Original Author: The Master Investor Podcast with Wilfred Frost
Original Compilation: Plain Talk Blockchain
In this interview, Wilfred Frost engages in a second in-depth conversation with Dan Morehead, founder of Pantera Capital. They explore the positioning of Bitcoin in its cycle after a 50% retracement from its high; how fiat currency devaluation creates intergenerational wealth conflict; and why the "smart money" is actually the last to enter this round.
Highlights
- Most institutional investors still have a 0.0% allocation to blockchain, literally zero.
- It's not that gold hit a new high, it's that paper currency hit a new historical low.
- This might be the first trade in history where the "smart money" is the last to enter.
- The average age of first-time homebuyers in the US has already been delayed from 28 to 40 years old.
- We are facing a generational inflection point of the separation of money and state.
- Stablecoins are highly likely to take half of bank deposits within a decade.
- Bitcoin has reached escape velocity; I can't find any factor that could derail this process.
- If you have no exposure to blockchain, to some extent, you are already shorting this trend.
01. "Still the Most Asymmetric Trade in History"
Host: Last time you were here, we delved deep into the macro logic of cryptocurrency. The price at which you first bought Bitcoin was astonishingly low, what was it again?
Dan Morehead:$65.
Host: $65, compared to our price today of around $66,000, it's like two different worlds. In that episode, you described Bitcoin as "the most asymmetric trade in history." Do you still hold that view today?
Dan Morehead: Yes, I am still convinced of that. Throughout my career, I have always looked for asymmetric opportunities where the upside potential far outweighs the downside risk. Bitcoin, and the broader crypto space, is the most asymmetric trade I have ever seen.
In the early days, I would tell people: You could very well lose all your principal, so don't invest more than you can afford to lose. But at the same time, you have the potential for 5x, 10x, or even thousand-fold returns.
I remain optimistic because we are still in the very early stages. Most institutional investors still have a 0.0% allocation to blockchain and cryptocurrency. Literally zero. As long as the downside risk is negligible relative to the vast size of global financial assets, and the upside is redefining the entire monetary system, this asymmetry will not disappear.
02. The Four-Year Cycle Holds True Again
Host: Our last recording was on October 12th, the timing was interesting. Around October 6th, cryptocurrency reached a阶段性 high, followed by a pullback. Since then, Bitcoin has fallen about 50%. As someone who has experienced multiple cycles, how do you interpret this decline?
Dan Morehead: Anything trying to change the world comes with a lot of hype and volatility. At highs, optimism is rampant; at lows, pessimism prevails. Pantera has been deeply involved in this industry for 13 years and has experienced four full four-year cycles. These cycles are actually very regular, even predictable.
When we met in October, we were恰好 at the high point we predicted two or three years ago. Based on the model of the previous three cycles, we estimated that Bitcoin would reach a阶段性 high around August 2025. Although we hoped this time would be different, for example, new government policies could break the cycle,事后看来, the cycle规律 has once again asserted itself. The market corrected by 50%. It sounds like a lot, but compared to the 85% declines in previous cycles, this is actually much milder. The market may still need about a year to bottom out, consistent with past patterns.
Host: You didn't bearish at the time. Do you think this cycle will ultimately fall 75% to 80% like before?
Dan Morehead: This is a key question. I truly did not predict such a large drop at the time because there were many positive factors. But the market has its own rhythm. I want to point out that in previous highs, the price deviated far from the long-term logarithmic trend line, showing疯狂 parabolic movements. For example, in 2013, the price increased 10-fold in the four months before the high. This time, the price did not show that kind of extreme overheating; it merely returned roughly to the 2021 level.
So I think the current price level is probably near the bottom range. Although it may take another six to eight months to bottom out, if you have a four to five year investment horizon, now is a very attractive entry point.
Host: The current price is around $66,000. Many technical analysts say $60,000 is a key support level; if it breaks, it could fall all the way to $25,000. Do you agree?
Dan Morehead: I'm not very good at that kind of technical analysis. We never try to do ultra-short-term timing. Our approach to managing funds is more like venture capital, with a perspective of 5, 10, or even 20 years. From that angle, the current price is already quite cheap.
