Pantera Capital founder: The crypto market is expected to continue to be dragged down by Federal Reserve policies

Author: Tom Maloney

Original Title: 《Ex-Goldman Bond Trader Builds a $5.6 Billion Crypto Behemoth》

Translation by: Gu Yu, Chain Catcher
Many people wish they had bought cryptocurrencies earlier when it was just a curiosity.
Former Goldman Sachs bond trader Dan Morehead is one of the few who did, launching his first crypto fund when Bitcoin cost less than a bag of groceries.
"I was captivated," said the 56-year-old Dan Morehead in an interview, calling it "the first truly global macro trade that crossed borders."
As a result, since 2013, the Pantera Bitcoin Fund has returned over 65,000%, and his Pantera Capital Management, which was once a traditional hedge fund betting on macroeconomic trends, now manages $5.6 billion in crypto assets as of the end of 2021. This is based on the fact that the company has returned $6 billion to investors.
It is always possible for it to crash. As the U.S. market opened in New York on Friday, Bitcoin was down 17% year-to-date, trading at $38,600, far below its peak of about $68,000 in November—driven down by expectations of rising global interest rates and aggressive measures by central banks to curb soaring inflation.
This is where Morehead's world collides.

Morehead stood out in the early days of cryptocurrency because he fully immersed himself in it after a legendary financial career. He started bond trading at Goldman Sachs in the 1980s, later working for hedge fund legend Julian Robertson, and founded Pantera in Menlo Park, California, in 2003.
Morehead stated that rising inflation and how central banks respond will be a major theme in 2022, having previously bet that inflation and yields would decline for a long time.
That trade "basically made my career," he said, "I think it has come to the end of this story."
Morehead expects this reversal of trend to weigh on cryptocurrency prices, but that hasn't diminished his enthusiasm for the underlying technology.

Pantera is not just betting on Bitcoin. Its venture capital fund invests in companies supporting the crypto ecosystem, including exchanges like FTX, Coinbase, and Gemini, while its token fund invests in blockchain developers. Recently, Pantera has focused on DeFi, a movement attempting to replace the old ways of Wall Street.
"Bitcoin and blockchain are disrupting the financial world," said Pete Briger, co-CEO of Fortress Investment Group, who has worked with Morehead. "Morehead is at the center of it all."
Morehead could have entered the cryptocurrency space earlier, in 2011, when his brother introduced him to Bitcoin. He read some books about it, thought it was a cool idea, and then almost forgot about it.
"Garbage Collector"
Two years later, Briger gathered him and early crypto evangelist Mike Novogratz at Fortress's San Francisco office to discuss Bitcoin. The 58-year-old distressed debt expert Briger called himself a "garbage collector" of the financial system, believing Bitcoin had the potential to disrupt traditional banking.
"Blockchain is a game changer for the financial services industry," Briger said. "It forces the banking and payments industries to rethink their reliance on traditional barriers to protect their competitive advantage."
After the meeting, Morehead committed to doing more research, and a month later he told Briger that crypto was the most exciting thing in his career. He began working on establishing a cryptocurrency investment fund in Fortress's office.
In addition to the returns from the Pantera Bitcoin Fund, his venture fund launched in 2013 generated returns of 51% and 385% in 2021, respectively.

Fortress became one of Morehead's biggest supporters. Finding such institutional investors in the early days of Bitcoin was an exception.
Morehead said most investors were "high-net-worth individuals, especially tech entrepreneurs and Wall Street executives, who were investing on their own."
Bypassing more traditional financing methods, Pantera was able to act quickly.
"A CEO of a tech company wired $2 million to the fund, and a few weeks later called and said, 'Hey, what's the deal?'" Morehead recalled.
Morehead organized an annual Bitcoin conference at his home in Lake Tahoe, which he called Bitcoin Pacifica, attracting crypto enthusiasts from around the world.
Briger, reflecting on a conference he attended, said, "They weren't the kind of people I met in Fortress before; there were a lot of fringe players, like crypto punks, cryptographers, and possibly some self-proclaimed anarchists."
Tiger Management
For Morehead, this was also a huge change. He founded Pantera as a traditional macro hedge fund, which was his expertise during his four years as chief macro strategist and CFO at Tiger Management.
Before the 2008 financial crisis, the first version of Pantera grew to about $1 billion in assets. Now, as a pure crypto investor, its scale is several times larger. At the beginning of this year, the company managed about $5.6 billion, including $600 million raised for its fourth fund last November.

Back to December 31, 2021.
This figure is down from the $6.4 billion managed by Pantera at the end of November last year. In an interview with Bloomberg on December 23, Morehead predicted that expectations for a more aggressive tightening of policy by the Federal Reserve would continue to weigh on cryptocurrency prices.
The Bloomberg Galaxy Crypto Index, which tracks the value of various cryptocurrencies, has fallen nearly 20% since the beginning of the year, while the yield on the 10-year U.S. Treasury bond has risen by about 25 basis points.
"Blockchain is now driven by all the excessive money printing in the world," Morehead said. His company recently opened a foothold in Puerto Rico, which has become a haven for crypto investors.
In a letter to investors last month, Pantera referred to it as the largest Ponzi scheme in the history of the U.S. government and the mortgage bond market.
As for whether the technology has realized Briger's vision of disrupting the banking system, he stated that the process has begun but there is still a long way to go.
"It's like email in the early 1990s when it was very clunky," Briger said. "No one could have imagined what instant communication would mean for business and the world."
Morehead stated that he is no longer interested in traditional assets that defined his early career, having not invested in anything other than crypto since 2013.
"Crypto is more attractive than any other trade."