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Pantera CEO Dan Morehead is confident we’ve already seen the worst of bitcoin prices, as crypto markets regain their footing following months of downward trajectory.
In a 2023 market outlook blog published Monday, Morehead reasoned that digital assets and blockchain will thrive despite last year’s carnage. Pantera itself believes there’s no better time than now to start a company in the space.
Morehead’s surety stems from Pantera managing blockchain funds through three previous crypto winters, each one with “supposedly catastrophic events,” he said. Pantera is a long-serving crypto hedge fund with $3.8 billion in assets under management.
“For example, when Mt. Gox went down, it represented 85% market share — much larger than FTX today.”
Morehead then compared bitcoin’s 54% drawdown, from Jan. 1, 2022 to Jan. 17, 2023, to Tesla, Meta and PayPal stock — all tanked slightly more, around 60%.
“Blockchain’s resilience in the face of a terrible macro market for risk assets and historic idiosyncratic disasters is impressive,” he said. “I believe that it [bitcoin] has already bottomed and we will see blockchain assets continue their 13-year 2.3x per year appreciation trend soon.”
Meanwhile, the Menlo Park firm’s co-CIO Joey Krug described 2022 as the “biggest year of upheaval in crypto history,” and drew parallels to the year 2014 when many projects went bust amid general belief that the industry would die.
He wrote that despite lower prices, the industry is much better placed than it ever was.
Krug flagged Ethereum’s moves to scale and reduce transaction fees as fuel to be hopeful, and that further upgrades could see fees shrink to just a cent (currently around $3.90 on mainnet and under $0.20 on layer-2s).
He further noted that developing smart contract-based systems has become much easier and more efficient, giving breathing room for new developers.
Bitcoin bottom or not, DeFi could lead the next crypto cycle
The end state, according to Krug, is a scenario where more people will opt for decentralized finance (DeFi) protocols and apps:
“The average person will have apps on their phone that give them access to DeFi, where they’ll be able to engage in financial transactions without banks/brokers, with lower fees, global liquidity, and markets operating 24/7. The internet, but for finance.”
DeFi protocols are the best places to borrow or lend crypto, said Krug, especially given that centralized businesses have either folded or are in the process of winding down.
But getting DeFi adoption to grow would require crossing two hurdles: Increasing liquidity within DeFi and making the space easier to use.
Krug believes more institutional capital needs to come into DeFi, along with more regulated asset custodians that support Ethereum. Another way is to aggregate liquidity across multiple chains, layer-2s and liquidity pools, he said.
Regarding usability, Krug thinks DeFi user experience isn’t yet good enough to enable mass adoption. He highlighted crypto wallet interfaces, transaction fees in ETH and fiat on-ramps unable to integrate natively within dApps as problems that must be addressed.
“The solutions to this current suite of problems will take another two to three years to be solved and built out. Many of them, and the future innovations they enable, will provide excellent investment opportunities,” he said.
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