Original source: Dan Morehead's LinkedIn account

Author: Dan Morehead, Founder of Pantera Capital

Translation: 0xjs@Golden Finance

The Pantera Bitcoin Fund has recently achieved a crazy milestone—1,000 times return.

The post-election surge in Bitcoin prices has pushed the Pantera Bitcoin Fund up another 30%. After fees and expenses, the lifetime return of the Pantera Bitcoin Fund is now 131,165%.

I want to share the original logic—because it is just as appealing to me today.

The day we chose to launch the Pantera Bitcoin Fund was actually the lowest point in the past eleven years.

The first investment memo still reads very well.

In 2013, we purchased 2% of the world's Bitcoin at that time.

Even after eleven years, Bitcoin is still squeezing up like a watermelon seed.

Honestly, I can't help but think that we can still achieve very substantial returns in the many years to come.

Gold in 1000 BC

My core point was written a month later:

"I discussed Bitcoin with an investor yesterday, and he somewhat dismissively replied, 'It's like buying gold.' No, it's like buying gold in 1000 BC; 99% of financial wealth has yet to touch Bitcoin. When they do, Bitcoin's value will either be zero or [increase by several orders of magnitude]."

As an industry, we have made some progress. Approximately 95% of financial wealth still has not allocated their positions.

The catalyst for this change—from 5% in 2024 to higher numbers—has just occurred: clarity from U.S. regulators. Large institutional management companies like BlackRock and Fidelity now offer extremely cheap and efficient services to anyone with a brokerage account. This new convenient service will ultimately allow tens of millions of investors and individuals to access this important new asset class.

We believe that the first U.S. president to support blockchain will greatly benefit the entire industry. We think the success of blockchain aligns with America's best interests, and we believe that everyone in the U.S. Congress will eventually take a neutral or supportive stance on blockchain—this is already starting to happen. The regulatory headwinds for blockchain over the past 15 years are now turning into tailwinds.

I still firmly believe in what I wrote eleven years ago:

"I believe the likelihood of the world adopting a global currency/payment system is over 50%, in which free cryptographic technology replaces the very expensive 'trust' charged by banks/VISA-MasterCard/Western Union/PayPal/etc. Bitcoin will surpass cash, electronic fiat, gold, bearer bonds, large stone slabs, etc. It can do all these things. This is the first global currency since gold. This is the first borderless payment system in history."

When Bitcoin was priced at $104

I still feel the same way. We are still in the early stages. 95% of financial wealth has yet to touch blockchain. They are just beginning this massive transformation. When they start to transform, Bitcoin's price could reach $740,000 per BTC.

When Bitcoin was priced at $254

The market has indeed seen a surge. In less than a month, Bitcoin's price rose to $1,000, and now it has increased by three orders of magnitude.

11-Year Compound Annual Growth Rate of 88%

I can imagine an investor thinking, "Bitcoin has doubled this year. Well, I guess I missed out." And then they give up.

No, that is the wrong mindset. On average, it nearly doubles every year. Since we launched the Pantera Bitcoin Fund 11 years ago, its compound annual growth rate has been 88%.

Another Order of Magnitude Growth

Bitcoin has achieved three orders of magnitude (1,000 times) growth. Another order of magnitude (10 times) seems feasible. If Bitcoin reaches $740,000 per BTC, then Bitcoin's market cap will reach $15 trillion. Relative to $500 trillion in financial assets, this is not an unbelievable number.

While the past does not necessarily predict the future, if this trend continues, Bitcoin will reach $740,000 by April 2028.

I think it will take a few more years, but I do believe there is a significant chance of it happening.

This is my mindset: I won't bet my life on it; I'm not 100.00% certain that blockchain assets will rise, but when you multiply the likelihood of an increase by the magnitude or higher extent that the industry could rise, the outcome will ultimately be much better than other investable assets. The expected value of Bitcoin trading is the most compelling I have seen in nearly forty years.

It’s Not Easy

It seems obvious now, but it was actually very difficult.

After the 87% crash that began in December 2013, Bitcoin gradually lost meaning. More than three years later, the market was still sluggish. By 2016, almost everyone had given up on Bitcoin. Investors were not interested.

That year, I flew around the world, attending 170 investor meetings. The result of all this effort was that we only raised $1 million.

The management fee was $17,241. One hundred dollars per meeting.

We Could Buy a Hotel!!!

I am inherently a loyal team member. I have always hoped that the Bitcoin team would win. For years, we have done everything we can to help the community. So when Expedia announced in 2014 that they would accept Bitcoin, all our travel expenses on Expedia were paid in Bitcoin.

