Bitcoin Has Bottomed, Will Soon Make Yearly Gains: Pantera CEO

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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.”

bit­coin has now out­per­formed Meta and Tes­la stock but still track­ing behind Amazon

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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