In-depth conversation with Pantera founder: From buying BTC at $65 to now, the crypto revolution has only completed 15%

Original: 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 firms 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 his deep thoughts on the future of the cryptocurrency market. PANews has compiled a written version of this podcast.

Bitcoin Investment in 2013

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

Dan Morehead:

It all started in March 2013. My two friends, Pete Briger (co-CEO of Fortress) and Mike Novogratz (founder of Galaxy Digital), reached out to discuss Bitcoin. (We all came from Goldman Sachs, and they later founded Fortress Investment Group.) Actually, my brother had introduced Bitcoin to me before, but I didn't pay much attention to it.

A brief meeting with Pete and Mike unexpectedly turned into a four-hour deep discussion. The concept of Bitcoin opened my eyes. Later, I accepted Pete's invitation and worked in their office for six years.

Bankless: You mentioned this is an asymmetric trading opportunity; can you explain that in detail?

Dan Morehead:

During my time at Tiger Management doing macro trading, I learned one thing: look for opportunities where potential returns far exceed risks. While investing always carries risks, the key is to find those that could yield massive returns.

For example, before investing in Bitcoin, we held Tesla stock. Interestingly, in 2013, Tesla and Bitcoin were priced similarly. Ultimately, we made a bold decision - to sell all our Tesla stock and fully bet on Bitcoin.

Bankless: You mentioned Bitcoin is like a "serial killer"; what does that mean?

Dan Morehead:

In the tech field, we often use the term "category killer" to describe disruptive innovations. Bitcoin goes a step further; it is a "serial killer" because it doesn't just disrupt one field but will reshape multiple industries. However, this process is gradual.

For instance, while blockchain technology has shown advantages in certain areas, 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" stage.

Bankless: After so many years of market ups and downs, has your view on Bitcoin changed?

Dan Morehead:

Although Bitcoin has seen incredible price increases, I still believe it is an asymmetric opportunity. We have experienced three major drops of over 85%, but each time it has reached new highs. In traditional investment fields, it is hard to find such assets.

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

Asymmetric Investment Opportunities

Bankless: Between 2013 and 2015, you purchased 2% of the global Bitcoin supply. Many investors wish they could have bought Bitcoin earlier and identify such asymmetric return opportunities. How did you build this conviction? Some might say it was just luck; what do you think?

Dan Morehead:

I agree with your use of the term "pattern," as it is indeed a form of pattern recognition. I have worked on Wall Street for 36 years, experiencing the savings and loan crisis, the financial crisis, investing in commodities in the 80s, and emerging markets in the 90s. These experiences give me an advantage in investing in cryptocurrencies compared to younger investors because I feel I have seen similar situations before.

Let me give you a few examples:

• I was involved in the GSCI (Goldman Sachs Commodity Index) at Goldman, and now commodities are a recognized asset class.
• In the 90s, I invested in emerging markets, which are now also a standard asset class.
• In 2006-2007, Pantera launched the first Western fund investing in Gulf Cooperation Council countries (UAE and Saudi Arabia). Many thought it was crazy at the time, but now the Middle East has become a completely normal investment destination.
• I invested in Russia during Gorbachev's era, participating in the privatization of Gazprom.

Bankless: So you have 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, interestingly, it is still considered a frontier asset class. This is unusual - an asset class with a market cap of $3 trillion is still viewed as frontier; I have never seen this before.

In investment memos I wrote in the following months, I listed various use cases for blockchain:

• Competing with gold (which is happening)
• Competing with Visa and Mastercard in the future
• Competing with remittance companies that charge high fees to immigrants, while Bitcoin can easily and cheaply facilitate cross-border transfers.

When you add up all these use cases, you will find that the ultimate value of cryptocurrencies far exceeds today's levels. That is why we are so optimistic about this field.

Experience of Buying Bitcoin in 2013

Bankless: Can you describe what it was like to buy a large amount of Bitcoin in 2013? I remember when I first bought cryptocurrency in 2014, it felt very unreliable, having to open accounts on multiple exchanges, and the websites looked very rudimentary. For many investors, these were reasons to hesitate. How did you build confidence in such an environment?

