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 spread the word about Bitcoin. Morehead was a trader at Goldman Sachs and Tiger Global Fund, and a few years ago, he developed a strong interest in Bitcoin, firmly believing that it would reshape the global economy. His confidence in Bitcoin was 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 the business. The three of them happily watched as the Bitcoin that Pantera initially acquired for $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 was involved in that dead Bitcoin project?” Morehead recalled. “It's still alive!” he would respond.

In 2016, Morehead attended 170 meetings on 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 his struggling fund. Worse still, Morehead's own travel and accommodation costs totaled about $17,000. “I could only make $100 per meeting, just to promote people to buy Bitcoin,” he told Fortune magazine.

In less than ten years, as the price of Bitcoin surpasses $120,000, Morehead's early struggles resemble a plot from 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 held assets include digital assets like Bitcoin and Ethereum, as well as venture capital investments in projects like Circle (which went public in June) and Bitstamp (which was acquired by Robinhood for $200 million earlier this year). Pantera stands out among many crypto venture capital firms due to its pioneering position, bridging a legendary gap between the conservative traditional finance world and the once rebellious crypto space. Its core figure is Morehead, who is a quiet presence in an industry led by legends.

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

Princeton “Gang”

Before penetrating the blockchain industry on Wall Street, Morehead stood out in the chaotic world of early cryptocurrencies. As a football and heavyweight rowing athlete 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 immersed in online message boards, with thin bodies and eccentric personalities. In contrast, Morehead comes from the traditional finance sector. To this day, he rarely goes without a suit jacket.

Before coming into contact 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 financial crisis of 2008, the fund collapsed, 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 Princeton University classmate Gavin Andresen was running a website where any user could earn 5 Bitcoins (currently valued at $575,000) by completing a CAPTCHA. But Morehead didn't think much of it until a few years later when another classmate, Briger, invited Morehead to the Fortres office in San Francisco to have coffee and talk about cryptocurrency, and Novogratz called in. “Since then, I became fascinated with 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, 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 of Fortress's San Francisco office. Although Briger is a behind-the-scenes figure, he still wields significant influence in the crypto space, and he recently became 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.

But in 2013, graduates from Ivy League schools 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 he and Casares shared a room at a Young Presidents' Organization gathering in the San Juan Islands. Briger quickly saw the appeal of disrupting the global payment system—though he believes Bitcoin is still in its infancy, he continues to hold that view to this day. He said that Bitcoin reflects the potential of the internet, which fosters 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 candidate. 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 external investors. Both Briger and Novogratz contributed as LPs, while Fortress and venture capital firms Benchmark and Ribbit invested as GPs, although they later all exited. Morehead's mentor at the Tiger Fund, legendary investor Julian Robertson, even supported a later fund.

The Rebirth of Pantera

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

Morehead logged into Coinbase, which had only been established for a year at the time, wanting to buy 30,000 bitcoins, priced at around $2 million. However, a window popped up, indicating a limit of $50. After trying 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 enduring through the downturn from 2013 to 2016. During that time, the price of Bitcoin was 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 and about,” Novogratz told Fortune magazine.

There were still many highlights during that period, including 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 plane rented by Morehead, but instead drove himself. “Kraken owns 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 clearly the most important,” Morehead said, “but there’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 venture-backed startups fail, this figure is truly astonishing. The investment environment for cryptocurrencies 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 can often persist.

Morehead now spends half of his time in Puerto Rico each year, 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 move there as well. He estimates that there are about 1,000 blockchain entrepreneurs on the island, though they are scrutinized for driving up real estate prices. Morehead is under investigation by the U.S. Senate Finance Committee to determine whether he violated federal tax laws 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 “taken appropriate actions regarding taxes” and declined to comment further to Fortune.

The Future of Bitcoin

Morehead acknowledged that the cryptocurrency industry is rife with gambling, and Pantera is different from many other venture capital firms that stay away from memecoins. However, he believes that this should not distract people from the larger goal of blockchain reshaping global finance. “It is absurd to try to destroy the blockchain industry over a minor incident,” he said, “GameStop does not mean that 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 all investments from its fourth fund later this year. Pantera has also entered the hot field of digital asset treasury, where publicly traded companies buy cryptocurrencies and include them on their balance sheets.

But Bitcoin remains at the core of Pantera's strategy. By the end of 2024, its Bitcoin fund had increased by 1000 times, with a cumulative return rate exceeding 130,000%. When asked about his prediction for Bitcoin's future trajectory, Morehead's answer has been consistent: the price will double within a year. In most cases, this simple model is effective, although Morehead admits 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, although he thinks this will be the last time Bitcoin experiences a 10-fold increase.

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