Conversation with Pantera Founder: Bitcoin Has Reached Escape Velocity, Traditional Assets Are Being Left Behind

In this interview, Wilfred Frost had his second in-depth conversation with Dan Morehead, founder of Pantera Capital. They discussed Bitcoin's cyclical positioning after a 50% pullback from its highs; how fiat currency devaluation creates intergenerational wealth conflicts; and why "smart money" is the last to enter the market this time. Most institutional investors still have a 0.0% position in blockchain, literally zero. It's not gold that's hitting new highs, it's paper money hitting all-time lows. This may be the first time in history that "smart money" has entered the market last. The average age of first-time homebuyers in the US has been pushed back from 28 to 40. We are facing an intergenerational inflection point where currency is becoming increasingly separate from the nation. Stablecoins are very likely to take away half of bank deposits within a decade. Bitcoin has reached escape velocity, and I can't find any factor that could derail this process. If you don't have any exposure to blockchain, you're essentially shorting this trend. Host: Last time you came, we discussed the macro logic of cryptocurrencies in depth. What was the price you bought Bitcoin at when it was incredibly low? Dan Morehead: $65. Host: $65, compared to our current price of around $66,000, it's like two different worlds. In that episode, you described Bitcoin as "the most asymmetric trade in history." Do you still hold that view today? Dan Morehead: Yes, I still believe it. Throughout my career, I've been looking for asymmetric opportunities where the upside potential far outweighs the downside risk. Bitcoin, and the broader crypto space, is the most asymmetric trade I've ever seen. In the early days, I would tell people: you could absolutely lose all your capital, so don't invest more than you can afford. But at the same time, you could potentially get 5x, 10x, or even a thousandx returns. The reason I'm still bullish is that we're still in the very early stages. Most institutional investors are still 0.0% positioned in blockchain and cryptocurrencies. Literally zero. As long as the downside risk is negligible relative to the sheer volume of global financial assets, and the upside potential is redefining the entire monetary system, this asymmetry won't disappear. Host: We last recorded this on October 12th, which was an interesting timing. Cryptocurrencies reached a temporary high around October 6th, followed by a pullback. Since then, Bitcoin has fallen by about 50%. As someone who has experienced multiple cycles, how do you interpret this major drop? Dan Morehead: Anything that tries to change the world will be accompanied by a lot of hype and volatility.At the peak, optimism is at its peak; at the trough, pessimism abounds. Pantera has been deeply involved in this industry for 13 years, experiencing four complete four-year cycles. These cycles are actually very regular, even predictable. When we met in October, we were near the peak we predicted two or three years ago. Based on our models from the previous three cycles, we expected Bitcoin to reach a temporary peak around August 2025. Although we hoped for a different outcome this time, such as new government policies breaking the cycle, in hindsight, the cycle has once again come true. The market has fallen by 50%. That sounds like a lot, but compared to the 85% drops in previous cycles, this is actually much milder. The market may need about a year to bottom out, consistent with past patterns. Host: You didn't show any bearish sentiment at the time. Do you think this cycle will eventually fall by 75% to 80% like before? Dan Morehead: That's a key question. I certainly didn't predict it would fall that much because there were many positive factors at the time. But the market has its own rhythm. I want to point out that at previous highs, the price deviated significantly from the long-term logarithmic trend line, exhibiting a wildly parabolic trajectory. For example, in 2013, the price increased tenfold in the four months before the peak. This time, however, the price hasn't experienced that extreme overheating; it's simply returned to roughly 2021 levels. Therefore, I believe the current price level is likely in the bottom range. Although it may take another six to eight months to establish a bottom, if you have a four- to five-year investment perspective, now is a very attractive position. Host: The current price is around $66,000. Many technical analysts say that $60,000 is a key support level, and if it breaks down, it could fall all the way to $25,000. Do you agree? Dan Morehead: I'm not good at technical analysis. We never try to do ultra-short-term timing trades. We