Dan Morehead Fireside Chat – LIVE at Crypto Invest Summit, Fall 2018



looks like a lot of people ran out to the restroom after the CMV session was with ran but there's no need for me to introduce who I get a chance to speak with today dan Moorhead of Pantera capital I do want to give a shout out because he actually started the first investment firm that focused on crypto and Bitcoin in the United States and that's pretty cool because you have to have really before we're thinking and looking around several corners to understand the power and the potential of getting into Bitcoin and crypto in general so that's pretty huge so unfortunately ran asked the first question I was gonna ask you was the performance of your fund because I was looking at it and I saw the report that down 72 percent for the year at down 28% for August and and that kind of sucks right if if I'm an investor in that I'm not having I'm not having a good day but then we were talking about it back in the room and you're like look you know let's look over this long turn so if you share that with the audience what you're sharing with me I mentioned briefly in the VC segment is that as markets go in these wild manic cycles and investors really should have at least a multi-year view if not a multi-decade view and you know we have four different funds you know they kind of go up and down in different rhythms one of our funds is up 10,000 percent right now so you know it's in general going well so I guess when you say well it's up 10,000 percent and it's down 72 percent for the air you're still doing pretty well right you got into that yeah that's the way people should view this investment is put only a small amount of your you know portfolio or your net worth or whatever in an amount you're willing to risk and lose if it all goes wrong but then just sit on it for you know five or ten years see what happens so the other thing so Tim Draper was out here he made a big call on Bitcoin he said that it was by 2022 is going to two hundred and fifty thousand dollars and I was like wow so and I saw your partner Joey it's called it out saying 10x by next year so do you see a quarter-million dollars by 2022 yeah I actually agree with both of those statements and there's some serious logic behind it yeah no it's not just kind of a number you pluck out of the air if you look at the graph of the price of Bitcoin it's a hyperbolic you know a hockey stick looking thing but any very disruptive technology like the Apple price you know over the last 40 years it looks like that if you regrab it with a log scale so it's exponential it's actually really really a flat upward sloping line there's some little Wiggles with the bubble in 2013 you know a wiggle with the bubble in December last year but it's a very very consistent growth rate bitcoins been growing a hundred eighty percent year-on-year for eight years and it's a little bit below its log regression right now if it regained its its regression which is my central view I think it will at the end of next year it would be 65,000 which is exactly 10x from here and if it compounded 180 percent for two more years its 240,000 so I actually think both of those estimates are totally valid that Bitcoin goes in these you know cycles around and long-term mean so there you have it you have two crypto experts that are in the space or coin a quarter million dollars by 2022 about 240 so we'll close enough and again it sounds ludicrous to say but you know big homes at 65 five years ago right like it really does you know it's already gone up a hundred x in five years it could easily go up another you know whatever that is a 20x a lot right lots of good thing all right let's switch gears here a little bit just last week you guys announced an investment in synthetic minds and when I started to read about this I was like wait a minute you know you're you're disrupting the developers in a way this is kind of a cool tech and I started thinking about Moore's like you know you could marry this with with hadera hash graph and you know you have Skynet right it becomes self-aware is is that what you guys are creating this kind of synthetic is this incredibly cool company that's using a programming tool that automates the reading and writing of code and it's been developed over the last few decades by NASA for Space Exploration and kind of a bizarrely space exploration and Bitcoin blockchain really have a couple characteristics in common that it's very high value software like it's not like a photo sharing website where if you lose a few photos it doesn't really matter if you lose a few you know hundreds of millions of the Dow it matters so and then it's permanent right and so spaceships you send them out into space and you can never go tinker with them again so this is a really I think it's a really an amazing company and then the other thing I like about it is the hardest thing and launching the company is naming it once you've named the company the rest is pretty easy and since the synthetic minds is just like the best name it's so that's why you invested it they have a cool name you sit on in so you guys you know think about that before your name your startup and if you get a cool name you're you're gonna get some money so is scalability the single biggest issue we're dealing with right now for the the crypto space I think it is there's there's three big issues scalability is the biggest volatility is another one and then it's actually just kind of onboarding and the on and off ramps for dabs and but scalability is the one you know six seven years ago you know Bitcoin and other block chains were just a science experiment and we didn't know if they would work now we know they work but they just don't have the throughput we need six or seven transactions a second is is you know not sufficient I actually was on a panel that Bloomberg did five years ago where I put a bunch of statistics about Bitcoin you know the hash rate and the price and how many transactions per day we're going through things like that and then they reconvene the panel just recently so five years later Susan NASA of Stanford a couple of other people and I put that same table