Crypto Winter or Buying Opportunity? Dan Morehead’s 4-Year Outlook

Summary

---

The Master Investor Podcast – Crypto Winter or Buying Opportunity?

Guest: Dan Morehead (Founder & CEO, Pantera Capital)
Host: Wilfred Frost
Date: March 31, 2026

---

Episode Overview

This episode explores the present crypto downturn—dubbed by some as “Crypto Winter”—and dissects whether it’s a time to be fearful or a historic opportunity for investors. Dan Morehead, a pioneer in the crypto hedge fund space, returns to share his take on the cyclical nature of crypto, his long-term bullishness, the geopolitical and macro shifts affecting digital assets, and why he believes the best days for crypto are ahead.

---

Key Discussion Points & Insights

1. The State of the Crypto Market: Cycles and Downturns

• Four-Year Cycles:
  Morehead emphasizes how crypto’s history is defined by regular, nearly predictable four-year boom-and-bust cycles.
  • "We've been involved in four of these four year cycles that crypto goes through and they're actually very regular and they're actually fairly predictable." (05:08)
• Current Downturn:
  Compared to previous cycles, the current drop is less severe (BTC down ~50% vs. historical 75-85% drawdowns), and he believes the bottom is near, though some grinding may persist.
• Long-term Perspective:
  His advice: Only invest what you’re prepared to hold for a minimum of four years—historically, this has yielded positive returns.
  • "Anyone that's held bitcoin for four years has always made money. I think the minimum is doubling your money." (00:31, reiterated at 07:50)

2. Crypto as the Ultimate Asymmetric Trade

• Definition and Conviction:
  Morehead maintains crypto remains the most asymmetric trade of his career, even after years of extreme volatility. The upside, he argues, still vastly outweighs the downside.
  • "The majority of institutional investors exposure to blockchain venture and cryptocurrencies themselves is 0.0. Literally the majority of investors have no exposure yet." (03:45)
• Duration and Patience:
  "We're very early in a multi decade disruption, bull market, whatever you want to call it." (04:18)

3. Bitcoin vs. Other Risk Assets

• Decorrelation and Liquidity Role:
  Despite often being grouped with 'risk assets,' BTC remains a unique, low-correlation asset over long periods (historically 0.1–0.2 correlation with S&P 500).
  • "The only $2 trillion something else is crypto. And so crypto's the only massive huge liquidity market that is open 24/7." (10:35)
  • However, during “risk-off” shocks, crypto often gets sold swiftly because of its 24/7 liquidity.

4. The Debasement Trade: Hard Assets vs. Paper Money

• Causal Theme:
  The central macro theme beneath both gold and crypto rallies is the debasement of fiat currencies.
  • "It's paper money hitting record lows… governments just print as much paper as they want, and so it takes a lot more pieces of paper to actually buy fixed quantity things." (14:08)
• Generational Divide:
  Younger generations, priced out of traditional assets (homes, land), are gravitating toward crypto as a rational reaction to monetary policy.
  • "There's a huge chunk of the population that really can't do what used to be the way to build wealth… they're buying crypto. And actually I think it's rational, like I really think that is smart." (16:40)

5. Persistent Inflation & Separation of Money and State

• War and Inflation:
  Geopolitical conflict reinforces the persistent inflation narrative, which Morehead believes strengthens the case for crypto.
  • "I think over the next decade we're going to see separation of money and state." (18:49)
• Geopolitical Fracture:
  He forecasts a world where both U.S.-aligned and adversarial powers seek “neutral” reserves, like BTC, outside the purview of U.S. Treasury controls.
  • "The world's kind of fracturing into groups... I think there will be an increased demand for money that's not controlled by the U.S. treasury Secretary." (00:59)

6. Institutional Adoption: "Smart Money Will Arrive Last"

• Unusual Adoption Curve:
  Unlike other market revolutions, the crypto space started with retail investors; institutional money is barely entering, which supports Morehead’s long-term bullishness.
  • "This one really is still being led by individuals that got this trade… smart money will arrive last." (23:30)
• Index Exposure:
  He warns that big institutions now risk being “short” crypto simply by not holding it, given its addition to major indices.

7. Stablecoins and Regulatory Outlook

• Regulatory Environment:
  Morehead sees the current U.S. administration as a clear positive versus the previous, adversarial one, with concrete progress toward regulatory clarity and stablecoin innovation.
  • "The previous administration was so aggressive in fighting what I would say is the inevitable blockchain being an important part of our financial system." (26:04)
• Stablecoins’ Future:
  He’s convinced stablecoins will ultimately pay interest, becoming superior to bank deposits, but sees adoption as a gradual, decade-long consumer behavior shift.
  • "Stablecoins are superior to bank deposits... I think over the next decade stablecoins will take, I would say at least half of bank deposits." (28:28)

8. Central Bank Gold & Bitcoin Reserves

• Gold’s Institutional Endorsement:
  Central banks are flocking to gold—Morehead expects a lag before they meaningfully adopt bitcoin, citing youth of the asset and the inertia of institutional investment committees.
  • "Crypto's only 15 years old, gold's 5,000 years old in terms of use... I think in five years or so they have to have flipped and gone positive on bitcoin." (33:38)

9. Bitcoin, Solana, and Layer-1 Diversity

• BTC's Role:
  Bitcoin excels at its use case (global, trustless value transfer).
• Solana and Others:
  Blockchains like Solana serve high-performance use cases (e.g. trading, gaming), affirming a multi-chain future with several core “layer-ones.”
  • "There's going to be at least a single digit number of very important layer ones like Solana and bitcoin." (35:01)

10. Valuations: Crypto vs. AI & Equities

• Relative Value:
  AI stocks look overextended; equities in general are "fully valued," while crypto is, in Morehead's view, extremely cheap relative to its historical trend.
  • "Crypto is 50% below its exponential trend. So there's this huge gap with AI way record high above its trend." (36:51)
• Buy Low, Hold Long:
  Morehead reiterates that periods of severe retracement are classically attractive entry points for long-term investors.

