Pantera Capital officials continue to maintain an upbeat outlook for cryptocurrency amidst the current market downturn. In an ICO and digital asset funds conference call Tuesday, CEO and chief investment officer Dan Morehead said blockchains are the next step in the evolution of equity, while cryptocurrency is a superior form of currency. He called bitcoin the biggest disruption of this generation.
Morehead has been a perpetual crypto optimist, having stated that the cryptocurrency market cap could one day be worth $40 trillion. In April, Pantera prematurely said that the market had bottomed out and that it was time to go “long” on bitcoin.
The recent performance of Pantera’s Digital Asset Fund hasn’t dampened Pantera’s enthusiasm. Since December, the fund is down 23.7%, while bitcoin is down 20.9%.
A Time To Buy
The current market is an opportune time to buy, according to Morehead.
“That’s actually a good time to increase your position” Morehead said, noting that investors in Pantera’s funds generally fail to follow this rule — most subscriptions are purchased when the fund prices are high.
The current bear market is one of seven that bitcoin has been through, Morehead said. He thinks it’s as low as it’s going to get, and in 10 to 12 months, it will be markedly higher.
“It’s highly likely to be the low point for the industry,” he said, adding that the bitcoin price has been growing at a stable rate since the beginning. “My normal view is that it’s going to return to its trend,” he said.
Regarding Warren Buffet’s bombastic claim earlier this year that bitcoin is “rat poison squared,” Morehead quipped:
“It is rat poison; it’s just the banks and credit card companies are the rats.”
Morehead offered a host of reasons for his long-term optimism for blockchain technology and cryptocurrency.
Blockchains, he said, are the “final piece” of the protocol structure that the internet is, a way to move funds without paying expensive third parties.
Bitcoin is not a category killer, he said, but a “serial killer,” meaning it will affect many different use cases. The Internet, in the beginning, took time to develop its leading use cases, like Uber.
He called blockchain the most “asymmetric risk-reward trade” he has seen. If you invest in it, you can’t lose everything. Many of the funds invested in bitcoin have the potential to rise in value 25 times, he said, which is not something you see in other investment opportunities.
“I think we’re heading towards a post-capitalist era,” he said. In capitalism, a wealthy individual invests to bring gain. The last 30 years has been an “interregnum period” where people who were not wealthy created valuable technologies.
“Now we’re going to have ‘cooperatively owned’ technologies that are very valuable,” he said.
Hedge Fund Investments
Morehead and his fellow officials took turns reviewing the various investments Pantera Capital has made, the most recent being Augur, an open source P2P oracle and prediction market platform built on Ethereum.
They also discussed the importance of having a diversified investment portfolio, which is why Pantera’s digital asset funds typically hold 30 different cryptocurrencies.
Pantera’s investment strategy is to invest early on in order to maximize returns through early access to token sales of the most promising blockchain protocols.
Joey Krug, co-chief investment officer, said ICOs are useful for offering something an investor can move in and out of a liquid asset, unlike traditional equity. In the future, a lot of things will come from returns from assets with smaller market caps, he said.
The company is also doing specialty trading and automating a lot of the trade execution, which should improve costs.
Institutional Custodians Weigh In
The growing interest of institutional custodians in blockchain technology and cryptocurrency was another factor cited by Pantera officials.
“We believe that institutional capital is on its way,” said Paul Veradittakit, partner, citing Goldman Sachs and Northern Trust. Other investment bankers are also looking at custody for crypto. “We see custody solutions emerging in all different geographies,” he added.
Lauren Stephanian, an investment associate, noted that Intercontinental Exchange (ICE), which operates global exchanges, is creating a company called Bakkt to build a technology to connect existing market and merchant infrastructure to the blockchain. There are three core products, an exchange, custody solutions and a payment system. Pantera has been giving Bakkt feedback on the platform design and is also a co-investor in the company.
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