Dan Morehead: Crypto - The Most Asymmetric Trade in History

Summary

The Master Investor Podcast with Wilfred Frost

Episode Title: Dan Morehead: Crypto - The Most Asymmetric Trade in History
Date: October 14, 2025
Guest: Dan Morehead, Founder and CEO of Pantera Capital
Host: Wilfred Frost

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Episode Overview

This episode features a lively and practical conversation between Wilfred Frost and Dan Morehead, the founder of Pantera Capital—one of the world’s largest and earliest crypto-focused hedge funds. The discussion covers the evolution, promise, and volatility of blockchain and crypto assets, Dan’s investment philosophy, the regulatory and institutional shifts affecting crypto, and practical advice for both novices and seasoned investors. Morehead passionately argues that crypto is “the most asymmetric trade in history” and shares why he remains deeply bullish, even after over a decade in the space.

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Key Themes & Discussion Points

1. Genesis of Crypto Investing & The Macro Perspective

• Dan’s Investment Roots:
  • Began his career at Goldman Sachs and Tiger Management, always chasing “asymmetric trades.”
  • Introduced to Bitcoin in 2011, saw it as a macro trade impacting every asset class and person with a smartphone.
• A Lightbulb Moment:
  • Realized, after intensive research and conversations with early Bitcoin leaders, that crypto was “the biggest trade ever.”
  • “It's a macro style trade, but it impacts literally every asset class, every person with a smartphone, 4 billion people. It's just the biggest trade of all time. And I really do think it's the most asymmetric trade of all time. And we're still really early.” — Dan Morehead (03:37)

2. Why Blockchain is Revolutionary

• Beyond Monetary Debasement:
  • Blockchain will do to finance what the Internet did to information, communications, and commerce.
  • There's a vast range of use cases: not just currency, but settlement, property title, programmable money, and more.
  • “Credit card companies are half a trillion. There are banks that are almost a trillion in market cap. Remittance companies charge migrants a month's wages just to move money across the border, which is crazy. So all of those use cases are what blockchain's doing, and they're all massive.” — Dan Morehead (05:41)
• No Blockchain Without Tokens:
  • You cannot have blockchain technology functioning at scale without cryptocurrency tokens themselves.

3. Regulation & Political Shifts: Crypto Goes Mainstream

• US Political Environment:
  • Contrary to fears that governments would stamp out crypto, recent US administrations have become increasingly supportive.
  • “... The really weird thing is if either party was supposed to pick it, it was the Dems. It's a progressive's dream. Bitcoin is doing financial inclusion for billion people on earth.” — Dan Morehead (10:01)
  • Significant turnover in Congress with pro-crypto lawmakers gaining ground and major regulatory advances, including ETF approval.
• Government Seizures & Transparency:
  • Blockchains' public, immutable ledgers are a boon for law enforcement, not criminals—governments quickly realized its value.

4. Investment Access: From Funds to ETFs and Treasury Companies

• The March of Mainstream Onramps:
  • Initial obstacles for institutional and retail investors have lessened dramatically—Bitcoin ETFs are now booming with ~$100 billion in inflows.
  • The emergence of “digital asset treasury companies” (DATs) like MicroStrategy and new ventures focused on assets like Solana have further broadened access.
  • “Last year ETFs were approved. The inflows are larger than stock funds, larger than gold. It's a record, record amount of inflows, 100 billion into Bitcoin ETFs. That makes it easier for people to get exposure.” — Dan Morehead (11:50)

5. Investment Strategy at Pantera: Asymmetric Bets & Holding Long

• Hedge Fund DNA, But Pure Long:
  • Initial plans included shorting assets, but with crypto’s asymmetry, the core bet is just to be long.
  • “If something's this asymmetric, just get long. And so our approach has been to be long. Our first fund is up 1500x…” — Dan Morehead (12:53)
• Coping With Volatility:
  • Crypto can and does experience sharp, 80–85% drawdowns. All-time holders who’ve held for four years have still always at least doubled their money.
  • “But anyone that's held bitcoin for four years has made money and the minimum they made is doubling their money, which I've never encountered any other asset class that's done that. So our advice on all these drawdowns is definitely keep your position.” — Dan Morehead (14:28)

6. Correlation with Risk Assets & Portfolio Allocation

• Crypto’s Unique Place:
  • As of now, most institutions still have zero or negligible crypto exposure, resulting in low correlation with traditional risk assets in the long term.
  • “The majority of institutions literally have 0.0 risk in crypto. So when they have to reduce risk...they actually don't have any crypto to sell.” — Dan Morehead (15:48)
  • Morehead predicts that by 2030, most portfolios will have at least 8–10% in blockchain assets, but “we’re still early.”

7. The Fallout from FTX and the Path Forward

• Learning From Sector Blowups:
  • Sees FTX, 3AC, and BlockFi collapses as “once in a generation” washouts due to leverage or fraud—unlikely to be repeated soon.
  • Now, with regulated, transparent players like BlackRock, Fidelity, Bitwise, the industry is “very healthy.”
• Volatility Does Not = Risk:
  • Volatility is present, but risk (in terms of ultimate loss) is low if you can stomach it; the sector’s overall risk/return ratio is, in his view, unmatched.
  • “Blockchain is actually not that risky. I admit it's highly volatile... for those kinds of returns, it's kind of the best return versus risk ratio I've ever seen.” — Dan Morehead (20:13)

8. The “Layer One” Debate: Bitcoin, Ethereum, Solana & The Network Effect

• No Single Winner:
  • Expects a handful (single digit) of foundational blockchains, each optimized for different use cases:
    • Bitcoin = store of value, cross-border payments
    • Ethereum = programmable money, smart contracts
    • Solana/XRP = high-speed, high-volume transactions
  • “I think you'll have a single digit number of these underlying blockchains like Solana and Ethereum and Bitcoin, they each do very, very different things.” — Dan Morehead (22:23)
• Bitcoin’s Unique “Digital Gold” Status:
  • Massive network effect and a 15-year track record.
  • “There have been tons of, hey, it's the next bitcoin, like Litecoin or feather coin or whatever. And those all fail because ultimately...Bitcoin is a technology currency. So there's already 2,300 million people using Bitcoin brand blockchain. So I think that has already won its use case.” — Dan Morehead (24:20)
  • However, he does not insist Bitcoin will always be the largest.