up with a kind of inin now you know spend to it and all the stats that were there and what they are today in almost at what every categories up at least 10x and things like the the hash power of the network was a hundred x the only thing that hadn't changed was the transactions because it's maxed out it's gone up less than double so that is scalability is an issue we're investing in half a dozen different approaches to get at scalability probably something won't work but at least several I think will work and blockchains will be you know massively scaled within probably two or three years so you're investing in these protocols who is the one I mean who is who's the and I can't remember if you've invested in hash graph or not I mean what do you think of those guys well I mean all of this investing I think you should have a portfolio approach you know you can't be dogmatic that there's one and only one solution even within etherium there's you know three or four projects to try and scale so we've invested in projects like thunder and cellar that could be a hundred acts the throughput of aetherium we've invested in stark where company building that underlying scalability solutions so it's we have a half a dozen projects in space and you know some probably will end up being very important but you can't you can't be very dogmatic guard are you did you invest in in ES and we have at dinner last night we had a pretty heated conversation about this where somebody was being very critical and they thought eels pretty much sucked but you did are you pro con or agnostic yeah so we passed so we're agnostic and you know there's you know two thousand projects out there we're invested in about 80 of them so you know we we invest in a handful of things but we don't invest in everything and so we're essentially neutral it'd be great if it works but our first aetherium competitor that we invest in is thunder all right cool so on you so you say the digital currency is it's at an inflection point and this basically means institutions are gonna come in and as we were talking about earlier backed and fidelity and probably Nasdaq you have some exchanges in Europe that are moving into this is is this the the the variable that it needs for mass adoptions that's what's gonna happen with crypto are we there I think so and they did the one perspective our chair is that it's not really like there's a light switch that's currently in the off position and there's gonna be one thing and it's gonna flicked on and then every institutions gonna invest we've had some very sophisticated institutions invest in our funds five years ago and there's probably going to be institutions have no crypto exposure ten years from now right so it's a very long continuum but bat is just a massive help to get institutions invested because there's some great exchanges you know bitstamp coinbase oppo you know they're great but those aren't really household names they're certainly not too big to fail in people's you know opinions they're not cific guaranteed or all those things so you get brands like the New York Stock Exchange involved fidelity I just think that increases the comfort level of institutional investors and they'll you know start taking more exposure okay cool so the other the other actual I think catalyzing bit of news in the last couple of weeks is the announcement to big endowments like Yale endowment are investing directly in blockchain now and again that's very much of a signaling effect for everybody else in the industry and it happened three years ago when Wall Street had no exposure to crypto at all goldman sachs invested in circle and in within six months every Wall Street firm Visa Mastercard Amex all bought a chunk of something and I think that's gonna happen now with backed Yale you know and fidelity all involved that kind of gives cover for everybody else to get involved okay so you mentioned circle it's a portfolio company of yours and circle went on to acquire plenty x and then recently they acquired seedinvest so you kind of see this vision of like a full-stack financial service firm it's kind of is this the investment bank of the future is that what we're doing are we disrupting your old employer goldman sachs i think we are but that's a very multi-decade thing you know that blockchain is gonna have dozens different use cases some of which like cross-border money movement are really really effective today and some like disrupting you know investment banking is 20 years from now kind of stuff I think circles done a couple of them a couple of very amazing transactions buying polonius was it was very creative plenteous had an amazing business but not much you know kind of infrastructure around it and circles very well run you know companies they also have built a stable coin which is the ball right problem that I mentioned before and yesterday coinbase announced that they will start supporting the u.s. digital dollar and you know that's huge news cuz the huge the problem with cryptocurrency as we've talked about is it's very volatile it goes up thousand percent and down 70 percent and stable coins are another you know really really important thing to have in one sport for a trader you don't care I mean you can make money either way if you if you bet right right so so you're the chairman of bits damn so you you're actually are very closely engaged with with in exchange a lot of the exchanges in the United States are not really they're kind of regulated there's this question of what's gonna happen over the long term you have the established then you have the startups like the Templeton's the T zeros share open finance everybody's kind of getting their 80s we're partnering with an exchange how do you see this evolving over the next couple of years I mean is there a winner there is everybody get a winner or gonna be like one that's gonna take home the grand prize yeah I think there will be a consolidation in the exchange space you know there there were hundreds of exchanges often regional because their local banking and regulatory issues and you know in a few years I think there's gonna be just a handful of global exchanges that have essentially