Dan Morehead:

The trading environment back then was indeed very primitive. For example, platforms like localbitcoins.com required face-to-face transactions, which were too risky; we never considered that method. Ironically, it was one of the most mainstream trading methods at the time.

Initially, we planned to operate this fund through a large publicly traded company. We conducted thorough system tests, but that company eventually backed 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 did you encounter during the actual purchase process?

Dan Morehead:

I remember when we started taking action over the Independence Day weekend, we first tried a small platform (which we later found out was Coinbase). We discovered they could only sell $300 worth of coins per day, while we wanted to invest millions. At that time, Coinbase had only one employee, and it took four days to get a response to our email. At that rate, it would take nearly 20 years to complete our plan.

In the end, we turned to Bitstamp in Slovenia. When processing the wire transfer at the bank, the branch manager asked detailed questions about what Bitcoin was, and the whole process took an hour to explain. To be honest, I was worried about the safety of our funds at that time. Interestingly, we later became major shareholders of Bitstamp, and I served as the chairman of Bitstamp for 6-8 years (PANews note: LinkedIn information shows he served as chairman of Bitstamp from 2014 to 2018).

Bankless: You mentioned visiting many exchanges, including Mt. Gox?

Dan Morehead:

At that time, I thought it was important to personally inspect exchanges. I 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 they were either incompetent or engaging in fraud. Ultimately, we decided not to work with them, and that decision was later proven correct.

Adoption of Cryptocurrency by Institutional Investors

Bankless: You mentioned holding 170 investor meetings, ultimately raising only $1 million. At that time, Bitcoin was still viewed as a "mysterious internet currency" or even a "drug trafficking 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 is why we emphasized in our investor letters to "make alternative investments more alternative."

This philosophy stems from my hedge fund experience that began in 1991. Back then, hedge funds were truly alternative investments, but now they have become a mainstream industry worth trillions of dollars, with almost all funds employing similar strategies. This experience has convinced me even more that blockchain should be an important part of investment portfolios because it still retains 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," when Bitcoin's price had plummeted by 90%, and the market generally believed "it's all about blockchain, not Bitcoin," with almost no one optimistic about public chains and Bitcoin as an asset.

Bankless: Has this kind of market downturn happened several times?

Dan Morehead:

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

During this difficult period, even though almost no one was paying attention to the field, our team continued to work every day. The fundraising situation in 2016 illustrates the issue - 170 meetings ultimately raised only $1 million, leading to just $170,000 in management fee income for the entire year.

Even today, while our fundraising scale has improved, to be honest, it feels like we are still in the early stages. Institutional investors remain very cautious about cryptocurrencies, with most either completely avoiding them or allocating only a tiny portion.

Bankless: Has your pitch for cryptocurrencies and blockchain changed from 2013, 2016, to now?

Dan Morehead:

My core viewpoint has remained consistent, perhaps because these ideas have stood the test of time. When I explain Bitcoin's fixed supply characteristic and how it won't be diluted by fiat currency inflation, I often hear the question, "Isn't that just like gold?" But my answer is: it's more like investing in gold in 1000 BC. While gold has indeed served humanity for 5,000 years, in the digital age, we need a 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 will take time, possibly up to 20 years, rather than happening overnight.

I am so confident because the development of blockchain technology is an unstoppable trend. While the timeline for realization may take longer than expected and some startups may run out of funds in the process, some changes are inevitable: five years from now, it will be impossible for immigrant workers to pay a month's salary for cross-border remittances, and you won't continue to pay a 3% fee for credit card transactions.

I cannot accurately predict whether this transition will take 10 years or 1-2 years. But because I am confident that this change will inevitably happen, I will continue to hold and invest in this field.

