appear 400 days before the actual date
• Cycle high reached 480 days after halving
• This model has maintained amazing accuracy

Two years ago when Bitcoin was at $17,700, we predicted it would reach $28,000 at the time of the halving, and then reach $117,000 480 days after the halving (next August), with the lowest point predicted almost accurately to the specific date.

At the time of the last halving, we tweeted our price predictions for each month of 2020. We predicted it would hit $62,964 on August 15, 2020, and it hit exactly that number that day.

Therefore, I still believe that this cycle will continue, and I think we will have a big bull market and then a bear market. But the only difference is that after three 85% declines in the past 12 years, the next correction may only be 50% or 60%, at least for Bitcoin, and smaller coins may still see more volatility .

Bull Market Outlook 2025

Bankless: If we follow the four-year cycle, does this mean there will be a bull market in 2025 and then a decline in 2026?

Dan Morehead:

Yes, that's what I expected. April 19 this year is the halving time, and August 2025 should be the peak of this cycle.

Bankless: It feels like everything is going in this direction, it seems too easy?

Dan Morehead:

I know it sounds ridiculous, but we've been talking about this for 12 years. We have always predicted that the amplitude of fluctuations will gradually decrease. The previous halving cycles were more volatile, and this time it will be relatively mild. Not only the halving factor, but also the political and macroeconomic environment are 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 affect the macroeconomy 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 Fed cutting interest rates. In December 2021, the federal funds rate was zero and the 10-year Treasury yield was 1.3%. At the time, I predicted that both indicators would rise to 5% and remain there for several years. To this day, I still stand by that judgment.

Why? Take a look at the current state of the economy:

• The economy is booming, as evidenced by overcrowded airports
• Unemployment is at an all-time low
• Wage inflation continues to rise
• Stocks continue to hit record highs

In this economic environment, I think those expecting the Fed to cut interest rates are unreasonable.

The real federal funds rate is only 80 basis points above core inflation, which is hardly a tightening. The historical average is 140 basis points higher, so it's only slightly tight now.

Even more worrying is the financial situation:

• At its best, the U.S. still ran a $2 trillion deficit
• Even with full employment and record highs in various indicators, fiscal balance cannot be achieved.
• This indicates that once the economy turns around in the future, it may face more serious problems.

Macroeconomic environment and cryptocurrencies

Bankless: What do these macroeconomic signals mean as the U.S. continues to have deficits, money printing, and expectations of interest rate cuts? Does it indicate that commodity and digital asset prices will rise?

Dan Morehead:

The United States has developed a dependence on printing money. This trend existed before the COVID-19 pandemic, and fiscal constraints have completely disappeared after the pandemic. For example, cash subsidies have been directly distributed to the people many times, which directly led to inflation and price increases.

The current financial situation is worrying:

• The U.S. is still running record deficits during the best of economic times
• Interest payments have exceeded military spending
• The government uses adjustable-rate financing, which increases future fiscal risks
• Interest rates are expected to remain at 5% or higher

That means we have to refinance all of our debt at higher and higher interest rates, which is going to be very expensive.

While I'm not too focused on studying finance and macroeconomics, there's one thing I'm sure of: I'd rather hold Bitcoin than U.S. dollars.

Bankless: You mentioned commodities, which reminds me of the current record highs of gold, bitcoin, stock market, and real estate. How should we interpret this phenomenon?

Dan Morehead:

The key is to shift perspective:

• These assets are not really "rising", but the legal currency is depreciating.
• You should pay attention to the relative price of Bitcoin to gold, stocks, real estate, etc.
• The depreciation trend of the U.S. dollar can be clearly seen from the price comparisons of various assets against the U.S. dollar.

In the current fiscal situation, holding fiat currencies makes no sense. Even former cryptocurrency skeptic Ray Dalio has started recommending holding gold and Bitcoin to deal with a possible debt crisis.

This shift in perspective is important because currency is essentially a consensus technology. The changing attitude of top investors shows that the market’s recognition of digital assets is increasing, and the consensus brought by deep liquidity is crucial to the development of an emerging currency.

RWA tokenization trend

Bankless: RWA tokenization seems to be primarily aimed at institutions. Will all assets eventually be put on the chain? Are we experiencing an S-shaped development curve from stablecoins to treasury bonds to stocks and bonds?