rolled up or bought exchanges in all the small spaces you started to see it happening the first major exit in the crypto space was a big public company Nexon buying one of our portfolio companies Corbett in Korea and I think that's a you know kind of an indication what's coming big public companies that can issue stock it you know 15 20 times earnings buying crypto exchanges which typically traded low single-digit earning multiple so it's you know it's a good trade essentially both for both sides and ultimately gonna have a handful very large global exchanges so that's how the traditionals get in a lot of them just gonna buy their way in so yeah so some will buy their way in and then again backed is a great example where completed you know clean piece of paper ice decided to invest and build their own exchange so you're getting it you know kind of from both sides I was I was just on a panel with Bobby Lee from BTC China who's who's fun he and Nate's from bitstamp both launched their exchanges in 2011 right so they've had seven years without any kind of you know real-world competition and now back there's another exchange from drw called air sacs that is you know dear to be very sophisticated 800 person trading firm in Chicago you know so you're bringing some very sophisticated entities from kind of the real exchange space now competing with you know the the startup bitcoin one cool so regulations I love talking about regulations I just have some sort of genetic flaw like I don't enjoy talking about regulations and policy stuff we have certain jurisdictions around the world like a Malta Switzerland Liechtenstein you know wherever that have moved very quickly to create a kind of a safe environment for for crypto to thrive now we have France that's working on the path law which essentially lets anybody do an IC o—- who wants to do it if it passes but it's expected to pass like in the next few months meanwhile you have the United States has kind of been pumping the brakes the entire time it's kind of a go slow sort of thing here is the u.s. falling behind yeah so it's it is an important question I would actually say the US has done a very good job and was way out ahead where it could be so Treasury's fencin ruled in March of 2013 on Bitcoin exchanges being money transmission the IRS ruled that it was property probably four years ago so you get long term capital gains tax treatment if you're long and the CFTC has been very progressive and for three or four years has been promoting the regulation of crypto as a commodity and you now have futures at CBOE and see me so that is actually the best proof of why it is so difficult because it's so many different things it's it's really a new thing it's a post currency ledger right so it doesn't fit into these regulatory frameworks very well if the CFTC says it's commodity and the IRS says is property everyone calls it a cryptocurrency some of them are securities it is really complicated to try and you know put into our regulatory framework and the SEC is very engaged now I think in the next nine months they're gonna lay out a set of criteria on what is a security what is not a security but it will probably we'll take another you know 9 or 12 months that's interesting because I'm not as confident to you that the SEC is willing to go that far out in the limb I think Congress is looking at it but it's a heavy lift it's hard for them to figure it out but I think it will obviously help the marketplace if you get some additional clarity in there so in regards to clarity is is this is there a different type of security or digital asset or you know can a utility coin exists in the United States that is tradable is that something you actually see happening because right now I mean it's all stos right yeah so the question if when the US has fallen behind is is something we've actually studied empirically we've been investing for six years we counted it up we've been to 40 different countries many of them you know half a dozen times we really gone to every corner of the earth looking for investment so we've made some really cool ones in Africa and Latin American everything but in the end 70% of the things that we invested in are in the United States so you know even though we've tried so hard to find projects in a borderless world the u.s. is still way ahead of the rest of the world and then the question I'm security tokens agility tokens is I do think we're in this kind of worst of both worlds period right now where eighteen months ago is all libertarian you're gonna do tokens without the government it's gonna be great and then in nine or twelve months I think it's to be very clear what's the security and what's not of security and right now we're in that kind of you know bad zone in the middle where everyone's scared of what might ultimately be deemed as security and so effectively now things are being treated in the United States are being treated as if they were a security right could twelve months I think you could actually have an environment where there's certain things that are definitely secured and certain things are definitely not security interesting all right that's cool so portfolio companies let me ask you about auger yeah I mean ours kind of it's your partner created this what's going on with auger you talking about it a little bit before yeah I think I mean is a really interesting project it's the first ICO in a theory I'm a really good point to remind people is it took four years to launch so everyone that you know hopes their ICO is gonna start trading or gonna start working functioning you know immediately should realize it's gonna take years before most these things actually function auger allows you to set up you know the called prediction markets so you can essentially bet on the outcome of really any anything ya know the weather this you know who's gonna be the next president United States you could also equally well do it on the closing price of Apple share so there's a lot of use cases it is one of the only things that actually works yet on a theorem so that's cool but the lack of scalability of aetherium you know essentially hampers it from being you know