All right. Hi everyone. I'm joined on stage by Dan Morehead, founder of Pantera Capital. Thanks for making it, Dan. So Dan is one of the most respected figures in macro investing. He's an OG in crypto before, honestly, before it was even called crypto. It was just called Bitcoin at the time. So Dan started Pantera Capital in 2003 as a global macro hedge fund. He bought Bitcoin at $65 in 2013. Let that sink in for a little bit. And he built Pantera into one of the most respected institutional crypto funds in the world. You guys manage over four billion in capital today. You've returned multiple billions. So, investors, the Pantera Bitcoin fund alone has returned over 132,000% since inception. Dan, these are some big numbers. And Pantera is one of Alchemy's earliest investors since 2019. So, thank you for believing in us. Thank you for joining us today.
Oh, thanks for having me. It's been a blast working with you for eight years.
Yeah. So, I'd love to hear about and I think the audience would love to hear about the early days when you guys bought Bitcoin. It was not like today. I'm sure that wasn't the most popular thing. It wasn't something everyone was doing. Tell us about what that was like back in the day.
Yeah. So, I got introduced to Bitcoin in 2011 and I'm a bit of a libertarian sense and so I was like this would be great, but I didn't do anything about it. And then two years later, Pete Briger and Mike Novogratz, who I used to go to college with and worked with at the beginning of my career, asked me to come in for a coffee and talk about Bitcoin. And I went in and the coffee lasted for like five hours. I was like, 'Oh man, this is the biggest trade of all time.' And they offered me an office in their building and I stayed for like 10 years. Like they finally just kicked me out like two years ago. Because it's just that big a trade. And the reason I'm still so excited is you all are believers. You're here, but like the majority of institutions still don't get it. They still don't have any exposure. So I feel like we're in, you know, still earliest days and back then 98% of people thought I was crazy. Now only 60% think I'm crazy, right? But that's really the opportunity is, you know, not enough people understood it back then. And the entire community you could fit in a small hotel, you know, like Bitcoin conferences were like 200 people or whatever. It was really, really tiny.
That's insane. That's insane. And so like how did you tell us about like buying the very first Bitcoin? Were there even places you could buy it? Like what was that like?
Yeah. So all the exchanges you know now didn't really exist. And a lot of it was just calling up people and doing trades on a phone. And Bitcoin, you know, it's been super volatile. It still is. And in just the first like three, four months I was studying it and preparing to set up what's now Pantera's Bitcoin fund and Pantera's venture funds and all that. Bitcoin crashed 50% in a couple months and I was looking at it for a while. We set up a bunch of accounts to be ready. And at the time, Mt. Gox was 85% of the market share. And I went over to Tokyo and met with the guy that had bought Mt. Gox and his chief of staff. And I'm like, there's something super wrong here. I'm not sending any money to these guys. And so 85% was trading in an exchange that seemed to be something bad going on. And so I went to Slovenia and met the guys at Bitstamp. And in the end it hit $65 and I was like, 'Okay, this is it. Got to go.' And so, we launched the fund and tried to buy 30,000 bitcoins on this little startup nobody had ever heard of. It's now called Coinbase, but at the time they had one employee. And so I sent him a wire and as soon as it hit the price, we're like, 'All right, let's start trading.' And a popup said that my limit was 50 bucks and not like in Wall Street where bucks sometimes be millions. It was like one US dollar bill and I'm like, 'Oh no.' You know, and so I sent this email in all caps. I sent you $2 million. I'm trying to buy Bitcoin and their one employee, a guy named Olaf, wrote back and said, 'Okay, your limit is $300.' And I'd still be trading if that were the point. And the perspective is, you know, now it's like 50 billion a day in Bitcoin. And back then it was so hard to do anything. So difficult. There was no custodians. I had 2% of the world's bitcoins in my head, which is not probably the smart thing to do. All those things, all the stuff we all take for granted now, like custodians and everything else just didn't exist. So, it was super primitive.
