Written by Leo Schwartz, Fortune Magazine
Translation: Luffy, Foresight News
Dan Morehead, Founder of Pantera Capital
In 2016, Dan Morehead embarked on a global tour to promote the 'gospel' of Bitcoin. This former Goldman Sachs and Tiger Management trader was completely 'conquered' by Bitcoin years ago and firmly believes it will reshape the global economy. His faith in this currency is so strong that he even came out of semi-retirement to transform his hedge fund Pantera Capital into one of the world's first Bitcoin funds.
This new venture was launched in 2013, with a rapid early momentum supported by two Princeton alumni, Pete Briger and Mike Novogratz, both from the private equity giant Fortress Investment Group. The three watched in delight as the Bitcoin purchased by Pantera at an initial price of $65 skyrocketed to over $1,000 by the end of the year. But then disaster struck, as hackers raided the major exchange Mt. Gox in the emerging cryptocurrency industry, causing Bitcoin's price to plummet by 85%. 'People would say, 'Aren't you doing that Bitcoin thing that has already cooled off?' Morehead recalled. 'It's still alive!' He would always respond like this.
During the Bitcoin promotional tour in 2016, Morehead arranged 170 meetings. Every time he walked into a potential investor's office, he would spend an hour arguing why this new asset was the most enticing opportunity. The result was that he raised only $1 million for a struggling fund. Worse yet, Morehead's own appearance fees totaled about $17,000. 'I made $100 for each meeting, just to convince people to buy Bitcoin,' he told Fortune magazine.
Less than a decade later, when the price of Bitcoin approaches $120,000, Morehead's earlier tough years have become part of the founder myth—comparable to Steve Jobs and Steve Wozniak tinkering in Jobs' parents' garage to invent, or Warren Buffett and Charlie Munger exchanging stock trading tips at an Omaha dinner.
Today, various cryptocurrency funds under Pantera manage over $4 billion in assets, holding positions in Bitcoin, Ethereum, and other digital assets, as well as investments in projects like Circle (listed in June) and Bitstamp (acquired by Robinhood for $200 million earlier this year). But in the highly competitive field of crypto venture capital, the unique aspect of this company is its 'pioneering' status: it is a renowned bridge between the conservative traditional finance world and the once-rebellious crypto industry. And the core figure, Morehead, is a low-profile doer in this industry filled with legendary figures.
'I am stubborn and absolutely believe (Bitcoin) will change the world,' Morehead told Fortune, 'so I have stuck with it all along.'
The Wild Journey of Bitcoin
Bitcoin's Price Trends Since 2013. Data Source: CoinGecko
Princeton 'Mafia'
In an era when Wall Street had not yet penetrated the blockchain industry, Morehead seemed out of place in the chaotic world of early cryptocurrencies. He was a dual-sport athlete at Princeton (football and heavyweight rowing) and still retains the broad shoulders and square jawline of his youth. This contrasts sharply with those who are skinny, eccentric, and spend all day on online forums. Instead, Morehead comes from traditional finance, and he still prefers to wear a suit jacket.
Before encountering Bitcoin, Morehead had a long trading career. After working at Goldman Sachs and the Tiger Fund, he founded his own hedge fund, Pantera, but it collapsed during the 2008 financial crisis. Around that time, a mysterious figure named Satoshi Nakamoto published a white paper online, introducing Bitcoin to the world.
In 2011, Morehead first heard about Bitcoin from his brother and vaguely knew that his Princeton classmate Gavin Andresen was running a website where users could obtain 5 Bitcoins (currently worth about $575,000) just by solving a CAPTCHA. But he didn't pay much attention until a few years later when another classmate, Briger, invited him to Fortress Investment Group's San Francisco office for coffee to discuss cryptocurrencies, and Novogratz joined remotely. 'From then on, I was hooked on Bitcoin,' Morehead said.
The tech sector is known for its so-called 'mafia,' such as the PayPal mafia that later dominated the next generation of startups. In the crypto space, the 'mafia' does not come from a company, but a university: Princeton has birthed some of the most influential projects in the industry. Briger and Novogratz are both key supporters of Pantera, and Morehead even moved into a vacant space at Fortress Investment's San Francisco office. Briger continues to maintain a behind-the-scenes influence in the crypto space, recently joining the board of Michael Saylor's $100 billion Bitcoin holding company, Strategy. Novogratz founded Galaxy, becoming one of the largest crypto conglomerates. Another classmate, Joe Lubin, later became a co-founder of Ethereum.