03. Why is Bitcoin Always the First to Be Sold Off?
Host: Why is Bitcoin always the "punching bag" among risk assets? When the Nasdaq and S&P 500 peak, cryptocurrency is often the first to be sold. Will this continue forever?
Dan Morehead: This is a very astute observation. Think about it, if a major shock occurs outside of Monday to Friday trading hours, you can't sell stocks. Cryptocurrency is the only globally available, highly liquid market with a scale of $2 trillion that operates 24/7, 365 days a year.
When a geopolitical crisis breaks out, institutions want to reduce risk exposure immediately, and Bitcoin becomes the only asset they can liquidate in real-time. This causes it to bear excessive selling pressure in the short term. But please note, although correlation spikes during "flash crash" moments, over the long term, the correlation between Bitcoin and the S&P 500 is actually very low, around 0.1 to 0.2. Over a span of several years, cryptocurrency moves independently upward, while traditional assets may just be treading water.
04. It's Not Gold Hitting New Highs, It's Paper Currency Hitting Historical Lows
Host: Let's talk about gold. Gold is up 55% in the past 12 months, while Bitcoin is basically flat. Does this shake the "digital gold" narrative for Bitcoin?
Dan Morehead:Gold is an interesting "old-school" asset. It periodically comes into the public eye. Before 2025, gold ETFs actually experienced net outflows for many years, with funds flowing into Bitcoin ETFs. But in 2025, people suddenly realized the US dollar was depreciating加速, and this sense of urgency drove funds back into gold.
But I think about this issue differently: It's not that gold or real estate is hitting new highs, it's that paper currency is hitting historical lows. As the printing presses keep running, the number of paper notes required to buy a fixed amount of assets必然 keeps rising. The word "pound" originally meant one pound of pure silver; now you need to shell out hundreds of paper bills to buy the same weight of silver. Governments can print money indefinitely, and this is the core of the devaluation trade.
Host: Aren't we currently in a staggering devaluation cycle?
Dan Morehead: Absolutely. The Fed defines "price stability" as 2% annual depreciation, which is本身 absurd. Stability should be zero. Even with only 2% annual depreciation, a person's lifetime purchasing power shrinks by nearly 90%. (Editor's note: Calculated with compound interest, at a 2% annual depreciation rate, purchasing power shrinks by about 80% after 80 years.) I think people are waking up to the realization that they must hold hard assets with fixed quantities, whether stocks, gold, or cryptocurrency.
This devaluation trade also has a clear generational characteristic. Massive money printing pushes up prices, which benefits the older generation who already own property and stocks, but squeezes the upward mobility of young people. The average age of first-time homebuyers in the US has already been delayed from 28 to 40 years old. Since they cannot accumulate wealth through traditional paths, it is a very rational choice for the younger generation to turn to cryptocurrency. If you look at the wage growth and house price growth curves since 1990, you'll find this剪刀差 has reached an outrageous level.
05. The Separation of Money and State
Host: How do geopolitical conflicts change the logic of cryptocurrency?
Dan Morehead: War always brings lasting inflation. But more importantly, we are witnessing the "separation of money and state." In ancient times, money was gold, naturally independent of government. Later, governments monopolized the right to print money, but事实证明 they haven't managed it well.
In the next decade, people will gradually realize that money does not need state endorsement. Geopolitical conflicts make this trend clearer—the world is阵营化. If you are a country not aligned with the US camp, or you worry that your assets might be sanctioned or frozen, you will want an asset not controlled by any single country. China once invested a large amount of foreign exchange reserves into US Treasury bonds, which poses increasing risks in the current international landscape. Bitcoin, as an asset independent of the banking system and制裁体系, sees its value反而 highlighted in conflicts.
06. The "Smart Money" is Actually the Last to Enter
Host: How many people actually hold cryptocurrency currently? Globally, are there truly large institutional positions?
Dan Morehead: Still very few. Although 300-400 million people globally hold cryptocurrency, most are small, "dabbling" positions. However, I believe that within a decade, due to the proliferation of smartphones (4 billion global users), most people will use cryptocurrency. Its cross-border transfers are fast, almost free, and require no one's permission.
