Original: Bankless

Compiled by: Yuliya, PANews

Finding the next "Bitcoin" in the cryptocurrency market is a dream for many investors. As one of the most influential investment institutions in the industry, Pantera Capital bought Bitcoin at $65 in 2013, and to date, the fund's returns have exceeded 100 times. In this episode of the Bankless podcast, founder Dan Morehead shares how he identifies assets with asymmetric return potential and his deep thoughts on the future of the cryptocurrency market. PANews has compiled a written version of this podcast.

Bitcoin Investment in 2013

Bankless: Let's talk about that famous email from July 5, 2013. You suggested buying Bitcoin at $65 and planned to invest in 30,000 BTC. Can you share your thoughts at that time?

Dan Morehead:

It all started in March 2013. My two friends Pete Briger (Co-CEO of Fortress) and Mike Novogratz (founder of Galaxy Digital) reached out to discuss Bitcoin. (We all came from Goldman Sachs, and they later founded Fortress Investment Group.) Actually, my brother had introduced me to Bitcoin before, but I didn't pay much attention.

A brief meeting with Pete and Mike unexpectedly turned into a four-hour deep discussion. The concept of Bitcoin opened my eyes. Later, I accepted Pete's invitation and worked in their office for a full six years.

Bankless: You mentioned this was an asymmetric trading opportunity; can you elaborate?

Dan Morehead:

During my time at Tiger Management doing macro trading, I learned one thing: look for opportunities where potential returns far exceed risks. While investing always carries risks, the key is to find those that could yield massive returns.

For example, before investing in Bitcoin, we held Tesla stock. Interestingly, in 2013, Tesla and Bitcoin were priced similarly. Ultimately, we made a bold decision - to sell all our Tesla stock and go all-in on Bitcoin.

Bankless: You referred to Bitcoin as a "serial killer"; what does that mean?

Dan Morehead:

In the tech field, we often use the term "category killer" to describe disruptive innovations. Bitcoin goes a step further; it's a "serial killer" because it doesn't just disrupt one sector but will reshape multiple industries. However, this process is gradual.

For instance, while blockchain technology has shown advantages in certain areas, it may take another decade to truly challenge payment giants like Visa and Mastercard. Just like the internet, which is now 50 years old, Bitcoin is still in its "teenage" phase.

Bankless: After so many years of market ups and downs, has your view on Bitcoin changed?

Dan Morehead:

Although Bitcoin has seen incredible price increases, I still believe it is an asymmetric opportunity. We have experienced three major drops of over 85%, but each time it has reached new highs. It's hard to find such an asset in traditional investments.

That's why since 2013, I have focused almost all my energy on the crypto market. We are still in the early stages of this financial revolution, and there are still great opportunities ahead.

Asymmetric Investment Opportunities

Bankless: From 2013 to 2015, you purchased 2% of the global Bitcoin supply. Many investors wish they had bought Bitcoin earlier and want to identify such asymmetric return opportunities. How did you build this belief? Some might say it was just luck; what do you think?

Dan Morehead:

I agree with your use of the term "pattern" because it is indeed a form of pattern recognition. I have worked on Wall Street for 36 years, experiencing the savings and loan crisis, the financial crisis, investing in commodities in the 80s, and emerging markets in the 90s. These experiences give me an advantage in investing in cryptocurrencies compared to younger investors because I feel I have seen similar situations before.

Let me give you a few examples:

• I was involved in the GSCI (Goldman Sachs Commodity Index) at Goldman, and now commodities are a recognized asset class.
• I invested in emerging markets in the 90s, and now emerging markets are also a standard asset class.
• In 2006-2007, Pantera launched the first Western fund investing in Gulf Cooperation Council countries (UAE and Saudi Arabia). Many thought it was crazy at the time, but now the Middle East has become a completely normal investment destination.
• I invested in Russia during Gorbachev's era, participating in the privatization of Gazprom.

Bankless: So you have always been looking for these frontier investment opportunities?

Dan Morehead:

Yes, we have always sought those non-mainstream or unconventional opportunities. In 2000, we even established a fund to invest in local farmland after Argentina's penultimate crisis.

Speaking of blockchain, interestingly, it is still considered a frontier asset class. This is unusual - an asset with a market cap of $3 trillion is still viewed as a frontier asset; I have never seen this before.