9. Treasury Companies (DATs): Access & Outperformance Potential

• What Are DATs?
  • Listed equity vehicles that hold and build positions in digital tokens (ex: MicroStrategy with Bitcoin, Solana Company for SOL).
  • Accessible to a broader range of investors, including those who can’t purchase tokens directly.
  • “We've done 200,000 trades in it already in like three weeks. And so it's allowing people to access the advantages of digital asset. Treasury companies, I think are superior to ETFs.” — Dan Morehead (27:56)
• Risks & Downsides:
  • Staking and engineering bring higher yields but more risk than passive ETFs; leverage is typically kept low (~10% or less).
  • If trading below NAV, could be acquired or rolled up.
• Industry Outlook:
  • Only a small number of well-run DATs likely survive per token/network; rest will consolidate.

10. Stablecoins, Remittance, and Global Use Cases

• Comparative Costs:
  • For most Americans, especially cross-border, money transfer remains expensive and slow—stablecoins are already much better in most such cases.
  • Quote: “It's so antiquated. Taking out of an ATM is 3% or 4%, Visa, MasterCard's 3%. Even if the biggest bank in the United States wants to send a billion dollars to the other biggest bank in the us it takes three hours on Fedwire...” (33:13)
  • The current real-world impact: Access to US dollar stablecoins and tokenized treasuries (e.g., Ondo) already reaching $12 billion.

11. Behavioral & Emotional Challenges: Holding Through Volatility

• How to Maintain Conviction:
  • Recognize that blockchain is inevitable and cycles of deep drawdowns are to be expected.
  • “...when it goes down 85%, yeah, it's not fun. You don't feel smart, but it really will. I think it's inevitable that it will do well. And so that’s what we try and encourage our investors to hold as long as they can.” — Dan Morehead (36:30)

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Notable Quotes & Memorable Moments

• “Crypto is the most asymmetric trade in history. And we're still really early.”
  — Dan Morehead (03:43)

• “Blockchain will be, I think like 10x higher in 5 years than it is today.”
  — Dan Morehead (36:34)

• On Public Ledger and Crime:
  “So there was first one agent that was doing it. So we reported it to another DEA agent that we knew. He quit that day. And I'm like, okay, that's really bad. And so we reported it to a third person…Print out the whole blockchain ledger. And they're both. They went to prison for 10 years. Right. That's when governments realized blockchain's terrible for crimes.” (09:13)

• On Portfolio Adoption:
  “If you give me all the way out to 10 years, I think every institution will have a blockchain team and something like 8 or 10% of their assets in blockchain.” (16:27)

• On Longevity of the Thesis:
  “I've been doing this for 12 years and I always ask people, especially skeptics, to please send me any paper any reasonably intelligent person ever has written that's negative on bitcoin or blockchain. I still have never seen one…you get very famous and very talented investors saying these kind of one line negative things about bitcoin. But I still am unaware.” (37:25)

• On Monetary Debasement:
  “Try and convert [the pound] into a pound of sterling silver. It doesn't work anymore. Right. They've printed so many pieces of pound sterling paper, it takes 340 pieces of those paper to buy a pound of sterling silver. Now that's the best argument. Buy bitcoin.” (40:01)

• Investment Advice:
  “Put 1% of your net worth into crypto and hold it for five or 10 years and it should work.” (41:51)

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Timestamps by Topic

• [02:10] – Dan’s early career & introduction to Bitcoin
• [03:40] – The “lightbulb” moment: Bitcoin’s total addressable impact
• [05:30] – Blockchain’s use cases beyond currency
• [08:29] – Regulation, politics, government’s surprising embrace
• [11:25] – Mainstream access: ETFs, digital asset treasury companies
• [12:38] – Pantera’s investment approach: asymmetric, long bias
• [13:57] – Crypto volatility, panics, and advice for holders
• [15:29] – Crypto’s (lack of) correlation, institutional adoption
• [18:00] – FTX, sector blowups, and how the industry matured
• [20:13] – Volatility vs. risk: why blockchain’s risk is “refutable”
• [21:46] – The major blockchains: Bitcoin, Ethereum, Solana, network effects
• [23:53] – Monetary debasement argument for crypto vs. proliferation of tokens
• [25:50] – Treasury companies (DATs): what they are, their advantages and risks
• [32:10] – Stablecoins & real-world remittance benefits
• [35:59] – Psychology: conviction in holding through extreme gains and drawdowns
• [37:23] – Strongest arguments against crypto, challenging your convictions
• [40:17] – Best and worst trades, lessons learned
• [41:47] – Parting investment advice

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Practical Advice & Takeaways

• Crypto is volatile but, for patient long-term holders, historically lucrative.
• Regulatory and institutional tailwinds are driving enormous new inflows; the asset class is still early.
• Digital asset treasury companies may offer enhanced exposure, but come with additional risks and complexity compared to ETFs or direct ownership.
• Even a minimal (<1%) portfolio allocation to crypto could be highly impactful over a decade.
• Despite deep pullbacks and negative headlines, structural factors and network effects heavily favor survival and growth of key blockchains.
• Skeptics have yet to supply rigorous arguments against the sector’s long-term prospects—according to Morehead, the best counterpoints are still just soundbites.