really useful now so it'll take a couple years I think for theorems of scale so that all the things built on top of aetherium will be you know I have a better user experience alright that's good ripple I mean for a while there ripple was getting pounded because nobody was using it or they were paying people to use it but recently there's been some announcements that people are actually starting to use it you know house house what do you see ripple going yes so ripple is always fun because you know there's always such strong opinions there the you know super you know diehard decentralized everything don't like ripple because it used to be kind of centralized I think a great thing to have it's in our portfolio I think it's a fantastic different strategy they're essentially re-architecting the way money's moved within the banking and regulatory system we currently have and you know I think that's a great approach they have probably 250 people building out real code they've been doing it for six years so you know there there is a lot of vaporware in the whole block chain space yeah this is real stuff there's a hundred banks already as clients and you know they're blockchain can do confirmation in three seconds they can do fifteen hundred transactions per second and it's a fraction of a penny to do a trade so it that is very potent and their business model they don't really like when I say this but they're basically trying to replace Swift and if you think about it very few people know what the acronym Swift actually stands for it's the Society for worldwide interbank financial telecommunication whoo that is so sixties right so that it's a yeah it sounds like a telegraph blockchain is certainly going to disrupt a telecommunications society so so that's they're you know very focused business and they're executing and you know so we think it's a it's a very compelling investment so I wanted to ask you about stable coins because you mentioned us digital coin before which is very interesting and what do you think about stable coins what do you think about tether I know they sit with people and people a lot of people say tethers are fraud it's you know it's it's a coin for ant for money laundering that's kind of the the killer app for tether do you think it's it's it's a it's a you know a you know a real thing or is it a sandwich I mean is yeah so why don't they have it audited right they're hard to prove it and so we've never touched it just because it does seem like there is a chance that the money isn't there circles a stable coin is gonna be audited and published all the time that just seems obvious right like if the money is there why can't you just show everybody the money so I think things like circles stable coin will be much more important in the long run yeah cool so I want to ask you so you were just at money 2020 yeah and money 2020 has been around for a long time it's kind of old school finance and then you come here and this is kind of a dedicated crypto group that wants to disrupt the in Trenton trench incumbents what do you see you know coming from from money 2020 in contrast to here what's the big difference between the two groups well yeah there's a you know healthy bit of skepticism from the legacy finance firms which dominate money 2020 they point out the things like scalability and you know all the the near-term challenges and my perspective on that is you know blockchain is essentially the final piece of the protocol puzzle it's the Internet it's the way to move money around and even value generally not just money and it took it's very common for people to say hey it took the internet 20 years to build out no it took the internet 20 years just to get to the browser right like the protocols existed for 20 years before that and then another 20 years to get to you know snap and uber and stuff and that's the perspective people should have when they're slacking off Bitcoin and blockchain because it only does seven transactions or whatever it's kind of like saying tcp/ip sucks in the early 90s because you couldn't dream Netflixed your iPhone and Bali right it's you know it doesn't mean that tcp/ip sucks it's just we had to build out all the other infrastructure parts and that that's my view about blockchain is we yeah we can only do seven transactions a second today but I think three years you're gonna be able to do a hundred times that and you know three years from that you know orders of magnitude more so you just ya have to be patient obviously here you know everyone is you know much more positive on crypto excellent so it's early days and you're here at the beginning you actually at the very very beginning and so are the people here so six years five years from now do you want to do a big prediction you've already said bitcoins going to $250,000 which I love be certain everybody treat that out because now we know yeah you know I think it I think it will I actually think that you know bitcoins kind of the mega cap of the industry and then all the I SEOs and projects we're investing and they're you know brand-new I haven't even started or kind of like the micro caps or the early-stage venture they're probably gonna outperform Bitcoin over time essentially just because the same reason like Apple can't go up 100x because it's already so big so I do think some of the small projects like I SEOs will will perform even better than a Bitcoin over time all right does anybody have a question in the crowd I can't it's hard from you see we got somebody right here is your mic not there you go there you go yeah how has your appetite in investment like profile for wrists like evolved over the years in how do you feel like about like emerging technologies like AI perhaps influencing some of your investment decisions yeah so the simple answer for me is it took a couple of years to get my head around how important Bitcoin would be but since then I've basically just been limit long like it just it's just a 20-year trade and so all these little cycles haven't changed my view you know obviously there's times when I cos were so hyped and you know there was basically sucking all the oxygen out of the venture space the pendulum