In investment memos I wrote in the following months, I listed various use cases for blockchain:

• Competing with gold (which is happening)
• Competing with Visa and Mastercard in the future
• Competing with remittance companies that charge high fees to immigrants, while Bitcoin can facilitate cross-border transfers easily and at low cost.

When you add up all these use cases, you realize that the ultimate value of cryptocurrencies is far greater than today's levels. That's why we are so optimistic about this field.

Experience of Buying Bitcoin in 2013

Bankless: Can you describe what it was like to purchase a large amount of Bitcoin in 2013? I remember when I first bought cryptocurrency in 2014, it felt very unreliable, having to open accounts on multiple exchanges, and the websites looked very rudimentary. For many investors, these were reasons to hesitate. How did you build confidence in such an environment?

Dan Morehead:

The trading environment at that time was indeed very primitive. For example, platforms like localbitcoins.com required face-to-face transactions, which were too risky; we never considered that method. Ironically, it was one of the most mainstream trading methods at the time.

Initially, we planned to operate the fund through a large publicly traded company. We conducted thorough system testing, but that company eventually backed out. At that time, Bitcoin had already dropped 50%, and we had to quickly pivot to operate independently under the Pantera brand.

Bankless: What difficulties did you encounter during the actual purchase process?

Dan Morehead:

I remember when we started taking action over the Independence Day weekend; we first tried a small platform (which we later learned was Coinbase). We found out they could only sell $300 worth of coins per day, while we wanted to invest millions. At that time, Coinbase had only one employee, and it took four days to get a response to our email. At that rate, it would take nearly 20 years to complete our plan.

In the end, we turned to Bitstamp in Slovenia. When processing the wire transfer at the bank, the branch manager asked detailed questions about what Bitcoin was, and the whole process took an hour to explain. To be honest, I was worried about the safety of the funds myself at that time. Interestingly, we later became major shareholders of Bitstamp, and I served as the chairman of Bitstamp for 6-8 years (PANews note: LinkedIn information shows he served as chairman of Bitstamp from 2014 to 2018).

Bankless: You mentioned visiting many exchanges, including Mt. Gox?

Dan Morehead:

During that period, I thought it was important to personally inspect exchanges. I flew to Tokyo specifically to meet with the two heads of Mt. Gox. Although I only stayed for two days, their performance made me very uneasy. Their explanations lacked logic, giving the impression that they were either incompetent or engaging in fraud. Ultimately, we decided not to work with them, and that decision proved to be correct.

Adoption of Institutional Investors

Bankless: You mentioned holding 170 investor meetings, ultimately raising only $1 million. At that time, Bitcoin was still seen as a "mysterious internet currency" or even a "tool for drug transactions." How did you pitch it to investors? How did those meetings go?

Dan Morehead:

If you want to achieve excess returns, you cannot follow the mainstream; you cannot invest in projects that have 20 analysts tracking them at every Wall Street firm. That's why we emphasized in our investor letters to "make alternative investments more alternative."

This philosophy of mine stems from my hedge fund experience that began in 1991. Back then, hedge funds were truly alternative investments, but now they have become a mainstream industry worth trillions of dollars, with almost all funds employing similar strategies. This experience has made me more convinced that blockchain should be an important part of investment portfolios because it still retains its true alternative characteristics.

Interestingly, the 170 meetings you mentioned actually took place in 2016, three years later than 2013. That was during the "crypto winter," when Bitcoin's price had plummeted by 90%, and the market generally believed "it's all about blockchain, not Bitcoin," with almost no one optimistic about public chains and Bitcoin as an asset.

Bankless: Have there been several instances of such market downturns?

Dan Morehead:

Bitcoin has gone through three cycles of 85% declines. In the first cycle, we started investing at $65, the price rose to $1,000, and then it crashed, remaining in a slump from 2014 to 2017.

During this difficult period, even though almost no one was paying attention to the field, our team continued to work every day. The fundraising situation in 2016 illustrates the point - 170 meetings ultimately raised only $1 million, leading to just $170,000 in management fee income for the entire year.

Even today, although our fundraising scale has improved, to be honest, it feels like we are still in the early stages. Institutional investors remain very cautious about cryptocurrencies, with most either completely avoiding them or allocating only a tiny portion.

Bankless: Have your pitches for cryptocurrencies and blockchain changed from 2013, 2016, to now?