manage our funds more like venture capital, with a 5-year, 10-year, or even 20-year perspective. From this perspective, the current price is quite cheap. Host: Why is Bitcoin always the "scapegoat" among risky assets? When the Nasdaq and S&P 500 peak, cryptocurrencies are often the first to be sold off. Will this continue indefinitely? Dan Morehead: That's a very insightful observation. Think about it: if a major shock occurs outside of trading hours, Monday through Friday, you can't sell stocks. Cryptocurrencies, on the other hand, are the only highly liquid market globally with a market capitalization of $2 trillion that's open 24/7, 365 days a year.When geopolitical crises erupt, institutions want to immediately reduce their risk exposure, and Bitcoin becomes their only asset that can be liquidated in real time. This leads to excessive selling pressure on it in the short term. But note that while the correlation spikes during a "flash crash," in the long run, the correlation between Bitcoin and the S&P 500 is actually very low, roughly between 0.1 and 0.2. Over a multi-year timeframe, cryptocurrencies move independently upwards, while traditional assets may simply stagnate. Host: Let's talk about gold. Gold has risen 55% in the past 12 months, while Bitcoin has remained largely flat. Does this shake the narrative of Bitcoin as "digital gold"? Dan Morehead: Gold is an interesting "old-school" asset. It comes into the public eye periodically. Before 2025, gold ETFs actually saw net outflows for several consecutive years, while funds flowed into Bitcoin ETFs. But in 2025, people suddenly realized that the dollar was depreciating rapidly, and this sense of urgency caused funds to flow back into gold. But I think about this from a slightly different angle: it's not gold or real estate that's hitting new highs, but paper money that's hitting all-time lows. As the printing presses keep running, the amount of paper money needed to buy a fixed amount of assets inevitably increases. The word "pound" originally meant one pound of pure silver; now you need hundreds of banknotes to buy the same weight of silver. Governments can print money indefinitely, which is the core of devaluation trading. Host: Aren't we in an astonishing devaluation cycle right now? Dan Morehead: Absolutely. The Fed's definition of "price stability" as a 2% annual devaluation is absurd. Stability should be zero. Even with only a 2% annual devaluation, a person's lifetime purchasing power shrinks by nearly 90%. I think people are waking up to the fact that they must hold a fixed amount of hard assets, whether it's stocks, gold, or cryptocurrencies. This devaluation trading also has a clear generational characteristic. Massive money printing drives up asset prices, which benefits older generations who already own property and stocks, but squeezes the upward mobility of young people. The average age of first-time homebuyers in the US has been pushed back from 28 to 40. Since they can no longer accumulate wealth through traditional means, it's a very rational choice for the younger generation to turn to cryptocurrencies. If you look at the wage growth and housing price growth curves since 1990, you'll find that the gap has become ridiculously large. Host: How do geopolitical conflicts change the logic of cryptocurrencies? Dan Morehead: War always brings persistent inflation. But more importantly, we are witnessing a "separation of currency from the state." In ancient times, currency was gold, naturally independent of the government.Later, governments monopolized the power to print money, but they proved to be poor managers. Over the next decade, people will gradually realize that currency doesn't need state backing. Geopolitical conflicts have made this trend even clearer—the world is becoming increasingly segmented. If you're from a country not part of the US camp, or if you're worried about your assets being sanctioned or frozen, you'll want an asset not controlled by any single country. China once invested a large portion of its foreign exchange reserves in US Treasury bonds, which is increasingly risky in the current international landscape. Bitcoin, as an asset independent of the banking system and sanctions, has its value highlighted in conflict. Host: How many people actually hold cryptocurrency right now? Are there many large institutional holdings globally? Dan Morehead: Still very few. While three to four hundred million people globally hold cryptocurrency, most are small, "casual" holdings. However, I believe that within ten years, due to the widespread use of smartphones (4 billion users globally), most people will use cryptocurrency. Its cross-border transfers are fast, almost free, and require no one's permission. This may be the first time in