This might be the first trade in history where the "smart money" is the last to enter. In all the investment opportunities I've seen over the past 40 years, typically Wall Street eats the meat first, and retail investors get the scraps last. This time it's completely the opposite; individual investors are at the forefront. I've been on stage with many alternative investment大佬 managing hundreds of billions of dollars, and many of them know nothing about Bitcoin.
This is why I'm so optimistic—this smart, wealthy institutional capital will enter someday. Currently, Coinbase has been included in the S&P 500 index. If you have no exposure to blockchain, to some extent, you are already shorting this trend.
07. Policy: From Hostility to Tailwind
Host: The attitude shift of the new administration is an important variable this cycle. How do you assess the current policy environment?
Dan Morehead: This is a huge tailwind. The previous administration took a hostile stance towards blockchain, pursuing Coinbase and cracking down on Ripple. The current government is willing to build this industry. Although the speed of legislative progress is always frustrating, frankly, the fact that the US Congress spends time discussing topics like "stablecoin market structure" itself indicates a qualitative change in the industry's status.
Regarding stablecoins, this is a revolution unfolding in phases. Currently, stablecoins may not yet pay interest comprehensively, but that's only a matter of time. Stablecoins are蚕食 bank deposit markets. The current scale of stablecoins is approximately $400 billion, while bank deposits are $17 trillion. (Editor's note: As of March 2026, the total market capitalization of stablecoins is approximately $300-320 billion, sources: DefiLlama, CoinDesk, and other data platforms.) In the next decade, stablecoins are highly likely to take half of bank deposits because they are available 24/7 on mobile phones, with an experience far superior to traditional banks.
08. Will Strategic Bitcoin Reserves Come?
Host: You also follow digital asset treasury companies, like MicroStrategy. Do you think governments will establish strategic Bitcoin reserves in the future?
Dan Morehead: I think this is highly likely to happen. The US already has a certain scale of digital asset reserves, mostly from law enforcement seizures. And now they are no longer selling these assets and may even start accumulating. Countries allied with the US will follow suit for strategic reasons, and countries opposing the US will also buy for defensive purposes. It takes time to advance through the political machine, but the trend is irreversible.
09. Why Solana?
Host: In the Layer 1 competition, why are you particularly optimistic about Solana?
Dan Morehead: We hold Bitcoin long-term, but Bitcoin focuses on store of value; it cannot handle tens of thousands of high-frequency transactions per second. Solana was designed for high performance from the outset—cheaper, faster, suitable for complex application scenarios like gaming and high-frequency trading. The internet has Google and Facebook; the blockchain field will also have several core Layer 1s. Bitcoin is gold, and Solana could be the digital highway.
10. Nasdaq Down 12%, Bitcoin Down 50%, Is This Reasonable?
Host: The Nasdaq is down 12.5% from its high, while Bitcoin is down 50%. Is this disconnect reasonable?
Dan Morehead: I think it's very unreasonable. Current stock valuations are at historical highs, risk premiums are extremely low, and interest rates are still high, meaning stocks are very expensive relative to bonds.
The AI field is also showing signs of overheating, with valuations of many AI companies far exceeding the trend line.
In contrast, cryptocurrency is 50% below its long-term trend line. From an asset allocation perspective, cryptocurrency is now in an extremely attractive oversold zone. Even if the Nasdaq continues to fall in the future, I believe cryptocurrency will perform better over a two-year span.
11. "I Can't Find Any Factor That Could Derail This Process"
Host: How is your mindset now different from during the 2014 or 2018 bear markets?
Dan Morehead: Completely different. In the early days, I did have moments of cold sweats, worrying that this entire experiment could be completely destroyed by a hack or regulatory crackdown. But after experiencing the Mt. Gox collapse, multiple 85% drawdowns, and rounds of regulatory crackdowns, the industry not only didn't fall but grew stronger. It has reached escape velocity.
Host: Is there any event that would make you completely abandon your bullish view?
Dan Morehead: A few years ago, I had a long list of risks, including custody security, hacking attacks, and regulatory uncertainty. But looking back now, most of these risks have been resolved. Although no one can guarantee that an accident won't happen tomorrow, logically, I can't find any factor that could彻底 derail this process. A smartphone-based, global monetary system is an inevitable direction for human society. There are 4 billion mobile phone users globally, and the financial普惠性 brought by blockchain is far more important than sharing photos on social media.