Dan Morehead:

My core viewpoint has remained consistent, perhaps because these ideas have stood the test of time. When I explain Bitcoin's fixed supply characteristic and how it won't be diluted by fiat currency inflation, I often hear the question, "Isn't this just like gold?" My response is: it's more like investing in gold in 1000 BC. While gold has indeed served humanity for 5,000 years, in the digital age, we need a new version—digital gold.

This is precisely why I have maintained my enthusiasm from 2013 to the present: I firmly believe that Bitcoin will gradually replace traditional gold, reform the cross-border remittance system, and revolutionize the payment systems of Visa and Mastercard. Of course, this process will take time, possibly up to 20 years, rather than happening overnight.

I am so confident because the development of blockchain technology is an unstoppable trend. Although the timeline for realization may take longer than expected, and some startups may run out of funds in the process, certain changes are inevitable: five years from now, it will be impossible for migrant workers to pay a month's salary for cross-border remittances, and you won't be able to continue paying a 3% fee for credit card transactions.

I cannot accurately predict whether this transition will take 10 years or 1-2 years. But because I am convinced that this change will inevitably happen, I will continue to hold and invest in this field.

Global Adoption of Cryptocurrency

Bankless: Many people feel they have "missed out" because Bitcoin has doubled this year, thinking it's too late to buy now. How do you view the upside potential for Bitcoin and the entire cryptocurrency asset class? From the perspective of global adoption, are we currently at 20% or 50%?

Dan Morehead:

In any ordinary asset class, if an asset doubles in a year, you really shouldn't buy it, as it may indicate overvaluation. But Bitcoin is different. The Pantera Bitcoin Fund has had an annual compound growth rate of 89% over the past 11 years, meaning it has doubled on average every year. A simple investment logic is: if it doubles again, you can earn 100%.

However, there is a very important investment principle: your investment amount should be controlled within a range that won't affect family stability even if you lose 85%. In simple terms, don't bet your marriage on this asset class. As long as you can keep your investment scale at this level, you can hold it long-term with peace of mind.

Bankless: So how much upside do you think Bitcoin still has?

Dan Morehead:

Bitcoin has indeed reached a considerable scale, and we cannot expect to see 1000x growth again, as that would consume all the energy on Earth. However, a tenfold increase to reach a market cap of $15 trillion is entirely possible compared to the global total of $500 trillion in financial assets.

I won't predict what will happen in 50 years, but within our current investment cycle, say a 5-10 year timeframe, it is entirely reasonable for Bitcoin to increase tenfold from its current position; it wouldn't seem crazy or overvalued.

Bankless: What stage are we at in terms of adoption?

Dan Morehead:

I believe we are still in the early stages. Statistics show that approximately 300 million people globally own cryptocurrency. While this number is difficult to estimate accurately, many holders may not have started using it in a meaningful way.

Let me analyze this from the perspective of technology adoption: using Bitcoin only requires a smartphone, and currently, there are 4 billion smartphone users worldwide. Some innovative projects, like KaiOS, which we are engaging with, are working to bring this functionality to feature phones. Assuming that in the next 10 years, smartphone users grow from 4 billion to 5 billion, most of these users may start using digital currency on their phones.

Think about it: half of the people share photos on Facebook. If photo sharing is so popular, digital currency will be even more popular. I believe that in about 10 years, it is entirely conceivable that 3 billion people will use cryptocurrency. Once they start using it, more use cases will emerge, and people will use it more in their daily lives.

Overall, I estimate that we have only completed about 15% of this cryptocurrency blockchain revolution. Not only are the number of participants still relatively small, but existing users have not fully explored its potential.

Bitcoin's "Escape Velocity"

Bankless: In 2013, people worried about the government cracking down on Bitcoin; by 2024, the situation is completely different. Has Bitcoin reached "escape velocity"?

Dan Morehead:

Bitcoin has indeed reached escape velocity and will not go backward.

In 2013, media coverage was mostly negative, focusing on events like Silk Road and ignoring the positive impacts. While the U.S. once banned gold, now 50 million Americans hold cryptocurrency.

Bankless: What impact does this change have on the political landscape?

Dan Morehead:

This involves an interesting phenomenon. Most Americans are under 40, but in the past three years, 90% of the wealth created by the Federal Reserve and Congress's monetary policy has flowed to those aged 70 and above. This is essentially a massive wealth transfer from the younger generation to the older generation.