Global Adoption of Cryptocurrency

Bankless: Many people see Bitcoin doubling this year and feel they have "missed out," thinking it is too late to buy now. How do you view the upside potential of Bitcoin and the entire cryptocurrency asset class? From a global adoption perspective, are we 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 it may indicate overvaluation. But Bitcoin is different. The annual compound growth rate of the Pantera Bitcoin Fund over the past 11 years is 89%, meaning it has doubled on average every year. A simple investment logic is: if it doubles again, you will make 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 your family's stability. In simple terms, don't bet your marriage on this asset class. As long as you can keep your investment scale at this level, you can hold it long-term with peace of mind.

Bankless: So how much more upside do you think Bitcoin has?

Dan Morehead:

Bitcoin has indeed reached a considerable scale, and we cannot expect to see 1000x growth again, as that would consume all the energy on Earth. However, a 10x increase to reach a market cap of $15 trillion is entirely possible compared to the global total of $500 trillion in financial assets.

I won't predict what will happen in 50 years, but within our current investment cycle, say a 5-10 year timeframe, it is entirely reasonable for Bitcoin to increase 10x from its current position, and it won't seem crazy or overvalued.

Bankless: From an adoption rate perspective, what stage are we currently in?

Dan Morehead:

I believe we are still in the early stages. It is estimated that around 300 million people globally own cryptocurrencies. While this number is difficult to quantify accurately, many holders may not have started using it in a meaningful way.

Let me analyze from the perspective of technology adoption: using Bitcoin only requires a smartphone, and currently, there are 4 billion smartphone users worldwide. Some innovative projects, like KaiOS, are working to bring this functionality to feature phones. Assuming the number of smartphone users grows from 4 billion to 5 billion over the next decade, most of these users may start using digital currencies on their phones.

Think about it: half of the people share photos on Facebook. If photo sharing is so popular, digital currencies will be even more so. I believe that in about 10 years, it is entirely conceivable for 3 billion people to use cryptocurrencies. Once they start using it, more use cases will emerge, and people will use it more in their daily lives.

Overall, I estimate that we have only completed about 15% of this cryptocurrency blockchain revolution. Not only are the number of participants still relatively small, but existing users have not fully tapped into its potential.

Bitcoin's "Escape Velocity"

Bankless: In 2013, people worried about governments cracking down on Bitcoin; by 2024, the situation is completely different. Has Bitcoin reached "escape velocity"?

Dan Morehead:

Bitcoin has indeed reached escape velocity and will not go backward.

In 2013, media coverage was mostly negative, focusing on events like Silk Road while ignoring the positive impacts. Although the U.S. once banned gold, now 50 million Americans 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 over the past three years, 90% of the wealth created by the Federal Reserve and Congress's monetary policy has flowed to those aged 70 and above. This is 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 behavior among voters under 40 compared to the 2020 presidential election. The term "young Republicans" has not been heard for many years.

Trump expressed strong support for cryptocurrencies in May of this year, and all the cabinet members he nominated are very supportive of cryptocurrencies. He even wants to establish a cryptocurrency envoy. I believe that 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 reflected at the congressional level as well?**

Dan Morehead:

Yes, many senators and congress members who were anti-cryptocurrency have lost their seats. According to what I've read:

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

I predict that in four years, those congress members who oppose cryptocurrencies may not remain in Congress because that is simply not a wise position. They will either change their views or may lose in the 2026 midterms or the 2028 general election.

It is strange to see the Democratic Party shift to an anti-cryptocurrency stance. I have been wondering if I missed some strategic consideration because it clearly seems like a lose-lose strategy.

Shift in U.S. Government Attitude Towards Cryptocurrency

Bankless: In 2025, we will see the first administration and Congress supporting cryptocurrencies. After experiencing the SEC's crackdown during the Biden era, what impact do you think a pro-crypto White House will have? Especially regarding the establishment of a strategic Bitcoin reserve?

Dan Morehead:

The executive branch can directly decide to stop selling seized Bitcoin, which is within its authority. We participated in the first Bitcoin auction by the U.S. Marshals in 2013-2014.

The U.S. government currently holds 1% of the world's Bitcoin. If they stop selling, it will have a significant impact. Because the actual circulating supply of Bitcoin is small, many holders never sell.