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For Newcomers:

"Essentially get off zero. If you have zero, you really should have some exposure. Put 1% of your net worth into crypto and hold it for five or 10 years and it should work." — Dan Morehead (41:51)

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This episode provides an in-depth, wide-ranging look at the crypto ecosystem, offering both technical and accessible arguments for why Dan Morehead sees blockchain as an inevitable, transformative force for finance and investment.

Transcript

[A]

Blockchain will be, I think like 10x higher in 5 years than it is today. And so when it goes down 85%, yeah, it's not fun. It doesn't, it's not. You don't feel smart, it's not fun. But I think it's inevitable that it will do well. And so that's what we try and encourage our investors to hold as long as they can. So that is a simple way to view blockchain is it's basically doing to finance what the rest of the Internet did to everything else. I actually strongly believe that bitcoin and other blockchain assets are going to generally have a very low correlation with risk assets. The reason is smart money doesn't own it. The majority of institutions literally have 0.0 risk in crypto. So when they have to reduce risk and they say, hey, let's just take 5% of our risk off across the board, they actually don't have any crypto to sell. And even your own currency, which is the oldest on earth, not currently the best, alas, try and convert it into a pound of sterling silver. It doesn't work anymore. Right. They've printed so many pieces of pound sterling paper, it takes 340 pieces of those paper to buy a pound of sterling silver. Now that's the best argument. Buy bitcoin.

[B]

Welcome to the Master Investor Podcast with me, Wilfred Frost, where we celebrate and learn from the success of the great greatest investors, business leaders and politicians in the world, giving you our listeners, the edge. My guest today began his career at Goldman Sachs before moving on to Tiger Management, the famed hedge fund of Julian Robertson, where he rose to be head of Macro Trading, amongst other roles. But he left to found his own hedge fund, Pantera Capital Management, in 2003. Initially a traditional macro hedge fund, he pivoted it to be a crypto only hedge fund as early as 2013. And today Pantera manages some $6 billion in crypto investments. He is of course, Dan Moorhead. I'm delighted he is with me here in London. A very good morning to you and welcome to the Master Investor Podcast.

[A]

Thanks for having me.

[B]

And Dan, I mean, you were very early to have a crypto only hedge fund way back in 2013, quite possibly the the first to do that. What would you say compared to everything else back then in 2013 struck you to say, I need to do this, I need to have a pure crypto hedge fund?

[A]

Sure. So my career was in global macro style investing, looking for asymmetric trades around the world and every Two or three years, a cool trade would come up that would impact just one asset class or one region or any. And it has some impact. And there have been some great trades. I went to Russia in 1990 when Gorbachev was the premier, to look at trades and invest in gazproms, privatization and things like Argentine farmland and Middle Eastern equities. There's been cool trades like that over the years. But in 2011, my brother John introduced me to bitcoin. Back then there was almost nothing you could learn about it. Little tiny bit of Wikipedia, the white paper, obviously it was so little. Kind of loved that a classmate of mine, actually Gavin Andreessen, was the chief scientist of bitcoin at the time. Satoshi Nakamoto gave him the keys to the kingdom and they were giving away free bitcoins. There was a thing called bitcoin faucet. You just go on and they would give you free bitcoins because nobody knew about it or cared about. I have a little bit of a libertarian streak, so I was like, this is really cool, but I didn't actually do anything. And then about 18 months later, Pete Brugger and Mike Novogratz of Fortress asked if I could help him think through bitcoin. And I was like, yeah, it's really cool. And I came in for a coffee and it lasted like five hours. And I was like, oh man, this is the biggest trade ever. And Pete gave me an office in the Fortress office in San Francisco. And basically I didn't leave for like eight years. They finally kicked me out like a few years ago. But it just hit me that it was the biggest trade ever. It's a macro style trade, but it impacts literally every asset class, every person with a smartphone, 4 billion people. It's just the biggest trade of all time. And I really do think it's the most asymmetric trade of all time. And we're still really early. And so in 2013, I spent about three or four months just reading everything I could find, meeting everybody I could meet in the industry. I flew around the world, went to all the exchanges and just had this light bulb moment that it was just the trade.

[B]

Just expand for the layperson on that. Why is it the trade? This comes back to the monetary debasement argument.

[A]

So the reason I love bitcoin and blockchain as the trade is there are like 20 reasons it's going to be huge and monetary debasement is one of them. But then there's like 20 other things. And so when you really look at it. Like right now we're all focused on monetary debasement that is happening at a faster pace, but it's been happening for a couple hundred years. And so that's one of the reasons. But if you zoom out, there's 20 really important reasons why blockchain is going to be massive. And one of the analogs I like is there's a bunch of protocols that we now call the Internet that revolutionized everything else in our lives. Commerce, communication, everything. Didn't touch banking, didn't touch finance, didn't touch credit cards. They're all exactly the same as they were in 1958. Right. So that is a simple way to view blockchain is it's basically doing to finance with the rest of the Internet did everything else. And there are huge margins. Credit card companies are half a trillion. There are banks that are almost a trillion in market cap. Remittance companies charge migrants a month's wages just to move money across the border, which is crazy. So all of those use cases are what blockchain's doing, and they're all massive.

[B]

I guess some blockchains are also quite expensive at the moment, but maybe that will be competed away. We'll come to that in a moment. But just want to again continue this overriding argument for crypto. What you're saying to me there is it's more about the blockchain, about the technology and the way it can power certain industries, particularly finance, than some of these cryptocurrencies being the currencies in which we transact our everyday lives going forward. Or do you believe in that argument as well?