And these young people love cryptocurrency, and they will vote. We have observed a remarkable shift in voting behavior among voters under 40 compared to the 2020 presidential election. The term "young Republicans" hasn't been heard in many years.

Trump expressed strong support for cryptocurrency in May of this year, and all the cabinet members he nominated are very supportive of cryptocurrency; he even wants to establish a cryptocurrency envoy. I believe that when someone writes a doctoral thesis on this election in the future, they will find that cryptocurrency was a key factor in changing the election outcome.

Bankless: Is this change also reflected at the congressional level?

Dan Morehead:

Yes, many anti-cryptocurrency senators and congress members have lost their seats. According to the information I read:

• House: 274 in support, 122 against
• Senate: 20 in support, 12 against

I predict that in four years, those congress members who oppose cryptocurrency may not remain in Congress because that is simply not a wise position. They will either change their views or may lose in the 2026 midterms or the 2028 election.

It is strange to see the Democratic Party shift to an anti-cryptocurrency stance. I have been thinking that maybe I missed some strategic consideration because this clearly seems like a lose-lose strategy.

Shift in U.S. Government Attitude Toward Cryptocurrency

Bankless: In 2025, we will see the first executive branch and Congress supporting cryptocurrency. After experiencing the SEC's crackdown during the Biden administration, what impact do you think a pro-crypto White House will have? Especially regarding the establishment of a strategic Bitcoin reserve?

Dan Morehead:

The executive branch can directly decide to stop selling seized Bitcoin, which is within its authority. We participated in the first Bitcoin auction by the U.S. Marshals in 2013-2014.

The U.S. government now holds 1% of the world's Bitcoin. If they stop selling, it will have a significant impact. Because the actual circulating supply of Bitcoin is not large, many holders never sell.

Bankless: Senator Lummis mentioned accumulating a reserve of 1 million Bitcoins. Do you think it is possible to at least retain the existing 200,000 Bitcoins and establish a custodial structure?

Dan Morehead:

This is very likely to be achieved. Stopping the government from transferring and selling Bitcoin will have a positive impact on the market. When you remove a seller, it naturally helps the price to rise.

As the issuer of the world's reserve currency, the U.S. cannot hold foreign currencies like other countries. The practice of storing gold in Fort Knox has become outdated. The U.S. should increase its holdings of digital gold and even consider selling traditional gold.

Singapore has held cryptocurrency for 5-7 years; this is not a radical idea.

Bankless: This issue seems to have become very partisan.

Dan Morehead:

Yes, it is strange. As Ro Khanna said, it's like a mobile phone—why turn it into a partisan issue? In fact, the Democratic Party should support Bitcoin more because it represents the dreams of progressives.

Global Bitcoin Reserve Race

Bankless: Suppose Trump retains the existing 200,000 Bitcoins in the U.S. (about 1% of the global total) and publicly announces it. China also has about 200,000 Bitcoins that have been seized; how do you think they will respond? Will other countries start hoarding secretly?

Dan Morehead:

A strategic Bitcoin arms race could last for 10 years. Both the U.S. and China may maintain a 1% global Bitcoin reserve.

It is ironic: why would countries competing with the U.S. store their wealth in U.S. dollars and U.S. Treasury bonds? Under the U.S. sanctions regime, their transactions could be monitored.

For countries that are at odds with the West, storing part of their wealth in Bitcoin is an obvious choice. Neutral countries will do the same—just like using gold—because Bitcoin provides an option that does not rely on the dollar system.

Bankless: The stablecoin bill has bipartisan support, which can help maintain the dollar's status as the world's reserve currency. Will these bills pass?

Dan Morehead:

As Bismarck said, "There are two things you should never watch being made—laws and sausages." I don't pay much attention to Congress because it is a machine that is difficult to understand and influence.

Institutional Adoption of Cryptocurrency

Bankless: In 2024, there has been a significant breakthrough in institutional adoption, such as Larry Fink admitting that his view on Bitcoin in 2021 was wrong. ETF products have achieved remarkable success. Compared to 2022, when Mike Novogratz predicted a "wave of institutional investors," it has finally come to fruition. So how is the current level of institutional adoption? How far have we progressed?

Dan Morehead:

The industry has indeed experienced some significant setbacks:

• The collapses of FTX, BlockFi, Celsius, and Terra Luna
• The discount issue with GBTC
• The SEC lawsuits against companies like Coinbase and Ripple

These events have indeed affected the enthusiasm for institutional participation. Imagine a public pension plan manager trying to propose investing in Bitcoin in this environment to the state legislature.