Bankless: Senator Lummis mentioned accumulating a reserve of 1 million Bitcoins. 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 likely to be achieved. Stopping the government from transferring and selling Bitcoin will have a positive impact on the market. When you remove a seller, it naturally helps the price rise.

As the issuer of the world's reserve currency, the U.S. cannot hold foreign currencies like other countries. The practice of storing gold in 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, which is not a radical idea.

Bankless: This issue seems to have become very partisan.**

Dan Morehead:

Yes, it is strange. As Ro Khanna said, it's like with mobile phones; why turn it into a partisan issue? In fact, the Democratic Party should be more supportive of Bitcoin because it represents the dreams of progressives.

Global Bitcoin Reserve Race

Bankless: Assuming Trump retains the existing 200,000 Bitcoins (about 1% of the global total) and publicly announces it. China also has about 200,000 Bitcoins that have been seized; how do you think they will respond? Will other countries start hoarding secretly?

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 is ironic: why would countries competing with the U.S. store their wealth in U.S. dollars and U.S. Treasury bonds? Under the U.S. sanctions regime, their transactions could be monitored.

For countries at odds with the West, storing part of their wealth in Bitcoin is an obvious choice. Neutral countries will do the same - just like using gold, because Bitcoin provides an option that does not rely on the dollar system.

Bankless: The stablecoin bill has 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 difficult to understand and influence.

Institutional Investor Adoption of Cryptocurrency

Bankless: In 2024, there has been a significant breakthrough in institutional adoption, such as Larry Fink admitting that his view on Bitcoin in 2021 was wrong. ETF products have achieved remarkable success. Compared to 2022, when Mike Novogratz predicted a "wave of institutional investors," it has finally come true. So how is the current level of institutional adoption? How far have we progressed?

Dan Morehead:

The industry has indeed experienced some major setbacks:

• The collapses of FTX, BlockFi, Celsius, and Terra Luna
• The discount issue with GBTC
• SEC lawsuits against companies like Coinbase and Ripple

These events have indeed affected the enthusiasm for institutional participation. Imagine a public pension plan manager trying 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 and president supporting cryptocurrencies, along with at least neutral regulatory agencies, everything could change dramatically. That is why you are now seeing prices soar and significant inflows into ETFs.

Speaking of ETFs, this is indeed an important breakthrough. We launched the first crypto fund in the U.S. 11 years ago, initially as a Cayman hedge fund, because we thought it would take years to get ETF approval. Now it seems the waiting time has far exceeded expectations.

Bankless: Can you provide specific data on these inflows?**

Dan Morehead:

Current inflow situation:

• Bitcoin ETF: $35 billion net inflow
• MicroStrategy and similar ETF products: $18 billion
• Total inflow exceeding $50 billion into ETFs or similar products

An interesting comparison:

• During the same period, the net inflow of all global gold ETFs was zero
• Funds are shifting from traditional gold to digital gold (Bitcoin)

Bankless: While it is encouraging to see people like Larry Fink change their stance, institutions like Vanguard still do not allow ETFs or crypto assets in their ecosystem. So what is the actual level of institutional adoption now?

Dan Morehead:

There is an interesting point here: many people say Bitcoin is a bubble, but the median institutional holding is zero. How can it be a bubble? Most institutional investors, including insurance companies, pension funds, and endowment funds, have virtually zero direct investment in blockchain. They may have indirectly invested in some blockchain companies through certain comprehensive venture capital funds, but direct investment is almost nonexistent.

That is why I am so optimistic about the future. We are actually just getting started. When you see the world's largest asset management company, BlackRock, publicly supporting it, having an excellent blockchain team, and institutions like Fidelity starting to build in blockchain since 2014, these are all very encouraging signs.

In the past, many institutions would use compliance as an excuse not to invest in cryptocurrencies, but now BlackRock, Fidelity, and others are selling highly regulated quality products, making that excuse untenable. Even Vanguard's position may become difficult to sustain as the market evolves.

Bankless: It sounds like there are still opportunities to position in crypto assets before institutional investors?**

Dan Morehead:

Absolutely, this is entirely applicable. There are indeed still opportunities to enter before institutional investors.