[A]

Oh, I do. I believe in that. And that's kind of coming back to my original statement that the reason I'm so bullish is there's dozens of really important reasons. And when you have a new technology, people want to have an analog to the old school world, like SMTP became electronic mail. And people want to call Bitcoin cryptocurrency, but it's a payment rail. It's a property title storage system. It has 100 different use cases. Currency is just one of them. People call Bitcoin digital gold, that's another use case. And so cryptocurrencies are really, really important as currencies, but they're also payment rails. They're also ways to transfer titles, all these other use cases. And so I think they are equally important. And a perspective I love is you really can't have blockchain technology without the tokens, without the cryptocurrencies. So you can't. There are sometimes popular, say, oh, I don't like bitcoin, but I really love blockchain tech. You can't blockchain tech money from here to Tokyo without buying a bitcoin. You actually have to buy the token because it is the kind of the space on the pipeline or however you want to, whatever analog you want. So I think there are kind of two sides to the same coin.

[B]

Again, I want to come to the costs of sending money to Tokyo by crypto soon because I think it's still pretty cheap at the moment to do it through traditional finance. But just rounding off the sort of bull case overall and where we are in this argument, how significant was it the extent to which the Trump administration has embraced crypto? I mean, clearly you've made a lot of money since 2013 already. But back when I started talking about it and thinking about it, 2016, 17, 18, I used to think, no government, particularly if you've got the reserve currency in the world, is going to want to let this proliferate in a big way. And at some point they'll stamp it out. They've done the opposite. I mean, is that your reading of it and how big a moment was that that the Trump administration has come in so clearly behind crypto?

[A]

Yeah, there's a couple of interesting layers to that onion. There is. The first one is this kind of instinct that governments hate blockchain. It's really the opposite. Bitcoin was originally supposedly a great way to commit crimes. Right. The Silk Road guy used bitcoin. He's in jail and all of his bitcoins got confiscated. The US government owns 1% of all the world's bitcoins. They didn't get them from good guys. It's from seizing it from criminals. And so the governments around the world, I think, fairly quickly realized that anything that has a permanent paper trail of every trade that's ever happened published every 10 minutes is a terrible thing for committing crimes. And so governments actually love blockchain.

[B]

When was that moment? When did they fall in love with it?

[A]

I was the chairman of Bitstamp eight or 10 years ago, and the CEO said there was two FBI agents laundering money on Bitstamp. And I said, you watched too many Tom Cruise movies. That's definitely not happening. I looked at it and I said, oh, that's bad. So there was first one agent that was doing it. So we reported it to another DEA agent that we knew. He quit that day. And I'm like, okay, that's really Bad. And so we reported it to a third person, this is in probably 2015 or 16. Ultimately reported to a federal prosecutor named Katie Hahn, who's now in the bitcoin blockchain venture business. Print out the whole blockchain ledger. And they're both. They went to prison for 10 years. Right. That's when governments realized blockchain's terrible for crimes. Right. And so they really are at least neutral. And so you brought us to the US and the SEC in the United States. For whatever reason, the United States political system makes everything partisan and somehow made a technology bitcoin partisan, which is itself weird. But the really weird thing is if either party was supposed to pick it, it was the Dems. It's a progressive's dream. Bitcoin is doing financial inclusion for billion people on earth. So that got it all politicized for a while. The election massively important for our industry. Not only is the current president very pro crypto, Congress swung and changed. There were a lot of people in Congress that were negative on crypto. Our industry participated in 58 congressional races and 54 anti crypto people lost their seats. And 54 pro crypto people came in. You see the results already. There's already been a stablecoin legislation passed in the US they're working on market structure. Very, very important to just kind of reduce the risk that investors were feeling in the US Regulatory situation was very, very scary. Essentially with the SEC selling Coinbase and Ripple Labs.

[B]

Another thing I guess has happened this year is it's not just via direct crypto wallets that people get exposure. There's, there's lots of much more easy ways for people who might have to have a mainstream account because of their job or whatever that people can get exposure to crypto quite, quite easily now.

[A]

Yeah. So that's another huge advance. And it is, it's tied to the changes in regulation in the US in the old days, it was really hard to get exposure to crypto. Are bitcoin funds the first institutional product for anybody? And then it's taken 10 years to get to ETFs, which I thought would take only a couple of years. Last year ETFs were approved. The inflows are larger than stock funds, larger than gold. It's a record, record amount of inflows, 100 billion into Bitcoin ETFs. That makes it easier for people to get exposure. And then kind of the next evolution are these digital asset treasury companies which make a public equity owner of a token. And those, I think are actually superior to ETFs, but it's bringing in just a whole new constituent of investors.

[B]

I want to get into those treasury companies in a second. But with this overall clearly bullish view you've got on the asset class, if we call it that. Tell us exactly what you do at Pantera. I mean, we think of hedge fund as taking as many short positions as longs. Are you trading between the different currencies, net long the asset class, or is it really just a case of getting in early to the. The bullish theme that you're outlining?

[A]

Yeah, that's a great question. So I grew up as a hedge fund investor, so that was my instinct is our first fund was going to be a long, short thing. We're going to buy Bitcoin and short gold, we're going to buy Ethereum.

[B]

Would have been a bad trade this year. Yeah, gold's rocketed. Yeah.

[A]

And short the credit card companies, those things. In the end, if something's this asymmetric, just get long. And so our approach has been to be long. Our first fund is up 1500x so if we were short something, it'd be 1501. Right. So you really have to get the long bit right. We try and provide access to investors from daily liquidity funds all the way through 10 or longer year venture funds. And so we essentially have, we invest in the entire blockchain spectrum and have funds that allow people to get exposure however they want it, both venture and cryptocurrency tokens.