But in 2013, it still sounded absurd for Ivy League graduates, active in high-end fields such as private equity and macro trading, to be interested in Bitcoin. Briger told Fortune magazine that he first heard about Bitcoin from Argentine entrepreneur and early crypto enthusiast Wences Casares when they shared a room at a Young Presidents' Organization gathering in San Juan Islands. Briger quickly saw the potential to disrupt the global payment system, and he still insists on this point, although he believes Bitcoin is still in its infancy. He said the prospects for Bitcoin are on par with the internet, which facilitated new forms of information dissemination. 'The way money moves has not kept up, and that's really unfortunate,' he said.
After sharing this idea with Novogratz, they believed that Morehead, with foreign exchange market experience, was the right captain to steer the ship. When Morehead decided to invest the rest of his financial career into the crypto space, he repositioned Pantera as a Bitcoin fund, opening it up to external investors. Briger and Novogratz both joined as limited partners, while Fortress Investments, venture capital firm Benchmark, and Ribbit invested as general partners (later exited). His mentor at Tiger Fund, legendary investor Julian Robertson, also invested in a subsequent fund.
The Rebirth of Pantera
In the early days of cryptocurrency noise, entrepreneurs had to face extreme market volatility, whereas today's volatility seems trivial in comparison. But Novogratz recalled that the biggest trouble was not the price rollercoaster, but the fact that it was nearly impossible to buy Bitcoin.
He once approached Coinbase, which had only been established for a year, to buy 30,000 Bitcoins, valued at about $2 million at the time. A window popped up, indicating that his limit was $50. After discussing with Coinbase's first employee, Olaf Carlson-Wee, who later became a well-known figure in the crypto space, Coinbase agreed to raise his limit to $300.
However, perhaps Morehead's most admirable achievement is having persevered through the downturn from 2013 to 2016. During that period, Bitcoin's price languished, and hardly anyone outside the closed blockchain circle cared about it. 'During those quiet years in crypto, Dan was out there hustling,' Novogratz told Fortune.
That era also had its highlights, including the three annual meetings hosted by Morehead at his home in Lake Tahoe. At one of them, Kraken founder Jesse Powell chose to drive instead of taking the private jet rented by Morehead. 'At that time, many people in the Bitcoin community were on the plane, and he was worried that if the plane crashed, Bitcoin would be finished,' Morehead recalled.
Unlike many of his peers, Morehead never positions himself as a 'Bitcoin maximalist' (someone who argues that no other cryptocurrencies should exist). After purchasing 2% of the global Bitcoin supply, Pantera became an early investor in Ripple Labs, which issues the digital currency XRP. 'My thought is that Bitcoin is clearly the most important,' Morehead said, 'but there is not just one internet company.'
According to Morehead, 86% of Pantera's venture projects have achieved profitability. Considering that the vast majority of venture-backed startups fail, this figure is astonishing. The crypto space may be more forgiving, as many projects hold cryptocurrencies, which means that even if a startup's product fails, the investment value often still persists.
Morehead now spends half of each year in Puerto Rico, which has become a crypto hotbed. At the time, Pantera's partner, Joey Krug, who now works for Peter Thiel's Founders Fund, had moved there, and Morehead decided to relocate as well. He estimates that there are about 1,000 blockchain entrepreneurs on the island, though they are under scrutiny for driving up real estate prices. Morehead was investigated by the Senate Finance Committee, questioned about whether moving to the island and obtaining over $850 million in capital gains from Pantera violated federal tax laws. He told the New York Times earlier this year that he believes he 'acted appropriately in terms of taxes,' but declined to comment further to Fortune.
The Future of Bitcoin
Morehead admits that the crypto industry is rife with gambling behavior, and Pantera does not venture into meme coins like many other venture capital firms. But he believes this should not overshadow the lofty goal of blockchain reshaping global finance. 'It's ridiculous to want to take down the blockchain industry because of a little side issue,' he said, 'the GameStop incident does not mean there is a problem with the entire U.S. stock market.'
Pantera continues to expand, including raising its fifth venture fund with a target of $1 billion. Morehead stated that they will close fundraising after completing investments from the fourth fund later this year. Pantera is also entering the hot field of digital asset treasury, where public companies incorporate cryptocurrencies into their balance sheets.
But Bitcoin remains at the core of Pantera's strategy. At the end of last year, its Bitcoin fund achieved a return of 1000 times, with a cumulative return of over 130,000%. When asked about the future price of Bitcoin, Morehead's answer has always been the same: it will double within a year. This simple model has generally worked, although he admits that the momentum of growth may be slowing. He believes Bitcoin will rise another order of magnitude, approaching $1 million, but this will be the last 10-fold increase.
If Bitcoin can never reach that milestone, Morehead is also willing to face criticism. After all, in 2016, he was still struggling to defend Bitcoin at $500. And less than a decade later, he has only just begun. 'I believe the vast majority of institutions' faith in Bitcoin is just beginning,' he told Fortune magazine, 'we still have decades to go.'