Yeah. Yeah. Wow. That's crazy to imagine because we've come so far since then. But I think a lot of what's gotten us that far is capital coming in and interest and then that funds development, it funds users. It drives attention back to the protocols and the platforms that we're all building. So I feel like so much of those early days is really because of people like you pushing the space forward. So like I know you have this macro thesis right and crypto and bitcoin fit into that today. Your guys' data you shared with me it suggests that AI is actually roughly overbought like 33% overbought crypto is probably oversold by about the same amount. These are two assets you guys see as opposite sides of the same question. So when you think about crypto as a macro trade, how does AI fit into that framing and how you think about these two assets and these two industries and how they're priced against each other right now?
Yeah, so it is important. AI and blockchain have been connected since I started in this space in 2013. A bunch of really strong early blockchain people are also super big on AI and they're converging now. We've done half a dozen investments in projects that are the intersection of AI and crypto. So, they're definitely really connected. They share one thing in common is they both are going to change the world. And so, anything that's that important is susceptible to hype, right? And so things get overhyped and then fear takes over and they crash. And I did go on TV a month or so ago and say that I think because I talked to a lot of institutional investors and they just look at these AI rounds and they're like, you know, I don't know if I could pull the trigger on those. The valuations are so high. And it's just my intuition that although AI is very important, it's going to go up big time over the long haul, seems to be pretty fully priced right now and we have an index of 10 of the top AI companies both private and public and that is trading at 33% over its log trend of the last four years and then we've long graphed Bitcoin versus its log trend and it got to 50%, it's 43% cheap to its trend and that's the biggest divergence we've seen in history of AI being very fully valued, maybe overvalued, and then crypto, I think, is incredibly cheap relative to its trend. So, as an investor, you're always trying to time things, and it seems like crypto is a good investment today, especially relative to AI.
Yeah. Yeah. And that's so interesting. Like, in that lens, it feels like there's been a lot of tailwinds in crypto recently. There's the administration, there's things like the GENIUS regulation, regulatory clarity coming out more and more. A lot of the use cases that we talked about today on some of these panels. Where do you think we are in the cycle? Because there's all these use cases, but prices are still down. You know, they fluctuate like you said, there's hype and then there's whatever the opposite of hype is. Like how do you think about where we are today?
Yeah. So, the four-year cycle is real. And when I started trading professionally in 2013, you know, people mentioned it and I was like, oh, I went to school when the efficient markets theory was like doctrine and everything was always, if you knew it was going to happen, it had to be priced in. It's not. The cycle is incredibly strong. Every four years they cut the number of bitcoin that are distributed. And so, if you cut the supply of something and the demand's the same, it goes up. It really does it every time. And we've been doing this, this is our fourth four-year cycle, and we make predictions at the beginning of the cycle. And about three years ago when Bitcoin was in like 20,000 or something like that, we said that it would peak at $175,000 on August 11th, 2025, and it did that day, which is super freaky. And we were on a call with a bunch of our investors, and one of them said, 'Hey, you know, that's just an amazing call. Congrats and everything, but doesn't that mean it's going to go down tomorrow?' And I'm like, no, no, this time's different. You know, the election, the regulatory thing, everything's different this time. Unfortunately, it did go down about a week or two later. And in the last three cycles, the up cycle has been I think it's 1,080 days with a standard deviation of only 20 days. And the down cycle is 380 days with a standard deviation of nine days. So like each cycle is so close. And the future doesn't have to be a predictability of the past, but like it's happened four times. So if that's all true, we're probably in a kind of bear market until January of next year. And that might be true. And the thing that we had thought is oh you know the election is such a big deal the regulatory thing in the US is so important that that might overwhelm it and again I guess the cycles really do impact. And so I think we're kind of in the middle of the unfortunate crypto winter but again mega bullish long term and anyone that's held Bitcoin for four years has made money which is nothing I've ever seen in any other asset class. So, you know, if you can size your trade and hold it for a venture style period, you're probably going to do really well.