But people may not realize how quickly the situation can change. If by 2025 we have a Congress and president supporting cryptocurrency, along with at least a neutral regulatory agency, everything could change dramatically. This is why you are now seeing prices soar and significant inflows into ETFs.

Speaking of ETFs, this is indeed an important breakthrough. We launched the first cryptocurrency fund in the U.S. 11 years ago, initially as a Cayman hedge fund because we thought it might take years to get ETF approval. Now it seems the waiting time has far exceeded expectations.

Bankless: Can you provide specific data on these inflows?

Dan Morehead:

The current inflow situation:

• Bitcoin ETF: $35 billion net inflow
• ETF-like products such as MicroStrategy: $18 billion
• Total inflow exceeding $50 billion into ETFs or ETF-like products

An interesting comparison:

• During the same period, the net inflow of all global gold ETFs was zero
• Funds are shifting from traditional gold to digital gold (Bitcoin)

Bankless: While it's encouraging to see people like Larry Fink change their stance, institutions like Vanguard still do not allow ETFs or crypto assets in their ecosystem. So what is the actual level of institutional adoption now?

Dan Morehead:

Here's an interesting point: many people say Bitcoin is a bubble, but the median holding among institutions is zero. How can it be a bubble? Most institutional investors, including insurance companies, pension funds, and endowments, have virtually zero direct investment in blockchain. They may have indirectly invested in some blockchain companies through certain comprehensive venture capital funds, but direct investment is almost nonexistent.

That's why I am so optimistic about the future. We are really just getting started. When you see the world's largest asset management company, BlackRock, publicly supporting it, with an excellent blockchain team, and institutions like Fidelity that have been laying the groundwork for blockchain since 2014, it is very encouraging.

In the past, many institutions used compliance as an excuse not to invest in cryptocurrencies, but now BlackRock, Fidelity, and others are selling highly regulated quality products, making that excuse untenable. Even Vanguard's position may struggle to hold up as the market evolves.

Bankless: It sounds like there is still an opportunity to position in crypto assets before institutional investors do?

Dan Morehead:

Absolutely, this is entirely applicable. There is indeed still an opportunity to enter before institutional investors.

The Cyclicality of Cryptocurrency

Bankless: You have experienced multiple cycles, and now Bitcoin has reached a new high of $100,000; we are clearly in a bull market. Do you think the cryptocurrency market will continue to follow a four-year cycle? The traditional view is that this is related to Bitcoin halving, while others believe it is related to global liquidity. When fiat liquidity is abundant, cryptocurrencies enter a bull market and then peak and decline. Will this four-year cycle pattern continue?

Dan Morehead:

Yes, I believe this cyclical pattern will continue.

Bankless: Is this your basic prediction? Do you not believe in the supercycle theory or the possibility of breaking this pattern?

Dan Morehead:

Let me explain with an interesting analogy. During my college years, a professor wrote the famous "A Random Walk Down Wall Street," which articulated the theory that markets are always efficient. Buffett once said something thought-provoking: "The difference between the market being always efficient and often efficient is worth $80 billion."

My understanding of the halving cycle has evolved:

• Initially, like many, I was skeptical—if everyone knows the halving is going to happen, then this event should already be fully reflected in the price.
• But after experiencing the halvings in 2013 and 2016, I completely believe in the validity of this pattern.

Why is halving so important? It starts with miner behavior:

• Miners sell almost all the Bitcoin they earn to cover operating costs.
• It's like the copper market—if it were announced that half of the copper mines would close one day, copper prices would inevitably rise.
• Bitcoin halving has a similar effect—every four years, the production is halved, and when demand remains constant while supply is halved, prices naturally rise.

However, the cyclical characteristics are gradually evolving:

• The amplitude of cyclical fluctuations is gradually decreasing. During the first halving, the reduced output accounted for 15% of the circulating supply at that time.
• As the circulating supply increases, the impact of the next halving will drop to one-third of the original.
• By the last halving in 2136, the impact will be negligible.

Our data analysis shows a clear pattern:

• The halving effect begins to manifest 400 days before the actual date.
• It reaches a cyclical peak 480 days after the halving.
• This pattern has maintained astonishing accuracy.