[B]

So let's talk a bit about the current. I guess Friday would have been a good day if you'd wanted to have your old hedge fund trading hat on and be short some stuff. Last Week, Bitcoin down 17%, Ethereum down 27, Solana down something similar. Some of the other coins like Dogecoin was down 50% in the week. XRP was down 57%. What happened at the back end of last week on Friday in particular?

[A]

Yeah, so any really disruptive thing brings excessive speculation and so sometimes the market gets ahead of itself and then when there are exogenous shocks like tariff wars, risk assets generally come off. Crypto has a very long term, very low correlation with risk assets. But in very short term periods it can be highly correlated. What we've always tried to stress to investors is this is a very disruptive trade. It's a multi decade trade and so only put on as much as you could hold. If things do go down in our 12 years of managing money, Bitcoin Itself, the best of the currencies has gone down 85% three times. So you have to be able to withstand those kinds of drawdowns. But anyone that's held bitcoin for four years has made money and the minimum they made is doubling their money, which I've never encountered any other asset class that's done that. So our advice on all these drawdowns is definitely keep your position. If you have any resources, add to it. Because in 10, 20 years no one's going to remember some little tariff spat.

[B]

Well, there's a couple things to get to there. So the first is a tariff announcement which has now been partly unwound, obviously as the course of the weekend played out is your classic kind of risk off moment for equities. So does it surprise you that crypto gets hit so hard? Or I guess implicit in your last answer are you saying to people, this isn't like gold, this isn't like a T bill. This isn't part of the portfolio that you should consider is a hedge to your equity exposure?

[A]

Yeah. So I actually strongly believe that bitcoin and other blockchain assets are going to generally have a very low correlation with the risk assets. The reason is smart money doesn't own it. And the reason all these other weird asset classes that intrinsically have nothing in common are highly correlated is modern portfolio theory was so successful. Everybody has the same portfolio. The majority of institutions literally have 0.0 risk in crypto. So when they have to reduce risk and they say, hey, let's just take 5% of our risk off across the board, they actually don't have any crypto to sell. So that is why it's typically very low correlation with risk assets.

[B]

I mean, I'm literally your perfect example on this, by the way, because I understand all these arguments, I talk about it, and yet my exposure is pretty much zero. As we stand. Where will typical portfolios be to crypto assets by the end of this decade, by 2030, do you think?

[A]

Yeah. So I actually feel like I've seen this movie a couple times before. I was at Goldman when they did the gsci and now everybody thinks of commodities and the asset class. I was even in emerging markets in the 90s and now EM is an asset class. It seems self evident to me that blockchain will be an asset class. And if you give me all the way out to 10 years, I think every institution will have a blockchain team in something like 8 or 10% of their assets in blockchain. And as I Said now the majority literally have 0.0 and even the most thoughtful endowments out there, maybe 2% in blockchain. So it's still very, very early.

[B]

That's really interesting. And we can check in on this in 10 years or in five years. And maybe I should tell you when I do finally take the plunge, which will almost certainly mark a short term top, if I do just dwell though a little bit more on that sell off on Friday, obviously we've had a number of those 85% pullbacks that you've said. The most recent one with the FTX implosion, when you look back on the fact that we've bounced back strongly from the FTX implosion and back to comfortable new highs in Bitcoin prices and other asset crypto asset prices, was that process actually helpful long term to go through a washout and a bounce, or does it kind of worry you that it makes the asset class still seem new and risky and all of those sorts of things? And is there a chance, with the type of leverage that clearly must be at play to see Friday and last week sell off, that we might have another big one of those blow ups in the sector in the next 12 months?

[A]

It's a reasonable instinct to think if we've had one, we might have another one. I would make the argument that was a once in a generation weird anomaly. So all of those things, FTX or a bunch of other hedge funds like Three Arrows and BlockFi and Celsius, all those things, they were all very opaque, highly levered, basically speculative entities that blew up from either excessive leverage or in a couple cases, criminal activity. Right. That's not going to happen again. People don't loan money to opaque, highly levered speculative things more than once in a generation. So we did that. People realized that was a dumb idea and now they're investing through BlackRock or Fidelity or Bitwise. Right. Very transparent entities, no leverage. And so I would say the industries essentially kind of did that once and that's in the past. And now everything's very healthy, very opaque, no leverage.

[B]

But. Well, those, as you said, some of them was criminal activity and they might have been opaque, but surely there's a lot of leverage in the system. How does Bitcoin fall, which is now a 2.5 trillion market cap asset, how does it fall nearly 20% in a week? How does Ethereum, which is close behind IT as the second biggest asset, fall 27% in a week if there's not a lot of leverage in the system?

[A]

Oh, I Actually don't think there is that much leverage because they've essentially bounced back. Most of them are back halfway to their highs.

[B]

But that's not healthy.

[A]

Oh, it's a high volume thing. I agree. The Indonesian rupiah used to be really high volume and now it's kind of more boring. Right. And so bitcoin's a teenager, still very young, and not that many people own it yet. So it will have higher volatility, but ultimately higher highs and higher lows. And one of the things I like to share with people is we grew up with portfolio theory where people literally say volatility equals risk and that var volatility at risk is like a concept. Blockchain is actually not that risky. I admit it's highly volatile and you just mentioned how volatile it is. We've been investing in venture for 12 years. In the real world, 65% of venture companies go broke and then a couple make a little bit and then one helps your fund make 1.7 times your money or two times your money. We have made money on 86% of our venture investments, which is just amazing. Partly it's our team's fantastic and we do really good work, but honestly, partly it's just a rising tsunami is floating all boats. We're in just such a good industry. And so the concept that blockchain is risky really is refutable. Our venture investing, all of our funds, we've returned all of our investors capital within 4 and a half years and then 5 to 15x over the following years. There's a little volatility, admittedly, but for those kinds of returns, it's kind of the best return versus risk ratio I've ever seen.

