Original Title: "Pantera Bitcoin Fund Hits 1,000x"
Original Author: Dan Morehead, Founder of Pantera
Original Compilation: Wu Blockchain
The post-election rally has further increased the fund by 30%. The fund's total return rate has now reached 131,165% (net of fees and expenses).
I would like to share the original logic - because it is still very convincing to me today.
The day we chose to launch the Pantera Bitcoin Fund was actually the lowest point in the past eleven years.
That initial investment memo still reads clearly today.
From 2013-2015, we purchased around 2% of the global BIT.
Note: If Pantera purchased around 2% of the global BIT from 2013 to 2015, it is estimated to be around 280,000 BIT. In comparison, as of November 24, 2024, MicroStrategy holds 386,700 BIT.
Even after eleven years, BIT is still being squeezed up like watermelon seeds.
Frankly, I can't help but believe that we still have many years of very attractive returns ahead of us.
Gold in 1000 BC
My core view was written a month later:
"Yesterday, when discussing BIT with an investor, he responded somewhat disdainfully, 'This is like buying gold.' No, no, this is like buying gold in 1000 BC. 99% of financial wealth has not yet touched BIT. When they start to participate, BIT will either become worthless or [rise to orders of magnitude higher]."
As an industry, we have made some progress. Now, only "about" 95% of financial wealth has not yet been fully allocated.
The catalyst for the change from 5% in 2024 to a higher proportion has just occurred: regulatory clarity in the US. Large institutional managers like BlackRock and Fidelity now provide an extremely cheap and efficient BIT investment channel for anyone with a brokerage account. This new convenience will ultimately allow millions of investors and individuals to access this important new asset class.
We believe the entire industry will greatly benefit from the inauguration of the first pro-blockchain US president. In our view, the success of blockchain is in the national interest, and we believe every member of Congress will ultimately take a neutral or supportive stance on blockchain - a trend that has already begun. The 15-year regulatory headwind for blockchain is turning into a tailwind.
I still passionately believe the view I wrote eleven years ago:
"I believe the likelihood of global adoption of a global currency/payment system, in which free cryptographic technology replaces the high 'trust' fees charged by banking Visa-Mastercard/Western Union/PayPal institutions, is greater than 50%. BIT will replace cash, electronic fiat currency, gold, bearer bonds, large stone discs, etc. It can do all of these things. It is the first global currency since gold. It is the first borderless payment system in history."
The BIT price at the time was $104.
This is still my feeling. We are still in the early stages. 95% of financial wealth has not yet touched blockchain. They are just beginning this massive transformation. When they participate, BIT could reach a level of around $740,000/BTC.
The market has indeed seen a rapid rise. It reached $1,000 in less than a month - and has now risen three orders of magnitude.
11-Year Compound Annual Growth Rate of 88%
I can imagine some investors might think, "BIT has already doubled this year. Well, I probably missed it." And then give up.
No, this mindset is wrong. BIT's average performance is almost doubling every year. Since we launched the fund eleven years ago, its compound annual growth rate has been 88%.
Order of Magnitude Growth
BIT has already experienced three orders of magnitude of growth. Another order of magnitude growth seems possible. If BIT reaches $740,000/BTC, that would mean its market cap reaches $15 trillion. Compared to the $500 trillion total financial asset pool, this figure is not unimaginable.
While past performance may not predict the future, if this trend continues, BIT could reach $740,000 by April 2028.
I think it may take a few more years, but I do believe this possibility exists.
This has always been my mindset: I won't bet my entire fortune, and I'm not 100.00% certain that blockchain assets will grow, but when you multiply their upside potential by the orders of magnitude or more they may increase - the result is far better than the expected returns of other investable assets. In my nearly 40 years of investing, this trade has the most attractive expected value I've ever seen.
Not Easy
Now it may seem obvious, but at the time it was very difficult.
After the 87% crash starting in December 2013, BIT gradually lost attention. The market did not recover for over three years. By 2016, almost everyone had lost faith in BIT. Investors had no interest.
That year, I traveled the globe and held 170 investor meetings. The ultimate result of all this effort - we only raised $1 million.
The management fee for this capital was $17,241. An average of $100 per meeting.
We Could Have Bought a Hotel!!!
I'm naturally a loyal team player. I've always wanted the BIT team to win. Over the years, we've done our best to support this community. So when Expedia announced they would accept BIT in 2014, we paid all our travel expenses in BIT.
In 2015, our team was out for 59 nights - an average of 1.5 BTC per night, totaling 88 BIT.