---

Notable Quotes & Memorable Moments

• On Surviving Bear Markets:
  "The first couple of bear markets I was sweating it… now I don't lose any sleep now. It's inevitable… even some of the worst critics of it have flipped." – Dan Morehead (40:27)
• On Asymmetric Opportunity:
  "It's still there… we're very early in a multi decade disruption, bull market, whatever you want to call it, that has to be very asymmetric." (03:26)
• On “Smart Money” Timing:
  "The smart money will arrive last." (23:30)
• On Stablecoins vs. Banks:
  "I think over the next decade stablecoins will take, I would say at least half of bank deposits… it will happen." (28:28)
• On Decoupling from State-Controlled Money:
  "People will realize you don't need the state to sponsor money… you could use money like bitcoin or other cryptocurrencies." (00:39, 18:49)
• On Institutional Risks:
  "If you don't have any exposure to blockchain, you are short the index already." (24:32)
• On the Need for Fixed-Quantity Assets:
  "It takes a lot more pieces of paper to actually buy fixed quantity things." (14:08)

---

Timestamps of Important Segments

• (00:00, 07:17, 40:27): Morehead on bottoming, four-year cycles, and never losing sleep over bear markets now
• (03:26): "Most asymmetric trade" thesis
• (10:35): Bitcoin's 24/7 status and impact during market shocks
• (14:08): Fiat debasement and need for hard assets
• (16:20): Impact on younger generations and housing affordability
• (18:49): Separation of money and state, geopolitical dynamics
• (23:30): Institutional adoption lag, smart money narrative
• (26:04): Administration change and regulatory outlook
• (28:28): Stablecoins’ future relative to traditional banking
• (33:38): Why central banks have not bought bitcoin in bulk
• (35:01): Solana, performance, and multi-layer blockchain vision
• (36:51): Valuations: crypto vs. AI and equities
• (40:27): Morehead’s comparison to past down cycles, institutional sentiment shift
• (44:16): On what could break the bull thesis—regulation is last real risk

---

Tone and Language

The conversation blended Morehead’s macro-investor analytical rigor with long-term strategic optimism, maintaining an educational and even-tempered tone throughout, regardless of current market sentiment.

---

For Listeners

Even amid steep drawdowns, Morehead counsels patience, discipline (holding for at least four years), and attention to the seismic macro and generational shifts that continue to support digital assets. Regulatory clarity and institutional adoption appear as inevitabilities on a longer time horizon, rather than immediate catalysts.

---

End of summary

Transcript

[Dan Moorhead]

I think somewhere around here is probably the bottom. I'm happy to admit it might be another six or eight months of grinding here, you know, because that's what it's done in the past. But my main advice to investors is, you know, definitely don't invest more than you're willing to lose. And the amount you can hold for at least four or five years. And anyone that's held bitcoin for four years has always made money. I think the minimum is doubling your money. If you've held it for four years, people will realize you don't need the state to sponsor money. And you could use money like bitcoin or other cryptocurrencies. And I think these geopolitical flashpoints probably highlighted even more that the world's kind of fracturing into groups, east, west, you know, U.S. aligned, adversarial of the U.S. and I think there will be an increased demand for money that's not controlled by the U.S. treasury Secretary. And bitcoin's great at that. I will admit the first couple of bear markets I was sweating it. You know, crypto was down 85% and everybody's talking about it was over and it failed. And you know, I just been telling everybody it was the greatest trade ever and got a bunch of, you know, friends and colleagues into it and sweating. I don't lose any sleep now. So I think it really has reached escape velocity. Bitcoin is going to be really important and yes, it goes through these, you know, wild cycles. Fear and greed drive it up, down, but it really does feel inevitable.

[Wilfred Frost]

Welcome to the Master Investor Podcast with me, Wilfred Frost, where we celebrate and learn from the success of the greatest investors, business leaders and politicians in the

[Podcast Host/Interviewer]

world, giving you, our listeners, the edge.

[Wilfred Frost]

The Master Investor Podcast is sponsored by Elseg Interactive Brokers, the World Gold Council and BNY Investments. Please do remember the views expressed in this podcast are for general information purposes only. Nothing in the podcast constitutes a financial promotion, investment advice or a personal recommendation. More on that in the show notes. My guest today is one of the

[Podcast Host/Interviewer]

foremost crypto experts around, Dan Moorhead. He's the founder and CEO of Pantera Capital, which he started in 2003 and pivoted purely to being the first crypto only hedge fund in 2013. And that followed a very successful career predominantly as a global macro trader at Goldman Sachs and Tiger Management.