Mhm. Mhm. And so, zooming out past crypto to more of a macro view, there's a lot going on in the world today, right? We're in like the most fragmented, one of the most fragmented macro environments of all time. There's geopolitical volatility. Oil prices are up. And then now for the first time we have like 24/7 markets where people can bet on outcomes and predict what they think the future holds. What does crypto mean in that world? Like how does it become the inevitable trade? What does the debasement mean there that we're seeing in different currencies like in that picture? How do you think about crypto as a whole?
Yeah. So crypto does so many different things but one of the things it's good at is storing wealth and protecting you from debasement of currency. And if you do zoom out, for a long time wealth storage and currency was gold, right? It was finite. There's just the same amount of it on this planet like you can't make any more of it. And then governments realized that they could issue pieces of paper that were backed by physical gold. So they did that for a long time and then they realized wow it's just more fun to print even more pieces of paper than we actually have gold to back it up. And so the era of paper money came in and two-thirds of the world's surface is covered by trees, right? So you have no constraint on the amount of paper money people can print and it's ruined lots of countries. The US has had 8% inflation just like a few years ago, right? Like it hasn't ruined the United States, but it's been very tough on people's savings. And so I think the paper money era is really kind of coming to an end.
And it's relatively new too, right? Like I think people who, you know, our age born recently, all we've known is paper money but it's actually like a relatively new thing right if you look at history.
Yeah. So for thousands of years it was gold and then we had a period where it was pieces of paper backed by gold. And then in the last century they started printing more pieces of paper than there are pieces of gold. A great example would be the oldest currency on earth is the British pound sterling and as the name implies it used to be exchangeable for a pound of sterling silver. They have printed so many pieces of paper pound sterling that it takes 340 pieces of paper pound sterling to buy a pound of sterling silver. Right? And so that's the deal and that's why Bitcoin and crypto have become so popular. And I was actually just talking to a big group of Latin American investors and I was saying that they're so lucky because Americans often don't even think about currency, right? Like 85% of Americans don't have a passport so they don't even think about foreign currencies. Latin Americans totally get it that their countries are always devaluing their currency and it's driving it down. And even in this last cycle, the policy response to the pandemic was just crazy. The Fed bought $9 trillion worth of paper bonds, drove rates so low that it basically dared everybody in America not to buy a house. So they all did buy a house and houses went up 45%. So massive inflation in everything that's solid like gold or stocks or bitcoin crypto and if you really look at it it's actually all those things aren't moving it's a massive devaluation of paper money or debasement of paper money so people are getting that. And I would say on the geopolitical side this is a little bit further afield but I think one of the things we've been talking about for a long time is Bitcoin allows for the separation of money and state. Right. So way back in the oldest days, gold was completely independent of any state. And then like you said, we've all kind of gotten used to, oh well, the US government issues currency and other governments issue currency, but we don't need to have it that way, right? We can separate the function of money from the function of state. And that's what Bitcoin is and other cryptocurrencies. So I think that trend is really happening especially young people grow up with everything on their mobile phone right why not do mobile money.
Yeah. How do governments balance that tension because a big part of how governments maintain their power is like one currency and then two the military. Like if Bitcoin and crypto starts to be more of an independent currency does that complement the system? Is that like a potential replacement for the system? So is that a threat? Like how do you think that evolves?
Yeah. So, it's a great question. It was everyone had in the front of their minds in the earliest days of Bitcoin. It is a threat and especially the United States, you know, issues these $100 bills that just trade in the world at zero coupon, you know, like it's an amazing business to print $100 bills and sell them to foreigners. So yeah it is a threat and in 2013-14 like I mean it was pretty real danger that the US could potentially just outlaw Bitcoin right and it was small enough back then could have done it. And so thankfully I think Bitcoin's reached escape velocity and can't anymore. But there still are a couple countries like China's always trying to kind of keep it in a box, you know. But it's definitely both to governments. Definitely a threat to the printing of money and all that stuff, but ultimately I think crypto should help with tax collection and all kinds of things that are good for governments. And even, the US is one of the largest holders of Bitcoin, right? The US government owns 1% of the world's bitcoins, right? So, it's even great for law enforcement. And obviously governments are very pro law enforcement. So, Bitcoin's good and they own it.
