Fortune: Dan Morehead and the Princeton "Gang"

Source: Fortune; Translated by AIMan@Jinse Finance

In 2016, Dan Morehead embarked on a journey around the world to promote the way of Bitcoin. Morehead, a former trader at Goldman Sachs and Tiger Management, developed a strong interest in Bitcoin a few years ago and firmly believes that Bitcoin will reshape the global economy. His confidence in Bitcoin is so strong that he came out of semi-retirement to reshape 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. Two Princeton alumni of Morehead, Pete Briger and Mike Novogratz, both from the private equity giant Fortress, also supported this business. The three of them watched with joy as the Bitcoin that Pantera initially acquired at $65 soared to over $1,000 by the end of 2013. However, disaster struck: hackers raided the major exchange Mt. Gox in the emerging cryptocurrency industry, and the price of Bitcoin plummeted 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 potential investors’ offices each time and spending an hour explaining why this new currency was the most attractive investment opportunity. The result: he only raised $1 million for his struggling fund. Worse still, Morehead’s own travel and lodging expenses totaled about $17,000. “I could only make $100 for each meeting, just to promote people to buy Bitcoin,” he told Fortune magazine.

In less than a decade, as the price of Bitcoin surpassed $120,000, Morehead’s early struggles resembled the plot 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 a dinner in Omaha.

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 numerous crypto venture capital firms due to its pioneering position, bridging the conservative traditional finance world and the once-rebellious crypto space. Its key figure is Morehead, who is a quiet presence in this industry dominated by legendary figures.

“I’m very stubborn, and I fully believe that Bitcoin will change the world,” Pantera told Fortune magazine. “So I will continue to stick with it.”

Princeton “Gang”

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

Before getting involved with Bitcoin, Morehead had years of trading experience. After working for a while at Goldman Sachs and Tiger Fund, he founded his own hedge fund, Pantera, but during the 2008 financial crisis, the fund went under, and 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 earn 5 bitcoins (currently worth $575,000) by completing a captcha. However, Morehead didn’t think much of it until a few years later when another classmate, Briger, invited him to the Fortres company office in San Francisco for coffee to talk about cryptocurrency, and Novogratz also called in. “From that moment on, I became fascinated with Bitcoin,” Morehead said.

The tech industry 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’s not a single company, but rather a university, with Princeton University influencing 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 wields significant influence in the crypto realm, recently becoming a board member of Michael Saylor’s $100 billion Bitcoin holding company, Strategy. Novogratz later founded Galaxy, which is one of the largest crypto groups. Another classmate, Joe Lubin, later became one of the co-founders of Ethereum.

However, 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 event in the San Juan Islands. Briger quickly saw the appeal of disrupting the global payment system—although he believed Bitcoin was still in its infancy, he still holds that view today. He said that Bitcoin reflects the prospects of the internet, which has facilitated a new form of information flow. “The way money flows 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 devote the rest of his financial career to the cryptocurrency field, he renamed Pantera to Bitcoin Fund and reopened it to external investors. Both Briger and Novogratz contributed as LPs, while Fortress and venture capital firms Benchmark and Ribbit took stakes as GPs, although they all later withdrew. Morehead’s mentor at Tiger Fund, legendary investor Julian Robertson, even supported a later fund.

The Rebirth of Pantera

In the early tumult of cryptocurrency, entrepreneurs had to face extreme ups and downs, and today’s volatility seems just a fleeting moment. But Novogratz recalls that the extreme price fluctuations were not the biggest trouble. The most headache-inducing part 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 were priced at around $2 million at the time. However, a window popped up, informing him that his limit was $50. After attempting to communicate with Coinbase’s first employee, Olaf Carlson-Wee, Coinbase agreed to raise his limit to $300. 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’s price was in a slump, and almost no one outside the insular blockchain community was paying attention to Bitcoin. “During those quiet years when cryptocurrencies were stagnant, Morehead was tirelessly running around,” 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 rented by Morehead, but instead drove himself. “Kraken has a significant amount of BTC in 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 no other cryptocurrencies should 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 obviously the most important,” Morehead said, “but there is not just one internet company.”

According to Morehead, 86% of Pantera’s venture capital investments have been profitable. Given that the vast majority of startups backed by venture capital end in failure, this figure is indeed astonishing. The investment environment for cryptocurrencies may be more forgiving, as many projects come with cryptocurrencies, meaning that even if a startup’s product makes no progress, its speculative value often endures.

Morehead now spends half of his time each year in Puerto Rico, which has become a hotbed for cryptocurrency. At that time, Pantera partner and current manager of Peter Thiel’s Founders Fund, Joey Krug, moved there, and Morehead decided to follow suit. He estimates that there are about 1,000 blockchain entrepreneurs on the island, although they are scrutinized 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 laws by moving to the island and earning over $850 million in capital gains from Pantera. Earlier this year, he told The New York Times that he believes he has “taken appropriate action in terms of taxes,” and he declined to comment further to Fortune.

The Future of Bitcoin

Morehead acknowledged that the cryptocurrency industry is rife with gambling, and Pantera is unlike many other venture capital firms that steer clear of memecoins. However, he believes that this should not distract people from the larger goal of blockchain reshaping global finance. “It’s ridiculous to try to destroy the blockchain industry over a small episode,” he said, “GameStop does not 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 wrap up fundraising for this new fund after completing the full investment of its fourth fund later this year. Pantera has also entered the hot digital asset treasury space, where publicly traded companies purchase cryptocurrencies and account for them on their balance sheets.

But Bitcoin remains at the core of Pantera’s strategy. By the end of 2024, its Bitcoin fund is expected to rise 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 been consistent: the price will double within a year. In most cases, this simple model has been effective, although Morehead acknowledges that the rapid growth momentum may be slowing down. He believes Bitcoin will rise by another order of magnitude, which means 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 bear 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 ten years later, he has begun to spread a new belief. “My faith 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.”