That's equivalent to $8,683,136 today!?!?
We could have bought two hotels!
Incredible Growth of the Blockchain Industry
In 2013, when we were preparing to launch the Pantera BIT Fund, I opened accounts at several exchanges and deposited funds to get ready. The first time I walked from our office on Market Street in San Francisco to wire money to Ljubljana, Slovenia at Wells Fargo, I didn't even know how to spell Ljubljana. Everything seemed very suspicious. The bank manager even came over and interrogated me at length about what I was doing.
(Now I know Slovenia is a lovely country, to the right of Venice and below Austria.)
But at the time, I doubted my own sanity. Another wire was to a small startup that sounded just as suspicious.
The BIT price was around $130 at the time. Over the next few days, I witnessed BIT's price drop from $130 to below $100. In retrospect, it's interesting that this "fear, uncertainty and doubt" (FUD) is still the default language of skeptics in today's BIT bear markets. Despite all these issues, when it dropped to $65, I decided to go all in - launching the Pantera BIT Fund. 30 years of trading instinct told me that was the opportunity.
I sent the email above to a small list of BIT enthusiasts, maybe only twenty people at the time, saying, "I just want to get involved."
(Today, that list has hundreds of thousands, and subsequent emails have been read 2.7 million times.)
I logged into a startup called Coinbase and tried to buy 30,000 bitcoins. A pop-up window appeared, indicating that the daily limit for the fund was $50 - not the "500,000 dollars" Wall Street slang, but a real $50 Ulysses S. Grant bill. I almost had a heart attack.
Since it was a trendy startup, there was no address or phone number. I hastily sent an email - the title was surprisingly written in all capital letters: "I WANT TO BUY 2 MILLION DOLLARS WORTH OF BITCOIN!" Four days later, their only employee - a man named Olaf - replied: "Okay, your limit is now $300." Even with my expanded trading limit, it would take 6,667 days to complete this transaction.
At this rate, I would have to trade for 2,522 days!
Fortunately, I was able to buy these bitcoins on Bitstamp, and the industry has also grown and developed. Nowadays, the daily trading volume of the cryptocurrency market reaches $130 billion. The development of the industry has indeed been amazing.
Blockchain as an Asset Class
Sometimes I feel like a gorilla in the forest who has found a shiny object... picked it up... turned it around... curious about what it is...
Bitcoin!
Of course, I don't fully understand all the incredible technical projects in this field, but I feel like I've seen a similar scene before.
I was the first asset-backed securities (ABS) trader at Goldman Sachs. Nowadays, everyone sees ABS as an asset class. I was involved in the creation of the GSCI (Goldman Sachs Commodity Index). Now, everyone sees commodities as an asset class. In the 90s, I invested in emerging markets. Nowadays, emerging markets (EM) are seen as an asset class.
Blockchain will be the same. I believe that in the not-too-distant future, every investment firm will have a blockchain team and will allocate a significant and long-term investment to blockchain.
Asymmetric Trades
My global macro background is what initially led me to blockchain. The asymmetry of this trade - operating in the world's largest market - makes this opportunity far exceed the trades we've chased globally in the past. I think this is the most asymmetric trade I've ever seen.
The best illustration of this theme comes from a comparison made at the second Pantera Blockchain Summit in March 2014:
"At a dinner before the late-night poker game, Morehead joked that the total value of all the bitcoins in the world at the time was roughly equivalent to that of a company selling ripped jeans and dorm room decor, Urban Outfitters - about $5 billion. 'Isn't that crazy?' Morehead said.
'I think, centuries from now, when they're digging through the ruins of our civilization like in Planet of the Apes, bitcoin may have a bigger impact on the world than Urban Outfitters,'" he added.
- Nathaniel Popper, 2015, "Digital Gold"
When I updated this statement in November 2020, the market capitalization of Bitcoin was equivalent to that of L'Oreal. Waterproof mascara is undoubtedly an amazing invention, but I still believe Bitcoin has asymmetry.
Digging deeper...
"At L'Oreal, our mission is to make the best quality and most accessible beauty products available to the masses in skincare, makeup, haircare and hair color."
That's great. And Bitcoin's mission surprisingly sounds similar: to make financial inclusion accessible to the masses.
I think financial inclusion will ultimately be more important.
Bitcoin has recently surpassed Meta (formerly Facebook). Photo sharing is certainly cool, but I think enabling financial inclusion for every person on Earth with a smartphone will be more meaningful.
Five more targets to surpass...
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