[Wilfred Frost]

Dan joined us, of course, for the

[Podcast Host/Interviewer]

first time on the podcast back in October, five or so months ago.

[Wilfred Frost]

Dan was welcome back. Great to have you back on the podcast.

[Dan Moorhead]

It's Wonderful to be back.

[Podcast Host/Interviewer]

We did a big deep dive in your first appearance on the Broad case for crypto and how you saw it before so many others, the unbelievably low price you bought your first bitcoin at, which was, which was, remind me, 65, 65, not 65,000 or so where we are today. And I would refer people back to that episode for that deep dive. But one little snapshot of deep dive, if I may, for this episode to kick things off. You described then bitcoin as the most asymmetric trade in history. Do you still think that and why do you think that?

[Dan Moorhead]

I do. And throughout my career I've been looking for these disruptions that have way more upside than downside. And I still think bitcoin and the broader crypto space is the most asymmetric trade I've ever seen. And I used to back that up by when talking to people about crypto in the early days, I used to say you literally could lose all your money. Like don't invest more than you're willing to lose, but you could make five times your money, ten times your money. As you mentioned, earliest investors have made a thousand times their money. That is crazy. Asymmetric. It's still there. And the reason I'm still so bullish is we're still in the earliest phases of this. The majority of institutional investors exposure to blockchain venture and cryptocurrencies themselves is 0.0. Literally the majority of investors have no exposure yet. And so we're very early in a multi decade disruption, bull market, whatever you want to call it, that has to be very asymmetric because the downside is only the appreciation so far, which is very small relative to financial assets.

[Podcast Host/Interviewer]

So lots for us to unpack as we go through. Now I mentioned we had you on in October. The last time we recorded was 12th of October and it was great timing because a moment of volatility. The recent crypto peak turned out to be 6 October, which at the time felt like a sudden pullback, but. But we didn't know if it was going to be temporary or not. So since 6th of October, Bitcoin's down 50% there or thereabouts.

[Wilfred Frost]

Why?

[Dan Moorhead]

Yeah, so anything that's going to change the world creates a lot of hype. There's a lot of hype on the upside and then often there's a lot of kind of pessimism when things go down. And so we've been doing this for 13 years and we've been involved in four of these four year cycles that crypto goes through and they're actually very regular and they're actually fairly predictable. And when we had met in October, we had just hit the peak that we had forecast two or three years before when Bitcoin was at 30,000 or something. We ran all of the models for the previous three four year cycles that we had been trading in and had estimated that Bitcoin would peak on August 11, 2025 at $117,542. And it did that day. That is very strange how precise it is. One of our investors said, hey, congrats, that was an amazing call, but doesn't that mean it's going to go down tomorrow? And you know, the hope is this time will be different, that the new administration, the U.S. or you know, all these things that that happened would be good and would change the cycle. But actually, you know, in hindsight, the cycle did really assert itself and the markets come off, it's down 50%. As you mentioned, the previous cycles went down 75 to 85%. So this is less than in the past. But there is a pretty good chance that the market will be down for about a year. That's what it has typically done, is come down for about a year, very tight dispersion between each of the three cycles and then continue its rally. That is, you know, what it's done in the past and it does feel like it is playing out as it's done in the past.

[Podcast Host/Interviewer]

Obviously when we spoke in October though, you know, you didn't take a bearish stance then and we're down since then. I guess that the more important short term question is do you think this cycle will also be a down 75 to 80 percenter?

[Dan Moorhead]

No. It's a great question. And yeah, in the moment I hadn't predicted that the markets would come off. There did seem like there were some unusually positive things like the change in administration, the US and a few other things. But in the end the markets do kind of have their period to them that they, they go up a bunch. What I would say is in previous peaks the market got way past its long term logarithmic trend and this time it really didn't. It went a bit above where it was in 2021, but not, you know, five times higher than it was or whatever. And so that gives me comfort that we don't need to have the same downside. We didn't have a completely crazy blow off top like we did in 2017 and 2021. And 2013 as well. In 2013 the market went up 10x in four months prior to the peak. So we didn't have one of those super crazy up moves. So I think somewhere around here is probably the bottom. I'm happy to admit it might be another six or eight months of grinding here because that's what it's done in the past. But my main advice to investors is definitely don't invest more than you're willing to lose. And the amount you can hold for at least four or five years. And anyone that's held bitcoin for four years has always made money. I think the minimum is doubling your money if you've held it for four years through the full cycle. And I have that same view here is if you can invest and you can hold it for four or five years, you will highly likely make money and potentially five times your money or ten times your money.

[Podcast Host/Interviewer]

66 or so thousand today. I'm not a chart expert by any stretch of the imagination or technical expert, but I've seen a lot of people say that the sort of low 60s is quite an important support level and if that was broken you dropped to the 25,000 level or something like that.

[Wilfred Frost]

Do you buy into that sort of analysis or not?

[Dan Moorhead]

Yeah, I don't understand the black art of technical, so I've never been aficionado of that. And we really don't try and trade for very short term periods. We're trying to invest people's money in a kind of venture style 5, 10, 20 year view. And so it seems pretty cheap here.

[Wilfred Frost]

This episode is sponsored by the World Gold Council, the global experts on gold. They champion gold as a trusted strategic asset, providing market leading research to help investors understand gold's role and modernize how gold is owned, traded and used. Developing industry standards and market infrastructure. Learn [e-mail].