Cyclicality of Cryptocurrency

Bankless: You have experienced multiple cycles, and now Bitcoin has reached a new high of $100,000; we are 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 Bitcoin halving, while others believe it is related to global liquidity. When fiat liquidity is abundant, cryptocurrencies enter a bull market, then peak and retreat. Will this four-year cycle pattern continue?

Dan Morehead:

Yes, I believe this cyclical 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 through an interesting analogy. During my college years, a professor wrote the famous "A Random Walk Down Wall Street," which articulated 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 evolved:

• Initially, like many, I was skeptical - if everyone knows a 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 fully believe in the validity of this pattern.

Why is halving so important? It relates to miner behavior:

• Miners sell almost all the Bitcoin they earn to cover operating costs.
• This is similar to the copper market - if it were announced that half of the copper mines would close one day, copper prices would inevitably rise.
• Bitcoin halving has that effect - every four years, the output is halved, and when demand remains unchanged while supply is halved, prices will naturally rise.

However, the cyclical characteristics are gradually evolving:

• The amplitude of cyclical fluctuations is gradually decreasing. During the first halving, the reduced output accounted for 15% of the circulating supply at that time.
• As the circulating supply increases, the impact of the next halving will drop to one-third of the original.
• By the last halving in 2136, the impact will be negligible.

Our data analysis shows a clear pattern:

• The halving effect starts to manifest 400 days before the actual date.
• It reaches a cyclical peak 480 days after the halving.
• This pattern has 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 after the halving (next August), with the lowest point's prediction almost precisely on the specific date.

During the last halving, we predicted the price for each month of 2020 on Twitter. We forecasted that 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. I think we will experience a major bull market followed by a bear market. But the only difference is that after experiencing three 85% declines in the past 12 years, the next correction may only be 50% or 60%, at least for Bitcoin; smaller coins may still experience greater volatility.

2025 Bull Market Outlook

Bankless: If we follow the four-year cycle pattern, does this mean 2025 will be a bull market, followed by a downturn in 2026?**

Dan Morehead:

Yes, that is my expectation. April 19 of this year is the halving time, and August 2025 should be the peak of this cycle.

Bankless: It feels like everything is heading in that direction; it seems almost too simple?**

Dan Morehead:

I know it sounds a bit absurd, but we have been discussing this topic for 12 years. We have always predicted that the amplitude of fluctuations would gradually decrease; previous halving cycles had larger fluctuations, while this one will be relatively mild. Not only the halving factor but also the political and macroeconomic environment is creating favorable conditions for cryptocurrencies. So I am quite optimistic about 2025.

Bankless: How do you view the macroeconomic situation? Will it have a positive or negative impact on cryptocurrencies? Is Bitcoin influencing the macroeconomy or vice versa?**

Dan Morehead:

Typically, we discuss the macroeconomic impact on Bitcoin. From a macroeconomic perspective, I am skeptical about the possibility of the Federal Reserve cutting interest rates. In December 2021, the federal funds rate was zero, and the 10-year Treasury yield was 1.3%. At that time, I predicted both would rise to 5% and remain there for several years. To this day, I still hold that judgment.

Why? Look at the current economic situation:

• The economy is booming, and crowded airports are the best proof.
• The unemployment rate is at a historical low.
• Wage inflation continues to rise.
• The stock market keeps hitting new all-time highs.

In such an economic environment, I believe those expecting the Federal Reserve to cut rates are being unreasonable.

The actual federal funds rate is only 80 basis points above core inflation, which is not tight. The historical average is 140 basis points higher, so we are only slightly tight.

What is even more concerning is the fiscal situation:

• During the best economic times, the U.S. still runs a $2 trillion deficit.
• Even with full employment and record-high indicators, it still cannot achieve fiscal balance.
• This suggests that if the economy turns, it may face more serious problems.

Macroeconomic Environment and Cryptocurrency

Bankless: The U.S. continues to run deficits, print money, and has expectations of rate cuts; what do these macroeconomic signals mean? Do they indicate that commodity and digital asset prices will rise?

