Fortune: Dan Morehead and the Princeton "Gang"

Source: Fortune; Translated by AIMan@Golden Finance

In 2016, Dan Morehead embarked on a global journey to spread the gospel of Bitcoin. Morehead, a former trader at Goldman Sachs and Tiger Management, developed a strong interest in Bitcoin a few years ago, firmly believing that Bitcoin would reshape the global economy. His confidence in Bitcoin was so strong that he came out of semi-retirement to transform his hedge fund Pantera Capital into one of the world’s first Bitcoin funds.

This new business was launched in 2013 and got off to a good start, with Morehead’s two Princeton alumni, Pete Briger and Mike Novogratz, both from the private equity giant Fortress, also supporting the venture. The three watched happily as Pantera initially acquired Bitcoin at a price of $65, which soared to over $1,000 by the end of 2013. However, disaster struck: hackers ravaged the major exchange Mt. Gox in the emerging cryptocurrency industry, causing the price of Bitcoin to plummet by 85%. “People would say, 'Aren’t you the one who did that dead Bitcoin project?” Morehead recalled. “It’s still alive!” he would respond.

In 2016, Morehead attended 170 meetings in his journey to promote Bitcoin, walking into the offices of potential investors each time and spending an hour explaining why this new currency was the most attractive investment opportunity. The result: he raised only $1 million for a struggling fund. Worse yet, Morehead’s own travel and accommodation expenses totaled about $17,000. “I could only make $100 for each meeting, just to spread the word about people buying Bitcoin,” he told Fortune magazine.

In less than ten years, as the price of Bitcoin breaks through $120,000, Morehead’s early struggles resemble the narrative of a founder’s myth, comparable to the story of Apple’s Steve Jobs and Steve Wozniak tinkering in Jobs’ parents’ garage, or the tale of Warren Buffett and Charlie Munger exchanging stock secrets at an Omaha dinner.

Today, Pantera manages over $5 billion in assets, covering various crypto funds. Its holdings include digital assets such as Bitcoin and Ethereum, as well as venture investments in projects like Circle (which went public in June this year) and Bitstamp (which was acquired by Robinhood for $200 million earlier this year). Pantera stands out among many crypto venture firms due to its pioneering status, acting as a legendary bridge between the conservative traditional financial world and the once-rebellious crypto space. Its core figure is Morehead, who is a relatively obscure character in an industry dominated by legends.

“I am very stubborn, I firmly believe that Bitcoin will change the world,” Pantera told Fortune magazine. “So I will continue to hold on.”

Princeton “Gang”

Before Wall Street penetrated the blockchain industry, Morehead stood out in the chaotic world of early cryptocurrencies. As an athlete in football and heavyweight rowing at Princeton University, Morehead still retains the broad shoulders and square chin of his youth. His physique is in stark contrast to those who spend most of their time on online message boards, being thin and quirky. In contrast, Morehead comes from the traditional finance sector. To this day, he still rarely goes without a suit jacket.

Before getting involved with Bitcoin, Morehead had several years of trading experience. After working for a while at Goldman Sachs and Tiger Management, he founded his own hedge fund, Pantera, but during the 2008 financial crisis, the fund collapsed. At that time, a mysterious figure named Satoshi Nakamoto introduced Bitcoin to the world in an online white paper.

Morehead first heard about Bitcoin in 2011 when he learned about it from his brother and vaguely knew that his classmate at Princeton, Gavin Andresen, was running a website where any user could complete a captcha to receive 5 bitcoins (currently worth $575,000). However, Morehead didn’t think much of it until a few years later when another classmate, Briger, invited Morehead to the Fortres company office in San Francisco for coffee to talk about cryptocurrency, and Novogratz also called in. “Since then, I have been fascinated by Bitcoin,” Morehead said.

The tech world is known for its so-called “gang” - a group of employees from well-known organizations like PayPal who continue to lead the next generation of startups. In the crypto space, it is not a company, but a university, Princeton University has influenced some of the most impactful projects in the crypto industry. Briger and Novogratz are major supporters of Pantera, and Morehead even moved into the vacant office space at Fortress’s San Francisco office. Although Briger is a behind-the-scenes figure, he still holds significant influence in the crypto space, recently becoming a board member of Michael Saylor’s $100 billion Bitcoin holding company, Strategy. Novogratz later founded Galaxy, one of the largest crypto groups. Another classmate, Joe Lubin, later became one of the co-founders of Ethereum.

But in 2013, Ivy League graduates working in scarce fields such as private equity and macro trading seemed still far from being interested in Bitcoin. Briger told Fortune magazine that he first heard about Bitcoin from Argentine entrepreneur and early cryptocurrency adopter Wences Casares when they shared a room at a Young Presidents’ Organization meeting in the San Juan Islands. Briger quickly saw the appeal of disrupting the global payment system—although he believes Bitcoin is still in its early stages, he still holds this view today. He stated that Bitcoin reflects the prospects of the internet, which has facilitated a new form of information flow. “The way money moves is different, and that’s really unfortunate,” he said.