[B]

Clearly for the long term holder, not the short term holder. Let's talk about the different currencies within the space. If we looked at your latest post on X, it's like you're solely focused on Solana at the moment. So I want to come to Solana in a second. But I think these numbers are roughly right. Bitcoins total market value is 2.5 trillion. Ethereum's the next biggest at about 400 to 500 million. So a fifth of the size of Bitcoin. Solana is at about 125 billion, so about a twentieth of the size of Bitcoin. Are those three the three that will be the biggest over the next decade and will their relative sizes to each other hold, do you think? Or is there more room for the smaller guys to play catch up?

[A]

Yeah, great question. And one of the things I've noticed in talking to investors over the years is there's this desire to know which one's going to be the winner, as if there's going to be one cryptocurrency in the future.

[B]

Sorry for asking that question.

[A]

No, no, I love it, I love it. It's important to stress that there'll be hundreds of important blockchains out there. Bitcoin, Ethereum and Solana are very, very important. But tomorrow they might invent something new that has another cool use case that's equally important. And then it should be said that these are layer ones like the underlying payment rails. The things that run most tokens are actually built on top of other tokens, like they're built on top of Ethereum or on top of Solana. And they're more like digital companies. And so you could have thousands of those. I think you'll have a single digit number of these underlying blockchains like Solana and Ethereum and Bitcoin, they each do very, very different things. And that's like we don't have one Internet company, right? We have six or eight big ones and then hundreds of smaller ones. Bitcoin's very good at storing money. It's very good at sending money across borders, but it's kind of clunky at doing other things. Ethereum is really good at programmable money, doing smart contracts, but as well it doesn't process that many trades per second. And then blockchains like Solana and XRP Ripple's token, they process thousands of transactions per second, so they just really have different use cases. And right now our biggest position is Solana, but we have big positions in quite a few other coins as well.

[B]

So lots to get to that. I want to get into Solana specifically just very quickly. And I know you said there's lots of arguments to own crypto, it's not just one, but the very fact you're saying there's going to be lots, does that not undermine the argument for those that are still looking at it this way, for Bitcoin to be attractive because of the monetary debasement of fiat currencies? Because yes, bitcoin might be limited in its supply, but the very fact that there could be quite a few of these new currencies, doesn't that undermine the monetary debasement argument for owning crypto in the first place?

[A]

No, the argument there would be there are 118 elements, people pick number 79 to store their wealth, gold. It's been great. There's other Elements like why not platinum or palladium or something. Those are prettier, right? Same with bitcoin. There are 25,000 on coinmarketcap.com tokens out there, but there's only one that has massive network effect and 15 year track records, Bitcoin. So there have been tons of, hey, it's the next bitcoin, like Litecoin or feather coin or whatever. And those all fail because ultimately both technologies and currencies have amazing network effects. And Bitcoin is a technology currency. So there's already 2,300 million people using Bitcoin brand blockchain. So I think that has already won its use case. There won't be another digital gold. You know, Solana is very hyper performance, so it's having its day. There might be a new coin come out tomorrow that has some other feature that we haven't envisioned. But I think it's pretty easy to say that Bitcoin has won the digital gold use case.

[B]

And so although you thought it was a silly question, will bitcoin always be the biggest by market value?

[A]

You know, that one's interesting. I don't know that I would say that I think that Bitcoin's 60% of the market. It's been a huge fraction of the market the whole time. But I do think there's going to be quite a few other important layer ones and then there's going to be tons of other tokens built on top of those. So I could easily see a world where there's many, many important blockchains where none have more than 50% of the market.

[B]

Let's talk about treasury companies, because I think that's part of the reason you're into Solana. The moment you've launched a Solana treasury company called Hilius. What is a Treasury company? We've talked in the past to Tom Lee about his Ethereum treasury company, bit mine. What is a Treasury company for someone that doesn't know?

[A]

So at Pantera, we've always been trying to provide access to people because back in the day Mount Gox was the alternative for investing in bitcoin. So each new thing is another way for people to get access. ETFs were a way for people to get access. MicroStrategy. Michael Saylor decided to buy some bitcoins on the balance sheet of his SaaS company and it proved popular. So he bought some more bitcoins and he studied and keeps doing it and gets bigger and bigger. So he essentially created that concept. And I'll admit I was A bit reticent at first to understand why it was important and what that would do. And I do credit one of my friends, a guy named Mark Casey, who's a neighbor in Woodside, California, where He owned about 10% of MicroStrategy. I was like, why are you doing that? And he said, hey, I'm a 40 act mutual fund. I have to only invest in listed equity securities. And I'm really bullish on bitcoin. And I think it could add value to my investors, my mutual fund investors. And this is literally the only thing I can buy. So they invested less than a billion dollars and made 6 billion in profits for their investors. And so that is a great trade. And that's what opened my eyes, is that it allows different types of investors to get access. We did launch a company that used to be called Helios and it's now called the Solana Company. My apologies, because it used to be a medical technologies company and now it's focused on being a Solana treasury company.

[B]

By the way, I think I got that from your comms team.

[A]

Oh, sure. And we just changed it. We just changed it to make it a little more obvious what it is. So to my mind, it's a way to give access to interesting trades. Our typical investor over the years is average two and a half million dollars. This is 2,200 bucks is the average trade on Solana company HSDT. So it's allowing. We've done 200,000 trades in it already in like three weeks. And so it's allowing people to access the advantages of digital asset. Treasury companies, I think are superior to ETFs. An ETF is essentially inert. There's never going to be more tokens per share. It's always just going to trade right at its price. A lot of the ETFs don't even do staking, which is the yield you get from owning a token. Whereas digital asset Treasuries can do all those things, plus potentially using financial engineering to add some value to their balance sheets and using strategy as a kind of a proxy for our industry. Last year they grew the number of bitcoins per share by 76%. So they are creating value for their shareholders. This year I think they've grown at about 30%. Tom Lee's company, we're one of the big investors in it. They've increased the value of their stock 10x over that time. So by intelligent financial engineering staking, you can add the number of tokens per share and increased value. So over time. I think DATs can outperform ETFs and again, it's one of the huge use cases. It's just access, it allows a broader access.