swung back to where you know we only do one or two icos a month and ventures now been popular so I think people should always have the 5 or 10 10 year view and then I don't really have any deep insight on how AI is gonna impact we haven't really invested in any AI oriented blockchain companies but you know those are the two super hot topics that somehow they're gonna mash up do have another question I can ask one so it seems like the last few years a lot of people have kind of punted on the medium of exchange thesis for Bitcoin I'm still a strong believer I'm curious if you believe that will again get back to that get back to payments in exchange and making you know money move in a trust this way around the world and what would it take I guess like price level wise but then also sort of infrastructure wise and sort of maybe event-driven things that might make that happen how do you see that thesis playing out if mo e ends up being why bitcoin is yeah so one of the lines I've used is that if you know when a technology is disruptive they call it a category killer bitcoins a serial killer it's gonna go through dozens of different industries the other reason I like saying it that way is it's gonna do it serially it's not gonna do everything overnight right and there's some use cases that bitcoins already amazing at like storing your wealth it's now it's been great at that for eight years it's now pretty good at cross-border money movement but like buying a latte in Starbucks that's like ten years from now like it's not it's it's just there's not enough the main reason there aren't enough consumers that have it now you know about 50 million people maybe have have Bitcoin now like 100 million people play candy crush right I mean it's just you know it's just not 50 million sounds like a lot to us because we're like really super bullish and it was only you know five hundred thousand a few years ago but it's still not really relevant in the example I would have is you know we're super supporters the industry we're always trying to do great things to help and when Expedia announced they would take Bitcoin like four years ago you know corporate policy everything had to be booked through Expedia and pay with Bitcoin but you know if you unwound those trades the price of a room in Bitcoin you know I could buy the hotel all right and so it's not it's not great it's like I don't want to spend Bitcoin because you know is there any regret there that you pay for those hotels nobody is it's like the famous story of the first commercial transaction in Bitcoin 10,000 Bitcoin for pizza right and yeah exactly I was due today it wasn't a dope you got two pizzas I bet I hope they were good pizza and again when people say hey bitcoins not successful because nobody uses it to buy a cup of coffee it's like because they're gonna buy a hundred cups of coffee with it in five years right you don't want to spend it excellent I can't see do you right okay over here yeah so you mentioned there may be other projects that will outperform Bitcoin just given bitcoins growth and what's ahead just curious if you would share some insight into the criteria that you use to measure those projects and if you would name maybe top three or so that you're most excited about yeah so the principal criterion is whether the token is absolutely necessary for the functioning and the net work and the ico boom in the last 18 months there was a ton of projects that were floated where that it's not even obvious what the token does and even if it is it could be replaced with some other currency like aetherium or a Bitcoin or even US Dollars and those projects are pretty rare you know Bitcoin being the best example you know it the token itself is necessary for the security the network and you can't move money from here to Japan using the blockchain tacky I have to buy bitcoins to do it so that that's the main thing that we look for and in terms of projects we've talked about a few another one is wire w-why Ari it's an amazing project for onboarding and you know cash into these projects we are excited about Thunder cellar and then there are a couple of scalability projects like stark where you know that are kind of in the background people don't know enough about them yet but in a couple years they're gonna really be impactful all right I think we got somebody right there yeah thank you Dan so blockchain could be potentially disruptive for all industries so for the past several years where do you see real disruption happening faster is is that in financial health care from an industry perspective and from a technical layer pista perspective is that gonna be in the protocol layer or the deeper layer or the second layer so there's two different questions where does the disruption happens yeah so block chains really good at a lot of things but it's not good at everything so it will be I think most impactful in the next few years in the essentially the financial realm and the perspective I have on it is that the internet protocols we had before Bitcoin totally changed almost everything in our lives from commerce communication all that stuff but they really didn't change banking or credit card use certainly didn't do anything to remittance and those are the three areas that I think are going to be impacted right now the other things that blockchain can do are further out you know it can do really amazing things with identity and health care is a great example health care is highly regulated enormous issues so I think those things are you know three to five years out rather than right now another great one people always talk about Oh property titles on on the blockchain you need a government to endorse that to actually have it happen somebody the government actually has to put their deeds on a blockchain and you know governments are very slow and you know so I it's just some things are gonna take quite a while governments or change adverse unfortunately that's just a reality of things so I think we're out of time now if every good could give a big round of applause to Dan Moorhead really great thank you very much [Applause]

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