Original author: Dan Morehead, founder of Pantera Capital
Compiled by: Odaily Planet Daily Azuma
Thousand times profit
Pantera’s Bitcoin Fund recently reached a crazy milestone — a thousand-fold profit.
With BTC surging nearly 30% following Trump’s victory, the fund’s total return since inception is 131,165% after fees and expenses.
I want to share with you our original logic because it seems to me just as convincing today.
Odaily Note: In an email on July 5, 2013, Dan, as CEO, called on Pantera to buy BTC at the market price of $65, and said that he had decided to buy 30,000 coins first, and others could decide whether the fund itself would buy. Two days later, on July 7, the Pantera Bitcoin Fund was officially established.
The day we chose to launch the Pantera Bitcoin Fund was the lowest point of BTC in the past eleven years.
The first investment memo is still impressive to read today.
From 2013 to 2015, we bought 2% of the worlds Bitcoin.
Even eleven years later, Bitcoin is still being “squeezed and pulled up like a watermelon seed.”
To be honest, I still can’t help imagining that we can still get very substantial returns through BTC for many years to come.
Gold from 1000 BC
About a month after that, I wrote down my core views on BTC.
Yesterday I was discussing Bitcoin with an investor who somewhat dismissively said it was like buying gold… Wrong! It’s like buying gold in 1000 BC! 99% of financial wealth has not yet touched Bitcoin, and when they do, the value of Bitcoin will either be zero or increase by multiple orders of magnitude (tens, hundreds, thousands, tens of thousands…).
As a nascent industry, we have come a long way and it is now safe to say that “only” 95% of financial wealth is not fully invested in Bitcoin.
There are now some clear catalysts for growth from 5% in 2024 to higher figures: improved regulatory attitudes in the United States; institutional giants such as BlackRock and Fidelity are now providing low-cost, efficient entry channels for all investors with financial accounts. This convenience will eventually drive tens of millions of investors to access this important new asset class.
We believe the industry will benefit greatly from the first clearly pro-blockchain U.S. president taking office. We believe that blockchain’s success is in the best interest of the country, and we believe everyone in Congress will eventually adopt a neutral or pro-blockchain stance. This is happening, and 15 years of regulatory headwinds for blockchain are turning into tailwinds.
Odaily Note: In an email dated August 21, 2013, Dan once again praised BTC and predicted a “melt-up” market.
I still believe what I wrote 11 years ago.
“I think there is a greater than 50% chance that the world will adopt a global currency/payment system where free crypto replaces banks, VISA, MasterCard, Western Union, PayPal, etc. Bitcoin can replace cash, electronic fiat, gold, bearer bonds, etc. It can do all of those things. It is the first global currency since gold, and the first borderless payment system ever.”
That’s still exactly how I feel. We’re still in the early days. 95% of financial wealth has not yet touched blockchain, and they’re only now beginning this massive transformation. When they do, the price of Bitcoin could be $740,000.
Odaily Note: In an email dated November 6, 2013, Dan revealed that Pantera Bitcoin Fund bought $1 million worth of BTC in a single day.
BTC did experience a “melt-up”, with the price of BTC exceeding $1,000 less than a month after the email was sent in November — and the current price is nearly three orders of magnitude higher than it was then.
11-year compound growth rate: 88%
I know that there are a lot of investors who, when considering buying Bitcoin, think “Bitcoin has already doubled this year, I may have missed out”… and then give up on investing.
No, that’s the wrong mindset. On average, BTC doubles almost every year. In the eleven years since the Pantera Bitcoin Fund was founded, our fund has had a compound annual growth rate of 88%.
Magnitude growth
BTC has grown by multiple orders of magnitude over the years, and it seems reasonable to go further. If BTC reaches $740,000, the market value will reach $15 trillion, which is not an unimaginable number relative to the total market value of financial assets of $500 trillion.
While the past is not necessarily predictive of the future, if the trend continues, Bitcoin will reach $740,000 by April 2028.
I think it may take longer, perhaps a few more years, but I do think there is a good chance that BTC will get there.
That’s my mentality. I wouldn’t bet my life on this, and I’m not 100% sure that blockchain assets will continue to rise, but when you multiply the probability of rising by the order of magnitude of the industry’s potential growth, it turns out that BTC’s potential for appreciation is much higher than other investable assets.
This is the transaction with the greatest expected value-added in my nearly forty years of experience in the industry.
It’s not easy to stick to it
Although it seems easy to buy BTC at a low price and hold it until now, it is actually difficult.
Starting in December 2013, BTC experienced an 87% crash and has since faded from the limelight. More than three years later, the market is still falling. By 2016, almost everyone had given up on BTC, with investors having no interest in it.
I flew around the world that year and gave 170 investor meetings, but ultimately raised only $1 million.
Our management fee that year was $17,241, which averaged out to $100 per meeting...