[Podcast Host/Interviewer]

My final question on the sort of move since October. I mean clearly there's been a risk off moment in markets. The Nasdaq, the S&P 500 peaked around October as well. Why do you think that bitcoin and crypto became the first source of liquidity amongst the basket of riskats and options. Do you think that will always be the case? Is it just the case now? What'd you put it down to?

[Dan Moorhead]

Yeah, it's a great question and I actually like the way you phrased it. The first risk off. If a huge event that shocks the market happens outside Monday through Friday 9:30 to 4, you can't trade stocks, right? You have to Trade something else. And the only $2 trillion something else is crypto. And so crypto's the only massive huge liquidity market that is open 24 7. And so I think it does bear probably a bit too much of the brunt of risk off kind of hedging, if you will. When something like a geopolitical shock happens, people want to take risk off. The only thing they do sell a huge amount of bitcoin or whatever. The thing to keep in mind is over very long periods of time, bitcoin has a very low correlation with the S&P 500 or other risk assets. Historically it was 0.1. I think it's crept up to about 0.2 now, but it's still very low. Most assets are 0.5, 0.6. And so although it appears to be correlated because the day a geopolitical thing happens, bitcoin does go down and the S and P goes down. So everyone goes, oh, they're correlated. But over any longer period of time, the correlation is pretty low. And the reason it is low is a result of what I said earlier. Since almost nobody has a meaningful position in bitcoin when they have to take risk off, they don't have any bitcoin or crypto to sell anyway. And so there's only these very short term flashes where crypto is highly correlated, but over long periods it's not. And then the huge point is that, you know, volatility, sometimes there's a trend to it and then, you know, over any multi year period, cryptos typically way up and other things, you know, kind of drift around and maybe down over five or ten year periods.

[Podcast Host/Interviewer]

I want to touch on your view on gold and particularly gold last year, before we get into the details of the debasement trade, but obviously gold was up 55%, obviously snapshotting this 12 month period arbitrarily, bitcoin was essentially flat. Why do you think that was?

[Dan Moorhead]

Yeah, so gold's an interesting animal relic, as it's been called, that comes into people's consciousness from time to time. And there are decades when people forget about it and don't really care. And so early in this trade we were talking about maybe buying bitcoin and selling gold. And we thought they'd be really connected and they really kind of marched their own drummer. They both have the same theme, their fixed quantity thing that's not being debased by the printing of money. And so they have kind of the same concept to them, but people's appetite for them really goes in These kind of bursts of enthusiasm. And gold actually was languishing for a long time. Up until 2025, there were net outflows from gold ETFs for years. At the same time, there was, I think it's about 80 billion total inflows into Bitcoin ETFs. Right. And so up until 2025, everyone was into digital gold and essentially getting out of old school gold. And I don't know why, but the consciousness of people got into the dollar's being debased. We gotta buy hard assets and bought gold big time in 2025. I think if I were betting man, from here forward, Bitcoin will outperform physical gold because it's done so poorly over the last five months.

[Podcast Host/Interviewer]

Do you think though, the debasement trade is the key theme behind both?

[Dan Moorhead]

I do, I do. And the way I think about it is not to talk about gold hitting record highs in price or real estate hitting record highs, or the equities hitting record highs. I really think the right way to say it is all those things are kind of not moving relative to each other. It's paper money hitting record lows. And as they print more and more paper money, the number of pieces of paper it takes to buy an ounce of gold or to buy a stock or to buy a piece of real estate or a bitcoin has to go up. And even in this country, the pound sterling used to be exchangeable for a pound of sterling silver. Right. And I haven't done this calc in a while, but I think it's over 300 now. It takes 300 pieces of paper sterling to buy a pound of sterling silver. And it's that simple. That used to be exchangeable. They used to be fixed and they used to be identical. And now governments just print as much paper as they want. And so it takes a lot more pieces of paper to actually buy fixed quantity things.

[Podcast Host/Interviewer]

And obviously silver's gone up a lot even since we last spoke in October. So it's made that trade even harder. I guess this is a kind of other point that jumps out when I've heard you talking about it. It's not just the US Dollar or the British pound. I mean, it's most major currencies that this applies to.

[Dan Moorhead]

Yeah, I think that is the reality is that three quarters of the earth's surface is covered by trees. And so there's no stopping paper money printing. Right. There's just nothing that slows people down. And the us, the UK and actually former British colonies are one of the only countries that have never defaulted on their debt or debased via inflation. And Ken Rogoff did a great book on this. There's only 13 countries out of 240 or whatever that haven't debased half of British colonies. But even that the US is debasing at 3% a year. It's debasing at 8% a year.

[Podcast Host/Interviewer]

Are we not debasing at the moment?

[Dan Moorhead]

Yeah, I think we are debasing at a, at a rapid rate. The Fed now calls stable prices 2% debasement, which is crazy. It should be zero. Right. And so even at our current rate of debasement, your savings are debased by 90% during your lifetime. It's incredible debasement. And that is what I think people are realizing is that you have to be in fixed quantity assets like stocks or real estate, physical gold or digital gold, other cryptocurrencies. And I do think another kind of part of the debasement trade is generational. There's essentially the younger generation is being priced out of housing by massive money printing. Right. And so money printing is great for old people with stocks and real estate. Right. Because it just inflates the value of their assets. But, but for young people it's terrible. And so the age of first time home buyers in the United States went from the 20s, it was like 28 or so to 40 now. Right. And so there's a huge chunk of the population that really can't do what used to be the way to build wealth is to invest in your home, have the real estate go up and they're buying crypto. And actually I think it's rational, like I really think that is smart.