In 2015, our team spent 59 nights on the road, averaging 1.5 Bitcoins per night, totaling 88 Bitcoins.

That amounts to today's $8.683136 million in fiat!?!?!

With that money, we could buy two hotels!

Amazing Growth of the Blockchain Industry

In 2013, when we were preparing to launch the Pantera Bitcoin Fund, I opened accounts at several exchanges and wired money for emergencies. When I first walked into a Wells Fargo on Market Street in San Francisco, ready to wire money to Ljubljana, Slovenia, I didn't even know how to spell Ljubljana. Everything felt very suspicious. So much so that the bank manager came over to interrogate me about what I was doing and asked for a long time.

(I now know Slovenia is a lovely country located to the right of Venice and below Austria.)

But at that time, I doubted whether I was crazy. My recipient was an unknown small startup, which also sounded equally suspicious.

At that time, Bitcoin was priced around $130. In the following days, I watched Bitcoin's price drop from $130 to $100. In retrospect, it’s funny; it was basically the same as what skeptics say during Bitcoin bear markets: "FUD—Fear, Uncertainty, Doubt." Even when Bitcoin's price dropped to $65 and all the problems arose, I decided to go ALL IN—launching the Pantera Bitcoin Fund. Thirty years of trading intuition led me to believe that day was the day.

I sent the above email to a small group of Bitcoin enthusiasts, about twenty people at the time, who said, "I just want to be involved."

(Now this list has grown to hundreds of thousands, and subsequent letters have been read 2.7 million times.)

I logged into a startup called Coinbase, trying to buy 30,000 Bitcoins. A pop-up window showed the fund's daily limit was $50—unlike Wall Street lingo, where "bucks" sometimes means millions. Every day, one Ulysses S. Grant (the portrait on the $50 bill). I almost had a heart attack.

Since it was a trendy startup, they had no address or phone number. I sent them an email to their support inbox, unusually titled in all caps: "I WANT TO BUY TWO MILLION DOLLARS OF BITCOIN." Four days later, their only employee—a guy named Olaf—replied, "Okay, your limit is now $300." Even at my newly expanded trading limit, it would take 6,667 days to complete this transaction.

Even if I bought it today, there would still be 2,522 days!

Fortunately, I was able to buy Bitcoin on Bitstamp, and the industry has grown. Today, the cryptocurrency market has a daily trading volume of $130 billion. The growth of this industry is astonishing.

Blockchain as 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…

Bitcoin!

I certainly don't understand all the nuances of the incredible technological projects happening in this field, but I feel like I've seen this movie before.

I was the first asset-backed securities (ABS) trader at Goldman Sachs. Now everyone thinks of ABS as an asset class. I was there when they did the GSCI (Goldman Sachs Commodity Index). Now everyone thinks of commodities as an asset class. In the 90s, I invested in emerging markets (EM). Now everyone thinks of EM as an asset class.

Blockchain is the same. I believe that in the near future, every investment firm will have a blockchain team and a substantial, permanent blockchain fund.

Asymmetric Trading

My global macro background led me into the blockchain space from the start. The asymmetry of this trade—working in the largest markets in the world—makes this opportunity several orders of magnitude larger than the trades we typically chase around the globe. I believe this is the most asymmetric trade I have ever seen.

This theme is best illustrated by a comparison from the second Pantera Blockchain Summit in March 2014:

"At dinner a few hours before a late-night poker game, Morehead joked that the value of all the Bitcoin in the world at that time was roughly equivalent to that of Urban Outfitters—a company that makes ripped jeans and dorm decor—about $5 billion. 'That's crazy, right?' Morehead said."

"I think that centuries from now, when they do archaeology on our society like in 'Planet of the Apes,' Bitcoin's impact on the world may be greater than that of Urban Outfitters."

– Nathaniel Popper, 2015, "Digital Gold"

When I updated in November 2020, Bitcoin's market cap was the same as L'Oréal. Waterproof mascara is undoubtedly an amazing invention, but I still believe there is asymmetry.

Digging deeper…

"At L'Oréal, our mission is to provide the best quality skincare, makeup, haircare, and hair color products to the greatest number of people."

That's great. Bitcoin's mission sounds surprisingly similar: to democratize financial services.

I thought the mission in finance would ultimately be greater.

Recently, Bitcoin's market cap has surpassed that of Meta (formerly Facebook). Photo sharing is indeed cool, but I believe that for everyone on Earth with a smartphone, financial inclusion will be even greater.

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