The Rise of Pantera's Founder: The Legend of Buying the Dip on Bitcoin at $65 and Making a Thousand Times Profit

Author: Leo Schwartz, Fortune Magazine

Compiled by: Luffy, Foresight News

In 2016, Dan Morehead embarked on a global journey 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 first Bitcoin funds in the world.

This new business was launched in 2013, initially gaining momentum with the support of 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 soared to over $1,000 by the end of the year. But then disaster struck when hackers raided the major exchange Mt. Gox in the emerging cryptocurrency industry, causing Bitcoin prices to plummet by 85%. “People would say, ‘Aren’t you doing that Bitcoin thing that’s already dead?’” Morehead recalled. “It’s still alive!” He would always respond like that.

During the Bitcoin roadshow in 2016, Morehead arranged 170 meetings. Every time he walked into a potential investor’s office, he spent 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 earned $100 per meeting just to convince people to buy Bitcoin,” he told Fortune magazine.

Less than a decade later, when the price of Bitcoin approached $120,000, Morehead’s early difficult years had become part of the founder myth – comparable to the stories of Steve Jobs and Steve Wozniak tinkering with inventions in Jobs’ parents’ garage, or Warren Buffett and Charlie Munger exchanging stock trading insights at a dinner in Omaha.

Today, Pantera’s various cryptocurrency funds manage over $4 billion in assets, holding positions in digital assets such as Bitcoin and Ethereum, as well as investments in projects like Circle (which went public in June) and Bitstamp (acquired by Robinhood for $200 million earlier this year). However, in the fiercely competitive crypto venture capital space, the company’s uniqueness lies in its “pioneering” status: it is a well-known bridge between the conservative traditional finance world and the once-rebellious crypto industry. The key figure, Morehead, is a low-key practitioner in an industry filled with legendary figures.

“I am very stubborn and completely believe that (Bitcoin) will change the world,” Morehead told Fortune, “so I have kept at it.”

The Wild Journey of Bitcoin

The price trend of Bitcoin since 2013. Data source: CoinGecko

Princeton “Gang”

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 University (football and heavyweight rowing), and he still retains the broad shoulders and square jawline of his youth. This is in stark contrast to those skinny, unconventional individuals who spend all day in online forums. Instead, Morehead comes from the traditional financial sector, and to this day he is accustomed to wearing a suit jacket.

Before coming into contact with Bitcoin, Morehead had a long trading career. After working at Goldman Sachs and Tiger Fund, he founded his own hedge fund Pantera, which collapsed during the financial crisis of 2008. 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 classmate from Princeton, Gavin Andresen, was running a website where users could obtain 5 Bitcoins (currently valued at about $575,000) by solving a CAPTCHA. However, he didn’t pay much attention until a few years later, when another classmate, Briger, invited him to the Fortress Investment Group’s San Francisco office for coffee to talk about cryptocurrencies, and Novogratz joined remotely. “Since then, I’ve been captivated by Bitcoin,” Morehead said.

The tech world is known for its so-called “gangs”, such as the PayPal gang that later dominated the next generation of startups. In the crypto space, the “gang” does not come from a particular company, but rather from a university: Princeton has nurtured some of the most influential projects in the industry. Briger and Novogratz are key supporters of Pantera, and Morehead even moved into the vacant space of Fortress Investment’s San Francisco office. Briger continues to maintain a behind-the-scenes influence in the crypto space, recently joining the board of Strategy, a Bitcoin holding company valued at $100 billion, led by Michael Saylor. Novogratz founded Galaxy, becoming one of the largest crypto corporate groups. Another classmate, Joe Lubin, later became a co-founder of Ethereum.

But in 2013, Ivy League graduates and those active in high-end fields like private equity and macro trading would find it absurd to be interested in Bitcoin. Briger told Fortune magazine that he first heard about Bitcoin from Argentine entrepreneur and early cryptocurrency 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 payments system, and he still insists on this today, although he believes Bitcoin is still in its early stages. He said the prospects for Bitcoin are comparable to the internet, which facilitated a new form of information dissemination. “It is truly unfortunate that the way funds flow has not kept up,” he said.

After sharing this idea with Novogratz, they believed that Morehead, who has experience in the foreign exchange market, was the right person to steer the ship. When Morehead decided to devote the rest of his financial career to the crypto space, he repositioned Pantera as a Bitcoin fund, opening it up to external investors. Both Briger and Novogratz joined as limited partners, while Fortress Investment, venture capital firm Benchmark, and Ribbit took common partner shares (later exited). His mentor at Tiger Fund, legendary investor Julian Robertson, also invested in a later fund.

The Rebirth of Pantera

In the early days of the cryptocurrency frenzy, entrepreneurs had to face extreme market volatility; compared to that, today’s volatility seems trivial. But Novogratz recalls that the biggest trouble was not the price rollercoaster, but the fact that it was almost impossible to buy Bitcoin.

He once went to find Coinbase, which had just been established for a year, wanting to buy 30,000 bitcoins, which were worth about 2 million dollars at the time. As a result, a window popped up, indicating that his limit was 50 dollars. After discussing with Olaf Carlson-Wee, the first employee of Coinbase who later became a well-known figure in the cryptocurrency world, Coinbase agreed to raise his limit to 300 dollars.

However, perhaps Morehead’s most admirable achievement was persevering through the downturn from 2013 to 2016. During that time, Bitcoin prices were sluggish, and no one cared about it outside of the closed blockchain community. “During those years when cryptocurrency was stagnant, Dan was out there hustling,” Novogratz told Fortune.

That era also had its highlights, including the three annual meetings held at Morehead’s home at Lake Tahoe. At one of them, Kraken founder Jesse Powell chose not to take the private jet rented by Morehead, but instead drove himself. “At that time, there were quite a few people from the Bitcoin community on the plane, and he was worried that if the plane crashed, Bitcoin would also be doomed,” Morehead recalled.

Unlike many of his peers, Morehead never positions himself as a “Bitcoin maximalist” (i.e., someone who believes that no other cryptocurrencies should exist). After buying up 2% of the global Bitcoin supply, Pantera became an early investor in Ripple Labs, which issued the digital currency XRP. “My thought is that Bitcoin is clearly the most important,” Morehead said, “but there isn’t just one internet company.”

According to Morehead, 86% of Pantera’s venture capital projects are profitable. Given 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 persists.

Morehead now spends half of his time each year in Puerto Rico, which has become a hotbed for crypto. At the time, Pantera partner Joey Krug, who now works at 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, although they are scrutinized for driving up real estate prices. Morehead was once investigated by the Senate Finance Committee, questioned about whether relocating to the island and obtaining over $850 million in capital gains from Pantera violated federal tax law. Earlier this year, he told The New York Times that he believes “he is acting properly in tax matters,” but he declined to comment further to Fortune.

The future of Bitcoin

Morehead admitted that the crypto industry is rife with gambling behavior, and Pantera does not engage in Meme coins like many venture capital firms do. But he believes this should not overshadow the grand goal of blockchain reshaping global finance. “It’s ridiculous to think that a little side issue could undermine the blockchain industry,” he said, “The GameStop incident does not mean that the entire U.S. stock market has problems.”

Pantera continues to expand, including raising its fifth venture capital fund with a target of $1 billion. Morehead stated that fundraising will close 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 cryptocurrency 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 generally works, although he admits that the growth momentum may be slowing down. He believes Bitcoin will rise another order of magnitude, approaching 1 million dollars, 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 ten years later, he is just getting started. “I believe that the vast majority of institutions’ faith in Bitcoin is just beginning,” he told Fortune magazine, “We have decades to go.”