Two years ago, when Bitcoin was priced at $17,700, we predicted it would reach $28,000 at the time of the halving and then hit $117,000 480 days after the halving (next August), with the prediction of the lowest point almost precisely on the specific date.

During the last halving, we predicted the price for each month of 2020 on Twitter. We predicted it would reach $62,964 on August 15, 2020, and it indeed hit that number exactly on that day.

Therefore, I still believe this cyclical pattern will persist. I think we will experience a major bull market followed by a bear market. But the only difference is that after experiencing three 85% declines in the past 12 years, the next pullback may only be 50% or 60%, at least for Bitcoin; smaller coins may still experience greater volatility.

2025 Bull Market Outlook

Bankless: If we follow the four-year cycle pattern, does this mean 2025 will be a bull market, followed by a decline starting in 2026?

Dan Morehead:

Yes, that is my expectation. April 19 of this year is the halving time, and August 2025 should be the peak of this cycle.

Bankless: It feels like everything is heading in that direction; it seems almost too simple?

Dan Morehead:

I know it sounds a bit absurd, but we have been discussing this topic for 12 years. We have consistently predicted that the amplitude of fluctuations would gradually decrease; previous halving cycles had larger fluctuations, while this one will be relatively mild. Not only the halving factor but also the political and macroeconomic environment is creating favorable conditions for cryptocurrencies. So I am quite optimistic about 2025.

Bankless: How do you view the macroeconomic situation? Will it have a positive or negative impact on cryptocurrencies? Is it Bitcoin that influences the macroeconomy or the other way around?

Dan Morehead:

Typically, we discuss the macroeconomic impact on Bitcoin. From a macroeconomic perspective, I am skeptical about the possibility of the Federal Reserve cutting interest rates. In December 2021, the federal funds rate was zero, and the 10-year Treasury yield was 1.3%. At that time, I predicted that both indicators would rise to 5% and remain there for several years. To this day, I still hold that judgment.

Why? Look at the current economic situation:

• The economy is booming, and crowded airports are the best proof.
• The unemployment rate is at a historical low.
• Wage inflation continues to rise.
• The stock market keeps hitting historical highs.

In such an economic environment, I believe that those expecting the Federal Reserve to cut rates are being unreasonable.

The actual federal funds rate is only 80 basis points above core inflation, which does not constitute tightening. The historical average is 140 basis points higher, so we are only slightly tight.

What is more concerning is the fiscal situation:

• Even in the best economic times, the U.S. still has a $2 trillion deficit.
• Even with full employment and record-high indicators, it is still unable to achieve fiscal balance.
• This suggests that if the economy turns, it may face more serious problems.

Macroeconomic Environment and Cryptocurrency

Bankless: The ongoing U.S. deficit, money printing, and expectations of rate cuts—what do these macroeconomic signals mean? Do they indicate that the prices of commodities and digital assets will rise?

Dan Morehead:

The U.S. has developed a dependency on money printing. This trend existed before the COVID-19 pandemic, and after the pandemic, fiscal constraints have completely disappeared. For example, multiple direct cash payments to the public have directly led to inflation and rising prices.

The current fiscal situation is concerning:

• The U.S. is still running record deficits even in the best economic times.
• Interest payments have exceeded military spending.
• The government is financing through adjustable-rate methods, which increases future fiscal risks.
• Interest rates are expected to remain at 5% or higher.

This means we will have to refinance all debts at increasingly higher rates, and the costs will be very high.

While I do not focus much on studying fiscal and macroeconomic issues, one thing I am certain of: I would rather hold Bitcoin than dollars.

Bankless: You mentioned commodities, which makes me think about the current situation where gold, Bitcoin, the stock market, and real estate are all hitting new highs. How should we interpret this phenomenon?

Dan Morehead:

The key is to change the perspective:

• These assets are not truly "rising"; rather, fiat currency is depreciating.
• We should focus on the relative prices of Bitcoin against gold, stocks, real estate, etc.
• The depreciation trend of the dollar can be clearly seen from the price comparisons of various assets against the dollar.

In the current fiscal situation, holding fiat currency lacks meaning. Even former cryptocurrency skeptics like Ray Dalio have begun to suggest holding gold and Bitcoin to cope with potential debt crises.

This shift in perspective is important because currency is essentially a consensus technology. The change in attitude among top investors indicates that the market's recognition of digital assets is increasing, and the consensus brought about by deep liquidity is crucial for the development of an emerging currency.