history that "smart money" has finally entered the market. Over the past 40 years, all the investment opportunities I've seen have typically seen Wall Street reap the rewards first, with retail investors left holding the bag. This time, it's completely reversed; individual investors are leading the charge. I've shared the stage with many alternative investment moguls managing hundreds of billions of dollars, many of whom knew nothing about Bitcoin. That's why I'm so bullish—these smart, wealthy institutional funds will eventually enter the market. Coinbase is already included in the S&P 500. If you don't have any blockchain exposure, you're essentially shorting this trend. Host: The new administration's shift in attitude is a significant variable in this cycle. How do you assess the current policy environment? Dan Morehead: It's a huge tailwind. The previous administration was hostile to blockchain, targeting Coinbase and cracking down on Ripple. The current administration is willing to build the industry. While the pace of legislation is always frustrating, frankly, the fact that Congress is taking the time to discuss topics like "stablecoin market structure" speaks volumes about the industry's status. Regarding stablecoins, this is a revolution unfolding in stages. Stablecoins may not be fully paying interest yet, but that's only a matter of time. Stablecoins are eroding the market for bank deposits. Currently, the market size of stablecoins is approximately $400 billion, while bank deposits total $17 trillion.In the next decade, stablecoins are very likely to take half of bank deposits because they are available 24/7 on mobile phones, offering a far superior experience compared to traditional banks. Host: You are also paying attention to digital asset treasury companies, such as MicroStrategy. Do you think governments will establish strategic Bitcoin reserves in the future? Dan Morehead: I think it's highly likely. The US already has a considerable amount of digital asset reserves, mostly from law enforcement foreclosures. Now they are no longer selling these assets and may even start increasing their holdings. Countries allied with the US will follow suit for strategic reasons, while countries opposing the US will buy for defensive purposes. This will take time to advance within the political machine, but the trend is irreversible. Host: In the Layer 1 competition, why are you particularly optimistic about Solana? Dan Morehead: We hold Bitcoin long-term, but Bitcoin focuses on value storage and cannot handle tens of thousands of high-frequency transactions per second. Solana was designed for high performance, is cheaper, and faster, making it suitable for complex applications such as gaming and high-frequency trading. Just as the internet has Google and Facebook, the blockchain field will also have several core Layer 1 blockchains. Bitcoin is gold, and Solana could be the digital superhighway. Host: Nasdaq down 12%, Bitcoin down 50%, is that reasonable? Dan Morehead: I think it's very unreasonable. Stock valuations are currently at historical highs, risk premiums are extremely low, and interest rates are still high, meaning stocks are already very expensive relative to bonds. There are also signs of overheating in the AI sector, with many AI companies' valuations far exceeding their trend lines. In contrast, cryptocurrencies are 50% below their long-term trend lines. From an asset allocation perspective, cryptocurrencies are currently in a very attractive oversold range. Even if the Nasdaq continues to fall, I believe cryptocurrencies will perform better over the next two years. Host: How is your mindset different now compared to the bear markets of 2014 and 2018? Dan Morehead: Completely different. In the early days, I did have moments of fear, worried that the entire experiment would be completely ruined by a hack or regulatory crackdown. But despite the collapse of Mt. Gox, multiple 85% drawdowns, and repeated regulatory crackdowns, this industry not only survived but has grown stronger. It has reached escape velocity. Host: Was there any event that made you completely abandon your bullish stance? Dan Morehead: A few years ago, I made a long list of risks, including hosting security, hacking, and regulatory uncertainty. But looking back now, most of these risks have been resolved.While no one can guarantee that nothing unexpected will happen tomorrow, logically speaking, I can no longer find any factors that could completely derail this process. A smartphone-based, globalized monetary system is an inevitable direction for human society. With 4 billion mobile phone users worldwide, the financial inclusion brought by blockchain is far more important than sharing photos on social media. [Blockchain in Plain Language]