[Podcast Host/Interviewer]

So I mean the unaffordability of housing, a massive problem. In fact, if you chart from 1990 House Price Growth vs Real Wage Growth, we're the worst actually in terms of that gap widening significantly.

[Wilfred Frost]

This episode is sponsored by Interactive Brokers. Building wealth starts with the right broker. And Interactive Brokers helps you reach your goals with powerful tools, global market access, low costs and unmatched financial strength. That's why the best informed investors choose IBKR. Learn more at ibkr.com masterinvestor.

[Podcast Host/Interviewer]

Bring it onto the war. Clearly it's inflationary which has fed part of the debasement trade that, that we've just talked about that helps the case for crypto. That said, it's also clearly quite a risk off moment for markets. So how do you factor in the short term what this war does for the case for Crypto, I think you're

[Dan Moorhead]

right that it shows that inflation's probably persistent, that 10 year interest rates in the US have already risen 50 basis points in the space of a few weeks. And those cycles kind of get momentum and perpetuate themselves. So inflation is high and persistent. The other sub theme I think that isn't much talked about but I think is very important is I think over the next decade we're going to see separation of money and state. In the oldest days money was independent of governments, right? It was gold. Gold was global and ubiquitous. And then princes and kings and government started printing money and everyone kind of got used to money being controlled by the state. But as we just mentioned, the states haven't done a great job and they printed a ton of pounds sterling over the years, they printed a ton of US dollars and then most countries have worse inflation rates. And so I really see over. It's going to take a decade, not immediately, but people will realize you don't need the state to sponsor money and you could use money like Bitcoin or other cryptocurrencies. And I think these geopolitical flashpoints probably highlighted even more that the world's kind of fracturing into groups, East, West, US aligned, adversarial US And I think there will be an increased demand for money that's not controlled by the U.S. treasury Secretary. And if you think about it, China has 1000 years of their hard work saved in US treasuries that was pretty wild to put all their savings in something that Treasury Secretary can cancel. So I'm not going to say it's going to happen overnight, but when we look back 10 years from now, I think major countries, both that are aligned with the United States and ones that are average area will each think they want to have currency that's outside the current financial and banking and sanctions regime. And Bitcoin's great at that.

[Podcast Host/Interviewer]

It's really interesting because I mean clearly gold has been a beneficiary of that from central bank buying. Maybe we'll come to whether central banks buy crypto when we talk about DATs in just a moment. But before we get to that, come back to that point, you said what level of ownership there is at the moment. We joked about this last time you were on. I'm probably a great example, someone that talks about crypto a lot, knows a fair amount about it now. But. But I'm still, I'm not at zero, I'm at 0.001 mainly because if I have a tiny position I track it better when it's real in my portfolio, but it's essentially zero. What level of ownership do you think there is for relatively sizable accounts across the country?

[Dan Moorhead]

Yeah, I think it's still pretty low. There's probably 3 or 400 million people globally that, that have some crypto. But like you said, a lot of people, you know, just have a kind of a fun amount rather than an amount that really makes them change their, their actions. And I think we really look at it, it'll really be in, you know, it's, it's basically cell phone based money. And there are 4 billion people with a cell phone. And I just think within a decade most of those people will use crypto. It's faster for sending money across borders, it doesn't cost a month's wages to migrants, it has all these incredible attributes and it's very easy to use. So I really see a world in the not too distant future where it's several billion people using it because it's just the easiest way to make payments. And importantly, storing your wealth. And stablecoins projects like Ondo that have treasuries on the blockchain. It's financial inclusion for anybody with a smartphone. It's so powerful. And those are the use cases that are coming that will bring hundreds of millions of people in the next couple years and billions in the next five, but no more than 10 years.

[Podcast Host/Interviewer]

And obviously there's still a cost to carry during the mining process for now as well. But transactionally, I kind of get your point. I heard you say this on a podcast recently, which I thought was really interesting, which is this might be the first significant trade in history where the smart money, and we should be putting smart money perhaps in inverted commas, not just with this, but with lots of things, but where the smart money will arrive last.

[Wilfred Frost]

Has there been an example like this?

[Dan Moorhead]

Not that I can think of. I've been doing this 40 years and all of the trades that I've seen before started out with the big Wall street firms, the big money managers, big hedge funds in it first and then essentially quote, retail last. And this one really is still being led by individuals that got this trade. There's definitely been some institutions in early. We've had some partners, you know, since 2013 that have been, you know, really, really thoughtful. But most institutions aren't there. And there again, that's what that makes me so bullish. Still, I was on a panel with the heads of massive firms, alternate publicly held alternatives firms, almost all of them completely ignorant about Bitcoin and crypto. And that's why I'm bullish that those people are really smart. They run these massive businesses and someday they're going to have to buy it. And so I view them as short. Bitcoin's now in The S&P 500 or crypto company Coinbase is in the S&P 500. So if you don't have any exposure to blockchain, you are short the index already. And I think over time cryptocurrencies themselves, more companies will join bigger indices and you just have to have exposure to it.