The Trend of RWA Tokenization

Bankless: RWA tokenization seems primarily aimed at institutions. Will all assets eventually go on-chain? Are we experiencing an S-curve development from stablecoins to government bonds, and then to stocks and bonds?

Dan Morehead:

This is indeed the long-awaited "killer application" in the blockchain space. While some early investments may have been premature, they are finally starting to show results. Take stablecoins as an example; they allow ordinary financial instruments to realize new value on the blockchain. Projects like Ondo are opening the doors to the U.S. financial market for more people.

The significance of moving government bonds onto the blockchain is much greater than it appears on the surface. Most of the 8 billion people globally live outside the U.S. and are eager to access dollar assets and U.S. government bonds, but traditional channels make this difficult.

Even for U.S. citizens, the existing system has obvious problems. For example, transferring from a Treasury Direct account to a broker can take up to a year, and this inefficiency highlights the need for blockchain technology.

Bankless: Wait, really? I had no idea this was the case.

Dan Morehead:

Yes, there is a stack of withdrawal applications piled up with a government worker, so high that it takes a year to transfer your 90-day Treasury bond from the government to Merrill Lynch. If anything perfectly illustrates our need for blockchain and RWA tokenization, this is it. You think it's wiser to buy directly from the government, but your funds are locked for a year.

Another great example is Figure Markets, which has processed $10 billion in mortgages on the blockchain. The traditional mortgage market takes 55 days from borrowing to final settlement, with many steps in between, each incurring costs. Blockchain technology can significantly enhance the efficiency of this process.

However, not all assets are suitable for tokenization. Products like hedge funds and private equity funds aimed at accredited investors already have a well-established operational model and do not urgently need to go on-chain.

But for assets like government bonds, blockchain indeed provides an ideal solution. This not only allows more people to participate in investment but also presents an opportunity for the U.S. government to expand its financing channels. Through blockchain, they can more easily promote government bonds to global smartphone users, benefiting all parties involved.

The Prospects of AI and Cryptocurrency Integration

Bankless: AI and cryptocurrency are intersecting in unique ways. What are your thoughts on the intersection of cryptocurrency and AI? Are you following any AI-related projects?

Dan Morehead:

The integration of blockchain and AI is inevitable. Fundamentally, AI has a tremendous impact on society, and decentralized, open AI is more beneficial for everyone than privately controlled systems. We have already invested in some projects in this direction, such as decentralized AI projects like Sahara.

One noteworthy phenomenon is that existing AI models have already digested almost all free internet content. The next generation of AI models will need to access paid data, and blockchain is particularly good at providing incentive mechanisms to address this issue.

Regarding the use of currency by AI agents, they clearly cannot open accounts in traditional banking systems. When interacting between machine agents, they must use some form of digital currency, and programmable currencies (like Ethereum) seem to be the most natural choice. While there may be explorations of solutions outside of blockchain, the solutions provided by blockchain are the most comprehensive.

In the long run, it seems difficult for AI to operate independently of blockchain. There are already significant intersections between these two fields, and in the next 5 to 10 years, we are likely to see further deep integration.

Finding the Next Bitcoin

Bankless: Pantera's initial Bitcoin fund achieved a 130,000% return; is this a unique "once-in-a-generation" return rate? Do you think investors will have similar opportunities in the coming decades?

Dan Morehead:

Blockchain technology is at a critical stage of development and represents a highly promising career path for young people. Even if they ultimately choose to shift to traditional industries, the experience gained in the blockchain field will be a valuable career asset. This career choice has asymmetric return characteristics: significant upside potential with controllable downside risk.

The current monetary policy and regulatory environment have created many adverse effects for the younger generation. High barriers in the real estate market, inflationary pressures, and other factors have made traditional wealth accumulation channels increasingly difficult. In contrast, the blockchain field offers a relatively fair competitive environment for the younger generation.

For young investors, the following investment strategies are recommended:

• Diversify the investment portfolio to avoid over-concentration of funds in a single crypto asset.
• Emphasize risk management and adjust investment proportions based on personal financial situations.
• Seize investment opportunities arising from generational cognitive differences.
• Adopt stable investment methods such as dollar-cost averaging.

It is important to note that investment strategies should be adjusted as personal life cycles change. In cases of being married or having a mortgage, it is advisable to appropriately reduce the allocation of high-risk assets to ensure that the investment portfolio matches personal risk tolerance.

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