Dan Morehead:

The U.S. has developed a dependency on printing money. This trend existed before the pandemic, and after the pandemic, fiscal constraints have completely disappeared. For example, multiple direct cash payments to the public have directly led to inflation and rising prices.

The current fiscal situation is concerning:

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

This means we will have to refinance all debts at increasingly higher rates, which will be very costly.

While I don't focus much on studying fiscal and macroeconomic issues, one thing I am sure of: I would rather hold Bitcoin than dollars.

Bankless: You mentioned commodities, which makes me think about the current highs in gold, Bitcoin, stocks, and real estate. How should we interpret this phenomenon?**

Dan Morehead:

The key is to change the perspective:

• These assets are not truly "rising"; rather, fiat currency is depreciating.
• We should focus on the relative prices of Bitcoin against gold, stocks, real estate, etc.
• The price comparisons of various assets against the dollar clearly show the trend of dollar depreciation.

In the current fiscal situation, holding fiat currency lacks meaning. Even former cryptocurrency skeptics like Ray Dalio are starting to suggest holding gold and Bitcoin to cope with potential debt crises.

This shift in perspective is important because currency is essentially a consensus technology. The change in attitude among top investors indicates that the market's recognition of digital assets is increasing, and the consensus brought about by deep liquidity is crucial for the development of an emerging currency.

RWA Tokenization Trend

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 field has long awaited. Although some early investments were premature, they are finally starting to show results. Take stablecoins as an example; they are allowing ordinary financial instruments to realize 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 onto the blockchain is much greater than it appears. Most of the 8 billion people globally live outside the U.S. and are eager to acquire dollar assets and U.S. government bonds, but traditional channels make this difficult.

Even for U.S. citizens, the existing system has obvious problems. For example, transferring from a Treasury Direct account to a brokerage can take up to a year, and this inefficiency highlights the need for blockchain technology.

Bankless: Wait, really? I didn't know that was the case.**

Dan Morehead:

Yes, a government worker has a stack of withdrawal applications so high that it takes a year to transfer your 90-day Treasury bond from the government to Merrill Lynch. If anything perfectly demonstrates our need for blockchain and RWA tokenization, this is it. You think it's wiser to buy directly from the government, but your funds are locked for a year.

Another great 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 many intermediaries, 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 have a well-established operational model and do not urgently need to go on-chain.

But for assets like government bonds, blockchain indeed provides an ideal solution. This not only allows more people to participate in investments 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, benefiting all parties.

The Future of AI and Cryptocurrency Integration

Bankless: AI and cryptocurrency 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 tremendous 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 decentralized AI projects like Sahara.

One noteworthy 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 particularly good at providing incentive mechanisms to solve this problem.

Regarding the question of AI agents using currency, they clearly cannot open accounts in traditional banking systems. When interacting between machine agents, they must use some form of digital currency, and programmable currencies (like Ethereum) seem to be the most natural choice. While some may 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. There are already significant intersections between these two fields, and we are likely to see further deep integration in the next 5 to 10 years.

Finding the Next Bitcoin

Bankless: Pantera's initial Bitcoin fund achieved a 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 stage of development, and it presents a highly promising career path for young people. Even if they eventually choose to transition to traditional industries, the experience gained in the blockchain field will be a valuable career asset. This career choice has asymmetric return characteristics: significant upside potential with controlled downside risk.

Current monetary policies and regulatory environments have created many adverse effects for the younger generation. High barriers in the real estate market, inflationary pressures, and other factors make traditional wealth accumulation channels increasingly difficult. In contrast, the blockchain field offers a relatively fair competitive environment for the younger generation.

For young investors, I recommend the following investment strategies:

• Diversify your portfolio to avoid over-concentration in a single crypto asset.
• Focus on risk management and adjust investment proportions based on personal financial situations.
• Seize investment opportunities arising from generational cognitive differences.
• Use steady investment methods like dollar-cost averaging.

It is important to note that investment strategies should be adjusted as personal life cycles change. In cases of being married or having a mortgage, it is advisable to reduce the allocation of high-risk assets to ensure that the investment portfolio aligns with personal risk tolerance.