[Wilfred Frost]

This episode is brought to you by lseg, the leading global financial markets infrastructure data and analytics provider. To learn more about how ELSEG connects businesses, investors and markets worldwide, visit lseg.com.

[Podcast Host/Interviewer]

Let's talk about the administration. One of the big positives that you mentioned when we last spoke was that you now have a government that's embracing it and trying to build it rather than crush it, which, which was certainly a significant moment. Do you pause and change your perspective on how big a positive tailwind that is based on what we're going to get clarity on coming forward in terms of this crucial question? With stablecoins, they aren't meant to pay interest like banks do to depositors, but instead have paid rewards. And we'll know soon, I guess, whether that's going to be allowed to continue. Is this a key test for whether you still consider this current administration as a big tailwind?

[Dan Moorhead]

Well, the administration certainly is. The easiest way to say it is. The previous administration was so aggressive in fighting what I would say is the inevitable blockchain being an important part of our financial system. Previous administration was suing the best companies in our space, Coinbase and Ripple Labs, like, you know, very aggressive, not allowing ETFs, all those things. So the new administration is obviously great relative to that. One of the perspectives I always like to share is, you know, there's some grumbling that the second piece of congressional legislation has not been passed and the President has not yet signed. It's amazing they've already passed one, right? Like there's so many super crazy things happening in the world today. And the US Congress is focusing on stablecoins. I'm in the crypto business. I think it's awesome, but frankly it is pretty wild. Right? And so we should be grateful for that. And they are working on a market structure bill, which again is also pretty amazing that they're talking about subtleties of market structure in the blockchain space when there's so many interesting things that they could be talking about. And your point about stablecoins is sometimes revolutions have to happen in steps. Obviously stablecoins have to pay interest at some point. Obviously it was the banking lobby that prevented it. Just like Christian usury laws in the Middle Ages. Right. I mean it's exactly the same. And so I'm not going to be here to predict when stablecoins get to pay interest, but it's coming. And I would note I'm on the board of a company called Figure, Mike Cagney's company and they do have an interest bearing stable called yield, which is already maybe half a billion of market share. And so there are ways that this can happen and are happening. And again, it's inevitable that stablecoins will

[Podcast Host/Interviewer]

pay interest, obviously kind of paying some forms of that at the moment in terms of rewards. We'll see how formalized it gets based on legislation, regulation going forward. Where is the demand for stablecoins relative to where you expected it? I mean, clearly Scott Besant's really behind it and part of the reasons he wants to anchor short term yields and have a lot of demand for T bills. Has it taken off less than you might have expected?

[Dan Moorhead]

No, it's actually doing great. We were very early investor in Circle, which is partnered with Coinbase, another portfolio company to do USDC and they're doing quite well. Stablecoins are a very, very good use case for blockchain is you can store your wealth, move your wealth on your cell phone close to free 247 and you don't need the treasury Secretary's permission. So they're really, really good. And collectively Stablecoins are the 13th biggest holder of Treasuries in the world. So you know, they're already pretty big. I think they're about 400 billion now just to kind of put things in perspective, bank deposits are 17 trillion. Right. So I think over the next decade stablecoins will take, I would say at least half of bank deposits and because they are superior. And again people, you know, we've been used to banks for 500 years, so it's shocking when people say stuff like that. But I think it's inevitable because stablecoins are superior to bank deposits and easier to use. They're on your cell phone, they're 24 7, all those things. And consumer behavior takes a decade to change. So it's not going to happen this week, but it will happen.

[Podcast Host/Interviewer]

Yeah. I mean, of course, if that's the case, it kind of comes to my Question. You offer the safer version of the product and yet we haven't seen it take off exponentially, I might say. Nor can you kind of meet your daily costs using one quite yet. So there's still a case for cash in a bank account. I guess stepping back from stablecoins to DATS digital asset treasury companies, obviously you're building one yourself. Solana1, you're an investor in an Ethereum one. Tom Lees, Bitmine, there's a number of others with both cryptos, but obviously also microstrategy for Bitcoin. How much of the buy case for a DAT is the hope value, maybe the probability value that major governments want to establish strategic reserves down the line and that you become the obvious target for them to buy?

[Dan Moorhead]

Oh, it's a good question. I think one thing to keep in mind is that DATs are pro cyclical with the markets that when the markets are surging up, DATs typically perform better than the market and then when the market's coming down they often perform worse. And so given that we're in a 50% bear market, DATs have not performed very well and some are trading below their net asset value. I do think if the market, if and when the market swings back into a bull case, DATs will start performing better than the underlying, that will bring people back in. Another issue, is there probably more DATs than we need? You probably only need one or two good ones in each currency. So like Bitmind is doing a great job in Ethereum. Solana company RDAT does a good job in Solana. Strategy's massive in Bitcoin. So I think you're going to see a consolidation where the best performing DATs acquire the underperforming DATs. So that'll all happen. I'm not sure whether I would see governments buying DATs in the future. In the near term future I think it's easier to imagine them buying just the tokens themselves and in particular bitcoin brand blockchain. Right. Like the US has a strategic bitcoin reserve. They actually do have a strategic digital asset reserve that has Ripple as well. And Cardano and two others that I can't remember offhand. But most countries I think will stick with just bitcoin. And there again I do think that is highly likely to happen where governments like the US countries that are aligned with the US want to have strategic bitcoin reserves and then I think ultimately other countries that are adversarially the US will also want to have their assets in a kind of independent currency system like bitcoin. So I think it is coming, but probably not via DATs.