After sharing this idea with Novogratz, they believed that Morehead, who has experience in the foreign exchange market, was the right person for the job. When Morehead decided to dedicate the rest of his financial career to the cryptocurrency field, he renamed Pantera to the Bitcoin Fund and reopened it to outside investors. Both Briger and Novogratz contributed as LPs, while Fortress and venture capital firms Benchmark and Ribbit came in as GPs, although they later all exited. Morehead’s mentor at Tiger Fund, legendary investor Julian Robertson, even supported a later fund.

The Rebirth of Pantera

In the early hype of cryptocurrency, entrepreneurs had to face drastic ups and downs, and today’s volatility seems like just a fleeting moment. But Novogratz recalls that the severe price fluctuations were not the biggest trouble. The most headache-inducing issue was simply how to buy Bitcoin in the beginning.

When Morehead logged in, Coinbase had only been established for a year and he wanted to buy 30,000 bitcoins, which at the time were priced at about 2 million dollars. However, a window popped up, informing him of a limit of 50 dollars. After trying to communicate with Coinbase’s first employee, Olaf Carlson-Wee, Coinbase agreed to raise his limit to 300 dollars. Olaf Carlson-Wee later founded Polychain Capital and became a prominent figure in the crypto space.

However, Morehead’s most impressive achievement may be persevering during the downturn from 2013 to 2016. At that time, Bitcoin prices were in a slump, and almost no one outside the isolated blockchain community was paying attention to Bitcoin. “During those quiet years when cryptocurrencies were stagnant, Morehead was out there making rounds,” Novogratz told Fortune magazine.

There were still many highlights during that period, including the three annual meetings hosted by Morehead at his home in Lake Tahoe. At one of the meetings, Kraken co-founder Jesse Powell chose not to take the private jet chartered by Morehead but instead drove himself. “Kraken holds a significant amount of BTC from the Bitcoin community, and he was worried that if the plane crashed, Bitcoin would collapse,” Morehead recalled.

Unlike many of his peers, Morehead has never positioned himself as a “Bitcoin maximalist” or someone who believes that other cryptocurrencies should not exist. After acquiring 2% of the global Bitcoin supply, Pantera became an early investor in Ripple Labs, which created the digital asset XRP. “I think Bitcoin is clearly the most important,” Morehead said, “but it’s not just one internet company.”

According to Morehead, 86% of Pantera’s venture capital investments have been profitable. Considering that the vast majority of startups supported by venture capital end in failure, this number is indeed shocking. The investment environment in cryptocurrency may be more forgiving, as many projects come with cryptocurrencies, which means that even if a startup’s product makes no progress, its speculative value often remains.

Morehead now spends half of his time in Puerto Rico each year, which has become a hotbed for cryptocurrency. At the time, Pantera partner and current manager of Peter Thiel’s Founders Fund, Joey Krug, 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 under scrutiny for driving up real estate prices. Morehead is facing an investigation by the U.S. Senate Finance Committee to determine whether he violated federal tax law by moving to the island and receiving over $850 million in capital gains from Pantera. Earlier this year, he told The New York Times that he believes he has “acted appropriately in terms of taxes” and declined to comment further to Fortune.

The Future of Bitcoin

Morehead acknowledges that the cryptocurrency industry is rife with gambling, and Pantera differs from many other venture capital firms by staying away from memecoins. However, he believes this should not distract people from the grander goal of blockchain reshaping global finance. “It’s ridiculous to try to destroy the blockchain industry over a minor incident,” he said, “GameStop doesn’t mean the entire U.S. stock market is tainted.”

Pantera continues to grow, including raising its fifth venture fund with a target size of $1 billion. Morehead stated that Pantera will complete the fundraising for this new fund after fully investing the fourth fund later this year. Pantera has also ventured into the hot field of digital asset treasury, where listed companies purchase cryptocurrencies and account for them on their balance sheets.

But Bitcoin remains the core of Pantera’s strategy. By the end of 2024, its Bitcoin fund has risen by 1000 times, with a cumulative return rate exceeding 130,000%. When asked about the prediction for Bitcoin’s future trend, Morehead’s answer has always been the same: the price will double within a year. In most cases, this simple model is effective, although Morehead acknowledges that the rapid growth momentum may be slowing down. He believes that Bitcoin will still rise by another order of magnitude, meaning it will approach 1 million dollars, although he thinks this will be the last time Bitcoin sees a 10-fold increase.

If Bitcoin never reaches that milestone, Morehead is also willing to face criticism. After all, back in 2016, when the price of Bitcoin was still at $500, he worked hard to legitimize this cryptocurrency. And now, less than a decade later, he is spreading a new belief. “My conviction has never changed - but the vast majority of institutions have no confidence in this,” he said in an interview with Fortune magazine. “I feel we have decades to go.”