[B]

I guess it is therefore stating the obvious though. If you're using staking or lending out the assets and you're using clever financial engineering or leverage, this comes with greater risk than buying the underlying or an ETF that just maps the underlying.

[A]

Admittedly true, there is more risk, but I would say it's an asymmetric risk that if you invest in a dat. One of my partners, Jeff Lewis, had a great line. This is kind of extreme, but the worst case for a DAT is it trades at par every day forever. And that's what an ETF does, right? Your downside is it does nothing or it stays there. And however, if they are able to, like strategy's done for years to grow the number of tokens per share, you can outperform owning the underlying token itself.

[B]

Albeit once there's leverage involved. That can all work. When the underlying is over time rising in price. If we see a prolonged period of price drawdowns in the underlying can't then the dat, the digital asset treasury company become a for seller as well. And this proliferates, then a kind of drawdown as opposed to this more equal kind of upside could do.

[A]

But Most of the DATs I'm aware of have 10% or less leverage. They're very low leverage. So if the price of crypto goes down 90%, yes, that will happen. But by then a lot of probably worse things have already happened. So leverage is not a large component in most of these. And another important thing is if a DAT does trade below its net asset value, ultimately someone will acquire it. And we've already had one trade in the sector where a DAT that was trading below par was acquired by a larger one there. Again, that's why I think you have some safety that a bad outcome would it be to trade maybe 20% below its net asset value and some larger DAT would buy it out?

[B]

Just finally on this, I mean, are there bad dats out there that could give the space a bad name? Clearly you're a believer in your own one. The Solana company sounds like you're a believer in microstrategy. It sounds like you're a believer in Tom Lee's efforts in this space. Are there bad ones out there that you avoid as an investor, as a researcher?

[A]

No, great question. We actually have two funds that invest just in DATs. And so we have invested in probably 30 over the year I would say there are great DATs and then ones that probably won't work. And not that they're bad, it's just each currency only needs one or two Dats. Maybe you don't need 20 more Bitcoin Dats. Michael Saylor's doing a great job. He's got a long term track record of being good at his company, has a track record of being good at what it's doing. So I would say that I would imagine in the long run each currency would have only one or two very well run, reputable large DATs and then the smaller ones will get rolled up by the bigger ones.

[B]

Quick question on stablecoins because I find this really fascinating. As someone based in the uk, I can transfer money pretty easily, certainly around the uk, even to the us or use Japan as an example. I haven't actually tried to transfer money to Japan, but it's pretty simple to do at zero cost, give or take maybe a 30 basis points charge on the currency transaction. Even with a stablecoin, it's much more expensive to transact still at the moment when you factor in all of the costs of mining and everything else. Is that fair to say? Is your argument that the costs will come down a lot in due course or am I wrong on that? Is it cheaper to transact stablecoins today?

[A]

No. It's so funny to have a European ask an American about money transfer. America is supposed to be the cutting edge of finance and it's so antiquated.

[B]

I remember getting to America and taking 100 bucks out and getting charged $3.50. I was like what? Where the hell did that come from? It's a ridiculous 3% charge.

[A]

It's called an oligopoly. That's where it came from. Yeah. So American money transfer is so antiquated. Taking out of an ATM is 3% or 4%, Visa, MasterCard's 3%. Even if the biggest bank in the United States wants to send a billion dollars to the other biggest bank in the us it takes three hours on Fedwire. Literally the fastest way to send anything in the United States takes three hours. Someone that can use SEPA or any of the other real time systems would be head scratching on why money transfer is hard. But in the US it actually is very hard. The important thing is when you start crossing borders, then you get into very slow, very expensive things. And so if a Brit did want to send money to Japan, it probably would take days over swift and cost 30 pounds or whatever. So within Europe, real Time money transfer is great. There are countries like Korea that have real time transfer. But anytime you start crossing borders, anytime you start dealing with the United States or whatever, then it gets really slow. And that's where stablecoins come in you is they can cross borders 24, 7, 365 without typically very low fees. And an important part of it is a savings vehicle. So there are so many people that live in countries with terrible currencies, terrible banks, and they want to access kind of the least bad currency. The US dollar is being debased by 3% a year, which is a separate topic. But that's in my opinion the real use case for stablecoins is there are 4 billion people with a smartphone. Most of them live in countries with terrible currencies. They would rather have it in stablecoins or I think kind of even better iteration are things like Ondo, which is a protocol that puts US treasuries on the blockchain and they have about 12 billion already on their system. But so it allows somebody in Japan to save in US dollars to get the yield of US Treasuries.

[B]

That's very interesting. I guess it's not at its most efficient yet either and could be in the years ahead, nearly out of time. A few kind of bigger picture questions to round up. This one I'm fascinated by because I'm definitely not built and I think investing is very emotional and you've got to be aware of your own emotions as you make these decisions. But I'm not built to have held on as you have successfully from 2013 to today. And how do you manage to keep conviction when you've already doubled your money or trebled your money or 10x your money? Is there not a point where you've just thought, let's just close it all up, I've made more money than I can hope for. Or on a shorter term trade, you might double in solana value in the short space of time. I mean, it's a great problem to have, obviously to be faced with those gains. But how do you maintain those positions when they've risen so much already?