[Wilfred Frost]

This episode of the Master Investor podcast with Wilfred Frost is sponsored by BMY Investments, a trusted partner for many delivering financial solutions to investors and institutions worldwide. This sponsorship does not constitute financial advice.

[Podcast Host/Interviewer]

Coming back to the point you made earlier, clearly there's been a massive shift from central banks in recent years to buy more gold. So whether it is Treasuries or central banks, why hasn't that been towards bitcoin yet, do you think?

[Dan Moorhead]

Yeah, I think a couple of reasons. One is it's still pretty new. Crypto's only 15 years old, gold's 5,000 years old in terms of use. And there was a whole period of decades that central banks were sellers of gold. The 90s, the 2000s, everyone's like, oh, gold's a barbaric relic. We have to get rid of it. So that's just changed. And then I think countries like the US used to be selling Bitcoin all the time. US Marshals Service was selling Bitcoin since 2013 or 14. Now they're not selling anymore and might start acquiring. And then countries like China took an adversarial stance against bitcoin. They have to work that out somehow. But I think in five years or so they have to have flipped and gone positive on bitcoin. So it's just kind of the politics of changing attitudes. The US used to sell bitcoins, now they're stable, maybe they're going to buy it. China used to be anti bitcoin. I think they have to ultimately end up being pro bitcoin. So it just takes a while for that to work through the kind of political machine. But it really does seem highly likely to happen.

[Podcast Host/Interviewer]

Why Solana?

[Dan Moorhead]

Oh, so we've been huge holders of bitcoin for a long time. Bitcoin's really good at what it does, but it only does a few things. And then you have newer blockchains like Solana that are more performant. Like they're set up to do thousands of transactions per second. And there are a lot of use cases that really need performance. All kinds of trading, gaming, things like that. Really impossible to run on bitcoin itself. And so Solana was built to be able to do know massive amount of transactions. And it's very important to remind people that there are dozens of Internet companies that are important. Google, Facebook, whatever. There's going to be, you know, probably at least a single digit number of very important layer ones like Solana and bitcoin. And Ethereum and Ripple xrp, you know, so there's going to be, each one has its own use case and, well, storage, shipping money across borders. Bitcoin is really good at that and I can't imagine anyone being better. But if you want to do high frequency things, Solana is cheaper, faster than Bitcoin.

[Podcast Host/Interviewer]

As we kind of come back to the broader price levels that we're at at the moment, I wanted to touch on that point. You know, we talked about the sell off starting in sort of October, mentioned this this morning on the program on sky, which is the Nasdaq went into correction territory on Friday. It's down 12 and a half percent only since October. Why do you think there has been that scale of disconnect in terms of a 50% sell off for Bitcoin, 12% for the Nasdaq for some stocks that have really appreciated pretty aggressively. Do you think there's a, a sort of unreasonable disconnect there?

[Dan Moorhead]

Oh, I do actually. I really think that there's been a big disconnect between equities generally and I even mentioned AI valuations and crypto. So equities are very close to their all time highs. The equity risk premium. So the valuation of equities versus bonds is extremely rich. It's 75 basis points through its 50 year average. And so equities are very fully valued relative to interest rates. And as we talked before, interest rates are drifting higher. And so I would say the equity sector is fully valued. And then my intuition, having traded cycles for 40 years is there seems to be a bit of a wobble in AI investing right now that, you know, up until very, very recently, kind of every AI company was able to print an up round, bigger size, bigger valuation, all that. It kind of feels like the market's saturated now and the companies that are trying to raise money now are for the first time ever really not being able to fill that demand. And we do track a trend graph of the 15 or so most important AI companies and they're about 20% over their very steep exponent trend. And then crypto is 50% below its exponential trend. So there's this huge gap with AI way record high above its trend. And on a four year basis, crypto is literally as cheap as it's ever been relative to its trend. And on an eight year two cycle basis it's at the seventh percentile. You know, so crypto's really, really extremely cheap relative to its trend. AI is expensive and then stocks are generally expensive relative to bonds. So as someone out there is looking to allocate capital. Seems clear to me that crypto is very, very attractive relative to bonds, gold equities and AI.

[Podcast Host/Interviewer]

I guess the pushback to that, maybe you're right that AI is overvalued and do a pullback, even the bubble to burst if some people go that far. But that doesn't mean another quite high risk asset is a buy necessarily. And if you did see a big de risking event in the Nasdaq, for example, presumably bitcoin would fall initially.

[Dan Moorhead]

Yes, I'm happy to admit that. If you said next week the Nasdaq's going to be down 30%, do you want to be long or short crypto today? Yeah, it probably would be short, right? But I don't know if that's going to happen when you say, hey, but what if you want to hold something for a year or two years or whatever? I do think that crypto is very low correlated with the Nasdaq. And so even if you tell me two years from now the NASDAQ's gonna be down 10%, I think crypto's gonna be up a lot.