Yeah. And then something that's really interesting is stable coins, right? Because Bitcoin is this independent currency and can be used a lot of different ways. But then stable coins arguably are extending maybe the predominance of the US dollar. And it extends the ability of people around the world to buy the dollar. So like I'm curious, there's over 300 billion in tokenized assets. We had some folks on a panel earlier talking about that. Every major bank, custodian, asset manager, like we've all heard a lot about their tokenization strategies. What are you seeing in the stable coin world? Like where what's the demand for stable coins like relative to where you guys expected it?
No, it's a great question.
Satoshi invented something really amazing that you can transmit value to anybody on earth with a smartphone pretty much free, pretty much real time. All those things are amazing, but it's pretty volatile, right? And so for a, you know, we're speculators and we think more people are going to use Bitcoin and crypto. So we like to be long it because we like volatility, but like you know, if you're a migrant, you're just trying to get money back to your mom. Like volatility is not a good thing. And so stable coins really been around about 10 years more now. Actually, Tether was, you know, 2014, maybe 15. So they've been around for a long time and it is a great idea, right? You're taking all the beauty of what Satoshi built, but you're just taking out the volatility. And so, stable coins are incredibly useful. And they are growing very quickly now. All stable coins are about 400 billion now in issuance. Collectively, they'd be the 13th largest holder of treasuries on Earth, right? Like they're getting pretty big. The only thing I would say though is there's 17 trillion of bank deposits in America and lots more in the rest of the world. So, stable coins could easily grow 20x from here and still not be too big yet or whatever. And so, stable coins are a massively important thing. And so, your point about the US, 99.6% they're backed by US dollars, right? And I would say that the new administration in the US got that this is so good for America, right? Stable coins are pumping our deficit out to anybody on earth with a smartphone, right? That if you're trying to run a $2 trillion deficit in the United States, a great thing is to be pro stable coin. And so, I think it is really good that America is doing stable coin legislation and we're encouraging it because it's helping make the US dollar more important than it would be otherwise. It's mitigating the impact of other currencies. And there are four billion people with a smartphone and most only a billion of them have access to kind of a normal bank like you and I would think. The other three billion stable coins is great, right? And so it's a huge boon to the global population and then again it's nice for the US because we're trying to pump a huge amount of debt out to people and this is pumping debt out to them at lower rates than the US could otherwise access.
Yeah. Do you think crypto and the crypto industry is it driven forward do you think by countries like the US with pretty mature financial systems or is it more this global community you're talking about which maybe doesn't have access to the same kind of financial infrastructure?
Yeah, it's a great question and honestly that's what I love about blockchain. It's global. There's only one or two countries that kind of mess with it, but the other 200 countries allow it to kind of do whatever it needs to do. And hundreds of millions of people already use crypto. And again, like 2.5 billion people share photos on Facebook, right? Like Bitcoin's way more important than photo sharing. So in hot take literally like less than five years, a billion people will be using it and I think a couple billion in the not terribly distant future. And so it is going to have this huge impact on the world. And again your question developed countries versus developing countries it's great for both right in the developing world it's just so obvious right if you're a citizen of a country that's always devaluing that's always your bank's always going bust your government is sometimes just confiscating your money or whatever man Bitcoin or crypto is great because you can keep it on your smartphone by yourself. Honestly another thing female financial inclusion is really important. There are a bunch of countries, a billion women live in countries that prohibit them from having a bank account, right? You can put Bitcoin in your smartphone, right? So, there's a huge amount of use of it in the developing world. And you're seeing that take off, but also in the developed world, even in the US was supposed to be so sophisticated, if JP Morgan wants to send $100 million to Goldman Sachs, it takes three hours, right? You have to sit there and wait while Fed wire grinds its way and with your smartphone you can send it in two seconds. So even in very sophisticated countries like the United States, Bitcoin and other cryptos are just better than the existing ones. And my one of my favorites is Swift, you know, the society for worldwide international telephonic communication is so antiquated. It's an anachronism. Doing that on blockchain, sending wires, sending money across border on blockchain is just so much better.
