Pantera Capital CEO on crypto narratives and what’s next

Pantera Capital CEO Dan Morehead joined Yahoo Finance Live to break down Bitcoin breaking $40,000 and why the price has surged.

Video Transcript

[MUSIC PLAYING]

SEANA SMITH: Bitcoin keeps marching higher, topping 40,000 for the first time earlier today. It’s doubled its value– more than doubled in less than a month. We want to bring in Dan Morehead. He’s the CEO of Pantera Capital. We also have Yahoo Finance’s Dan Roberts joining the conversation. Dan, my question to you is when you see this parabolic move like we have seen in the price of Bitcoin in such a short amount of time, my question to you, I guess, is, are we looking at a potential bubble at all?

DAN MOREHEAD: Well, Bitcoin’s been growing at 210% compound annual growth rate for 10 years. And sometimes, it goes down. In bear markets, sometimes it surges up. But if you look at it on a log graph, it’s actually not parabolic. It’s pretty much straight. It goes up about that much every year. And right now, it’s literally just on its trend growth. So I don’t think it’s a bubble.

DAN ROBERTS: Hi, Dan. Dan Roberts here. A couple of questions for you– you know, I’ve covered the space since way back in 2012. And I know you’re kind of deeply entrenched in the space. For us, we see kind of the narratives that have taken shape and the idea of Bitcoin as digital gold and it’s OK that right now it’s just being used as an investment.

For regular people, when the price gets this high at the start of the year, you start to see that hype cycle again where, boy, I know that, anecdotally, I’m getting more texts than ever before from relatives and friends who are not as entrenched in this space. And the curiosity starts up again.

And you get kind of the same questions that you get every time there’s a big price surge, where people say, well, I just don’t understand. You know, I’ve read about it. I’ve had my dad say to me, I’ve read up on it and I still don’t understand. Why would you buy it? What’s the value? It’s not like a stock. There’s no dividend. It’s not a company that has revenue.

And then, you explain, well, the scarcity has an appeal. And you try to explain mining. I’m curious, as someone who runs a crypto investment firm, I mean, what do you tell newbies or people in your life who don’t understand it with as much [? expertise ?] as to why they would want to own cryptocurrency?

DAN MOREHEAD: Yeah, cryptocurrency is useful. It does many things. One of the things is storing money. And if you live in the developing world and your banks are potentially bankrupt, it’s a great place to store your money. If your currency’s devaluing, it is. It’s great for sending money across borders. About 7% of all of the flow between the United States and Mexico is going over Bitcoin, now. So you know, it has real-world use cases.

And ultimately, it really comes down to just econ 101. It’s supply and demand. If there are– now, if there’s 100 million people that use Bitcoin and think it’s useful for any one of those use cases, and if there’s only 21 million Bitcoins, the price of Bitcoin will go up.

DAN ROBERTS: And just to follow up with that, Dan, you know, another thing that people try to say, well, I can’t use it really to pay for things or use it as currency in most places. And of course, crypto diehards say, well, that doesn’t matter. That’s fine. It’s an investment. I’m curious whether you think that PayPal coming in might change that. So much was made about PayPal planning to allow people not just to buy Bitcoin within its wallet, but also use it for payments if they want. Do you think that we’ll start to see that happen?

DAN MOREHEAD: We will. And PayPal authorizing their 300 million users to instantly buy Bitcoin is a huge development. Obviously, it credentializes the space with such a well-respected brand. And it just makes it a lot easier. In the previous rally in 2017, if you wanted to buy crypto, you had to take a selfie with your passport and send it to your exchange and wait for a week for them to authorize you to start buying a little bit.

And now if you’re one of the 300 million people that uses PayPal, you can instantly buy. And within a few weeks of PayPal going live, their purchases are more than 100% of all the newly-issued Bitcoin. So they’re definitely a huge part of the rally.

ADAM SHAPIRO: But help us understand, though– and I’m a Luddite when it comes to Bitcoin– how fractionalization is helping drive the price up and why it’s no different than, say, a synthetic CDO. I realize it’s different, but the opaqueness seems to me dangerous for those who are buying, even if it’s incremental minor bits.

DAN MOREHEAD: Yeah, you know, the funny thing is it’s about the most transparent thing on Earth. It’s just an open source piece of software. Anyone can review the 50,000 lines of code. So it really is as transparent as possible. And everyone knows that there’s no kind of extra money printing. You can never quantitatively ease Bitcoin. There’s just 21 million Bitcoins.

And so if you buy a certain percentage of the outstanding Bitcoins, you know, you will always own that percentage of Bitcoins. And I think that’s why it’s proved so popular in this era of literally unlimited money printing. The US government printed more debt in the month of June than they did in the first 200 years of our country’s existence.

Most people get it, that if you’re printing more pieces of paper money, it’s going to take more pieces of paper money to buy things like gold or even the S&P 500 or Bitcoin.

SEANA SMITH: Dan Morehead, Pantera Capital CEO. And of course, our thanks to our very own Dan Roberts.

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