[Podcast Host/Interviewer]

Final couple of questions, Dan, in terms of again, your overall thinking things at the moment, you talked about these four year cycles. Clearly since October, we're in a bad period of one of those cycles. How is your gut towards crypto in this moment versus the other first year of those downtrends? And on top of that, the very fact that that has come at the same time that another asset has started shining bright, that plays to your same theme in gold. Does it make you second guess? Okay, the best days of this asymmetric trader behind me.

[Dan Moorhead]

Oh, two great questions. The first one is very easy, I will admit. The first couple of bear markets I was sweating it. You know, crypto was down 85% and everybody's talking about it's over and it failed. And you know, I just been telling everybody it was the greatest trade ever and got a bunch of, you know, friends and colleagues into it and sweating it, you know, and maybe it was a dumb idea, maybe the US government was going to outlaw it or maybe it was going to get hacked or break or whatever. I don't lose any sleep now. It's inevitable. Even some of the worst critics of it have flipped and are all positive. Some of the big CEOs of banks and alts firms that used to be super negative are all out there selling bitcoins now. So I think it really has reached escape velocity. Bitcoin is going to be really important. And yes, it goes through these, you know, wild cycles. Fear and greed drive it up, down. But it really does feel inevitable. So, you know, I really have gotten past the cold sweats I used to have in 2014, 2018, you know, it really seemed like it, you know, Mt. Gox was 85% of the market cap in, in 2013. It got hacked and destroyed and hacked and it seemed like everything was going to be over. No. And it just kept going. So all these really, really bad things happen to the industry and it keeps going. And the second part of your question is how do you think your question was how is it cheap versus gold

[Podcast Host/Interviewer]

or so that's really interesting first kind of perspective on it, I guess the added factor that's thrown in in this first year where all those questions are being asked. And by the way, I think there are a lot of people out there again who are saying, oh my gosh, is this as much as four years ago? Is this thing done and dusted forever at the same time they found or some people have found an alternative to suddenly pile into. Again, to play the same theme, this debasement trade, which I think we both agree is probably the biggest factor behind it, does that not feed into your concern about whether or not the best days of this trade are behind it?

[Dan Moorhead]

Yeah, I mean it's a good question. If somebody said, hey, my only two choices are sit in paper money or buy gold. Yeah, definitely buy gold, it's going to do better. But given that gold's been around a long time, everyone kind of knows what it is. It has rallied to all time highs. My intuition is it seems fully valued. Whereas bitcoin's still very small minority of investors actually own any. It's at a 50% drawdown to where it was recently. Seems cheap. And I would say that's my same logic with AI because bitcoin used to be the sexiest thing in finance and then AI became even more alluring to people and so a lot of money has flowed that direction and there again I would say it is important and people should have exposure to it. But buy low, sell high, right? You gotta when something has taken a 50% retracement, it's probably more attractive than something still at all time highs.

[Podcast Host/Interviewer]

I'm nearly there. Not there yet. Try and catch that. Falling knife is impossible though every expert guest tells me. Final question, Dan, for you. Is there an event, is there a factor that you watch out for every, not every day but every quarter, every year that would make you drop your bull thesis on Crypto, what could happen that would change that?

[Dan Moorhead]

Oh, it is a great question. And we actually did a letter to our investors a few years ago listing all of the reasons to say no to bitcoin and crypto. And there were a lot of them. No real custodian. It could get hacked, all these things. The nice thing is all those have really been crossed off. The US regulatory thing is really the last really, really scary thing out there. So I am actually not conscious of a thing that could pop up that I just say, you know what, this is all stupid and I'm going to go on and be a macro trader again or whatever. So obviously something could pop up as soon as we in this interview that would make me do that. But there isn't anything that I can think of. And there used to be some big ones, you know, like when we started, the US could have outlawed bitcoin. It probably would have worked, you know, and there were no custodians, like, you know, very primitive, everything was really primitive. And there were a lot of ways that everything could go wrong, you know, now there really isn't anything that could derail it. So, you know, it might take a lot longer than we hope. But I just think cell phone based money that doesn't have very expensive intermediaries, you know, really has to work. And again, 4 billion people could use blockchain and 2 and a half billion use Facebook. Right? Like it's, you know, this has got to be more important than sharing photos. So I do, I think it is going to be big.

[Podcast Host/Interviewer]

Dan, it's always a pleasure to catch up. Thanks so much for stopping by again and join joining us on the Master Investor Podcast.

[Wilfred Frost]

Thank you.

[Podcast Host/Interviewer]

Dan Moorhead there of Pantera Capital. Next week on the Master Investor Podcast, we'll be joined by the CEO of Charles Schwab, Rick Wurster. Please hit follow or subscribe if you haven't done so already to make sure you get that. But for now, our thanks again to Dan Moorhead. Thank you.

[Wilfred Frost]

The Master Investor Podcast is sponsored by LSEG Interactive Brokers, the World Gold Council and BMY Investments. Please do remember the views expressed in this podcast are for general information purposes only. Nothing in the podcast constitutes a financial promotion, investment advice or a personal recommendation. More on that in the show Notes. This podcast is produced by Paradine Productions and Master Investor limited in association with Birdline Media. If you've enjoyed the show, please do subscribe on YouTube or click follow on your podcast platform and you'll be automatically notified each time a new episode drops.