We could have bought that hotel!
I am a team player by nature. I always want the Bitcoin community to win in the end. Over the years, we have been trying to help the community in various ways.
So, when Expedia announced in 2014 that they would accept BTC, we paid for all our travel expenses exclusively with BTC through Expedia.
In 2015, our team spent 59 nights on the road — spending an average of 1.5 BTC per night — for a total of 88 BTC.
At today’s prices, that’s $8,683,100, enough for us to buy two hotels!
Amazing development of the industry
In 2013, when we were preparing to launch the Pantera Bitcoin Fund, I set up accounts at several exchanges and started wired money to prepare. When I first walked from my office into the Wells Fargo Bank on Market Street in San Francisco to wire money to Ljubljana, Slovenia, I didn’t even know how to spell “Ljubljana”, so the bank manager came over and questioned me for a long time, asking me what I was doing.
PS: I now know that Slovenia is a beautiful country, just to the right of Venice and below Austria…
But at the time, I wondered if I was crazy. I also made a loan to another small, unknown startup that sounded equally shady.
At the time, the price of BTC was around $130. Over the next few days, I watched the price of BTC drop from $130 to $100. It’s funny to think back now that the FUD (fear, uncertainty, doubt) that skeptics were talking about in recent bear markets was essentially the same as it was back then. When BTC fell to $65, even with all the problems, I decided to go all in and launch the Pantera Bitcoin Fund. Thirty years of trading intuition convinced me that this was the day to make the move!
I sent the above email to a small community of Bitcoin enthusiasts, about 20 people at the time, who were interested in participating. Now the community has hundreds of thousands of people, and those emails have been read 2.7 million times.
I logged onto a startup called Coinbase and tried to buy 30,000 BTC, but the exchange popped up a window saying that the daily trading limit was only $50 (bucks) - and these werent bucks like in Wall Street jargon, which sometimes refer to millions of dollars, they were just $50... I almost had a heart attack.
Since they were still a startup, they had no address or phone number. In a panic, I sent an email to their customer support email address — with the unusual subject line in all caps — “I Want to Buy $2 Million in Bitcoin.” Four days later, their only employee — a guy named Olaf — replied, “OK, your limit is now $300.”
This means that even after the limit is enlarged, it will take me 6,667 days to complete this transaction. Eleven years later, I still need to buy another 2,522 days...
Luckily, I was able to buy the BTC on Bitstamp. Today, the industry has grown tremendously, with the cryptocurrency market now trading $130 billion per day. It’s amazing how far this industry has come.
Blockchain’s path to becoming an “asset class”
Sometimes I feel like a gorilla in the forest, noticing a shiny object on the ground…picking it up…spinning it…wondering what it is….
Wow, it’s Bitcoin!
I certainly didn’t understand the nuances of the incredible technical projects in the industry, but I felt like I had seen these scenarios before.
I was the first asset-backed securities trader at Goldman Sachs, and now everyone considers ABS as an asset class; I was there when they did GSCI, and now everyone considers commodities as an asset class; I invested in emerging markets in the 90s, and now everyone considers emerging markets as an asset class.
The same will be true for blockchain. I believe that in the near future, every investment company will have a blockchain team and a fairly large, permanent blockchain asset allocation.
Asymmetric transactions
My global macro background is what initially got me into blockchain. The asymmetry of this deal — working in the largest market in the world — makes this opportunity much larger than the deals we typically chase around the world. I believe this is the most asymmetric deal I’ve ever seen.
A comparison from the 2nd Pantera Blockchain Summit in March 2014 illustrates this theme. Nathaniel Popper wrote about this passage in his 2015 book Digital Gold.
At dinner a few hours before a late-night poker game, Morehead joked that all the bitcoin in the world at the time was worth about the same as the market capitalization of Urban Outfitters, a purveyor of jeans and dorm decor with a market value of about $5 billion. “That’s crazy, right? I think when people in a few centuries are looking at our current society like they did in Planet of the Apes, Bitcoin will have a bigger impact on the world than Urban Outfitters did,” Morehead said.
When I updated this data in November 2020, Bitcoins market cap was comparable to that of LOréal. Of course, waterproof mascara is undoubtedly a great invention, but I still think there is an asymmetry here.
Let’s explore further… “At L’Oréal, our mission is… to democratize access to the highest quality beauty products in skincare, makeup, haircare and color”.
This sounds fantastic, and sounds eerily similar to Bitcoin’s mission to “democratize finance” — but I think finance will ultimately be much bigger than cosmetics.
Bitcoins market cap recently surpassed Meta (formerly Facebook). Sharing photos on the internet is cool, but I think financial inclusion will be even greater for everyone on the planet with a smartphone.
Now, there are only five companies left for Bitcoin to surpass (Nvidia, Apple, Microsoft, Amazon, Google)...