Dan Morehead:

This is indeed the long-awaited "killer application" in the blockchain field. While some of the early investments were premature, they are finally starting to show results. Take stablecoins as an example, which allow ordinary financial instruments to exert new value on the blockchain. Projects like Ondo are opening up the U.S. financial markets to more people.

The significance of moving national debt to the blockchain is much greater than it seems on the surface. Most of the world's 8 billion people live outside the United States. They are eager to obtain U.S. dollar assets and U.S. Treasury bonds, but this is difficult to achieve through traditional channels.

Even for U.S. citizens, there are clear problems with the current system. For example, Treasury Direct accounts need to wait for up to a year to transfer funds to brokers. This inefficiency just shows that we need blockchain technology.

Bankless: Wait, really? I didn 't even know there was such a thing.

Dan Morehead:

Yes, some government worker has a stack of withdrawal requests so high that it will take a year to transfer your 90-day Treasury note from the government to Merrill Lynch. If there’s one perfect example of why we need blockchain and RWA tokenization, this is it. You think it would be wiser to buy directly from the government, but instead your funds are locked up for a year.

Another great example is Figure Markets, who have processed $10 billion in mortgages on the blockchain. In the traditional mortgage loan market, it takes 55 days from borrowing to final settlement. There are many intermediate links, and each link will incur costs. Blockchain technology can significantly improve the efficiency of this process.

However, not all assets are suitable for tokenization. Products for qualified investors such as hedge funds and private equity funds have already completed their operations and do not urgently need to be put on the blockchain.

But for assets like Treasury bonds, blockchain does provide an ideal solution. This not only allows more people to participate in investment, but is also an opportunity for the U.S. government to expand financing channels. Through blockchain, they can more easily promote Treasuries to smartphone users around the world, which benefits all parties.

The Prospects of the Fusion of AI and Cryptocurrency

Bankless: AI and cryptocurrencies are intersecting in unique ways. What are your thoughts on the intersection of cryptocurrency and AI? Are you following AI-related projects?

Dan Morehead :

The integration of blockchain and AI is inevitable. Fundamentally, AI has a huge impact on society. Decentralized and open AI is more beneficial to everyone than private control. We have already invested in some projects in this direction, such as decentralized AI projects such as Sahara.

A noteworthy phenomenon is that existing AI models have digested almost all free Internet content. The next generation of AI models needs to obtain paid data, and blockchain is good at providing incentive mechanisms and can solve this problem well.

Regarding the use of currency by AI agents, they obviously cannot open accounts using the traditional banking system. When machine agents interact with each other, they must use some form of digital currency, and programmable currencies such as Ethereum seem to be the most natural choice. While there may be people exploring solutions outside of blockchain, blockchain provides the most complete solution.

In the long run, it seems difficult for AI to operate independently of the blockchain. There is already an important intersection between these two fields, and we are likely to see further in-depth integration of them in the next 5 to 10 years.

Looking for the next Bitcoin

Bankless: Pantera 's original Bitcoin fund achieved a 130,000% return. Is this a unique "once in a generation" return? Do you think there will be similar opportunities for investors in the coming decades?

Dan Morehead:

Blockchain technology is at a critical period of development and is a highly potential career development direction for young people. Even if you ultimately choose to switch to a traditional industry, the experience accumulated in the blockchain field will be a valuable career asset. This career choice has the characteristics of asymmetric returns: large upside potential and controllable downside risks.

The current monetary policy and regulatory environment has a number of detrimental effects on younger generations. The high barriers to entry in the real estate market, inflationary pressure and other factors have made traditional wealth accumulation channels increasingly difficult. In contrast, the blockchain field provides a relatively level playing field for the younger generation.

For young investors, the following investment strategies are recommended:

• Diversify your investment portfolio to avoid excessive concentration of funds in a single crypto asset
• Pay attention to risk management and adjust investment proportions based on personal financial status
• Seize the investment opportunities brought about by cognitive differences between generations
• Adopt stable investment methods such as fixed investment

It should be noted that investment strategies should be adjusted as the individual's life cycle changes. If you are married, have a mortgage, etc., you should appropriately reduce the allocation ratio of high-risk assets to ensure that the investment portfolio matches your personal risk tolerance.