[A]

So the reason I love this trade and the reason I have so much conviction is I think it's the only inevitable trade I've ever seen. That blockchain will change the world and they might go through cycles, it might go down 85% and it's done that three times. But it is just inevitable it's going to happen. And that's totally different than every other trade I've done. I was joking with my friend Mike Novogratz that We've been trading 40 years and dollar yen hasn't moved more than 20 points from 120 the whole time. It's never gone anywhere. Right. And so Those trades are 51, 49 or whatever. Like if you're in a trade like that, that's going against you. I don't know if you can hold onto it because like it's. Who knows where it's going. Blockchain will be I think like 10x higher in 5 years than it is today. And so when it goes down 85%, yeah, it's not fun. You don't feel smart. It's not fun, but it really will. I think it's inevitable that it will do well. And so that's what we try and encourage our investors to hold as long as they can.

[B]

It's funny you used the word inevitable there because that itself might put some people off. They might think he's not thought this through. What's the best argument against it being inevitable that you've heard, you've considered and ultimately clearly rejected?

[A]

That is such a great question. I've been doing this for 12 years and I always ask people, especially skeptics, to please send me any paper any reasonably intelligent person ever has written that's negative on bitcoin or blockchain. I still have never seen one. You get the, you know, the Warren Buffett, it's rat poison, like one liners, you know. So you do get very famous and very talented investors saying these kind of one line negative things about bitcoin. But I still am unaware. And if any of your viewers has one, I literally would love to read a long, well thought out paper that's negative because it really isn't one.

[B]

I can think of one on the spot that relates to it as a currency. I mean, clearly so much of today's conversation you've made the argument and others have on this podcast like Kathy Wood and Tom Lee, that it's much more than that. And it's almost like a company in your portfolio as opposed to a currency. But I think people lose track of investing sometimes when actually for most people's portfolios it's how do I save for the future? And I think in that regard you have to think about meeting the liabilities you have in the future. For me, those liabilities are going to be in pound sterling almost certainly in the rest of my lifetime. And we're not yet at a point where I think I'm going to Be able to pay my kids school fees or pay for my food and whatever else which is my first concern in Bitcoin or in Solana. And thus I do think something that has a volatile price is definitely not something that I consider a currency more than just a bet in my portfolio. But I guess your argument to that is you're saying think of it as a technology, as a blockchain grouping, not as an individual currency. Or do you think it will be something that I settle my school fees for in years to come?

[A]

Oh, so I'll make the point that I don't think you're ever going to walk into a Starbucks anywhere on earth and see Bitcoin as the price they show on the screen. In Japan they're always going to show yen, in the UK they're always going to show pound sterling. I think it's already pretty easy to use Bitcoin in the background if you want as a payment rail. So I think it will be easy to pay your school tuition fees via bitcoin, but you're rarely if ever going to see the price shown there. My argument would be think of it as a deflationary currency. And that is very hard to get your head around. With the exception of gold, which has worked for 5,000 years. Paper money, we don't have experience with that. And even your own currency, which is the oldest on earth, not currently the.

[B]

Best.

[A]

Try and convert it into a pound of sterling silver. It doesn't work anymore. Right. They've printed so many pieces of pound sterling paper, it takes 340 pieces of those paper to buy a pound of sterling silver. Now that's the best argument. Buy bitcoin.

[B]

It's a pretty good one actually. As we wrap up this last couple of questions, we ask lots of our guests, but what's the best investment call you've made in the worst?

[A]

Yeah, so best buying bitcoin. We bought 2% of the world's bitcoins at $65. That was a good one. I've had a lot of terrible trades. One I did that I can't not think about is in 2006, seven or so. I convinced myself that buying the dividends on The S&P 500 out 6, 8, 10 years was a great idea because the dividends would go up. And so we bought these 2017 S&P dividend swaps. Unfortunately very large size relative to the market. And when the markets crashed in 2008, essentially just got forced out at the absolute terrible lows of this super liquid thing. Lost so much money. And then eight years later it was 2017 and the dividends would have been an amazing trade, but I was not alive to see it.

[B]

Well, instead you pivoted Pantera into Bitcoin at whatever would you say, $65 a Bitcoin. So I guess forced you into a different area and it worked out well in that regard. Final question for you, Dan. What is your overriding piece of investment advice? You've done so much different types of investing as you've been telling us about. What's the overriding piece of advice you have for our listeners? Yeah.

[A]

So I really think it's so important to just spend some time and address blockchain. The majority of institutions have 0.0. Most individuals still don't have any exposure to sit down for a Saturday afternoon, read about it. Best thing would buy a little bit of it. That always makes you really pay attention and essentially get off zero. If you have zero, you really should have some exposure. Put 1% of your net worth into crypto and hold it for five or 10 years and it should work.

[B]

Dan, it's been a real pleasure. Thanks so much for stopping by. Great to see you here in person as well.

[A]

Yeah, thank you for having me.

[B]

That was, of course, Dan Moorhead of Pantera Capital. If you've enjoyed the conversation, please do subscribe and leave us. A five star review. Coming up next week we're speaking to the co founder of Oaktree Capital Management, Howard Marks. Make sure to stay tuned for that one. Do remember that nothing you've heard on the Master Investor Podcast should be considered direct financial advice. There's more on that that in our show notes if you'd like to refer to them. The Master Investor Podcast is produced by Paradine Productions and Master Investor Podcast Ltd. In association with Birdline Media. If you've enjoyed the podcast, please do subscribe on YouTube or click follow on your podcast platform and then you'll be automatically notified each time a new episode drops. Our thanks again to Dan Moorhead of Pantera Capital. Dan, thanks so much. Thank you and reminder to join us next week with Howard Marks.