MASSIVE POLITICAL PIVOT ON BLOCKCHAIN[1]
“There are decades where nothing happens; and there are weeks where decades happen.”
– Vladimir Ilyich Lenin
I’ve been investing in bitcoin/blockchain for over a decade. Nothing happened at the SEC and the presidential administrations the whole time. A decade’s worth of rational thinking just happened in a few weeks.
It’s like the shock wave of a sonic boom. Ten years of correct thinking is crashing through politics right now.
In May one of the presidential candidates threw his support behind blockchain. Weeks later two of the three presidential candidates, ten United States Senators, and members of the U.S. House of Representatives were at a bitcoin conference!?! The change is absolutely massive.
So much happened it is actually kinda hard to condense, but here’s a quick distillation of the major policy initiatives:
PRESIDENT TRUMP’S BITCOIN 2024 SPEECH :: POLICY INITIATIVES
1. Bitcoin is a “Marvel of Technology”
“Bitcoin is not just a marvel of technology, as you know, it’s a miracle of cooperation and human achievement.”
2. Bitcoin May Overtake Gold
“But I say this is the steel industry of 100 years ago. I think you’re just in your infancy….
“It’s already bigger than Exxon Mobil. Soon it will be surpassing the entire market cap of silver….
“One day it probably will overtake gold.”
3. Trump’s “America First” Approach
“The reason I’ve come to address the Bitcoin community today can be summed up in two very simple words: America first. Because if we don’t do it, China is going to be doing, others are going to be doing it. Let’s do it and do it right. My vision is for an America that dominates the future….
“I want the United States to be first in technology, first in science, first in manufacturing, first in artificial intelligence, and first in space.”
4. Making America the Global Leader in Crypto
“This afternoon, I’m laying out my plan to ensure that the United States will be the crypto capital of the planet and the Bitcoin superpower of the world, and we’ll get it done.”
5. What Bitcoin Stands For
“Bitcoin stands for freedom, sovereignty and independence from government coercion and control. The Biden Harris administration’s repression of crypto and Bitcoin is wrong, and it’s very bad for our country. It’s really quite un-American.”
6. Crypto-Friendly Policies and Shutting Down “Operation Choke Point 2.0”
“As President, I will immediately shut down Operation Choke Point 2.0….
“I will cut unnecessary and burdens of regulations. Fight every day to make America the best place on earth to build a business, including a crypto business.”
[“Operation Choke Point 2.0” is the term some in the blockchain industry use to describe a perceived effort by regulators to cut off blockchain companies from banking services, which has forced many projects oversees.]
7. A New Crypto Presidential Advisory Council
“Upon taking office, I will immediately appoint a Bitcoin and Crypto Presidential Advisory Council. Their task will be to design transparent regulatory guidance for the benefit of the entire industry.”
8. Regulatory Clarity for Stablecoins
“As part of our effort to provide regulatory clarity, we will create a framework to enable the safe, responsible expansion of stablecoins, allowing us to extend the dominance of the U.S. dollar to new frontiers all around the world.”
9. Bitcoin Is Not a Threat to the U.S. Dollar
“Those who say that Bitcoin is a threat to the dollar have the story exactly backwards. I believe it is exactly backwards. Bitcoin is not threatening the dollar. The behavior of the current US government is really threatening the dollar.”
10. Embracing New Ideas
“Our nation has never thrived by trying to censor new ideas and shut down the dreams of our people. America always plants our flag on the next frontier and pushes boldly ahead.”
– Donald Trump, Bitcoin 2024 Conference in Nashville, July 27, 2024
TECTONIC SHIFT
Donald Trump saying ten things in a row that I completely agree with? Wow.
That’s why I’m so bullish on the future of blockchain. All those policies are completely rational.
It is highly likely that whoever is the next president of the United States, the country will have rational cryptocurrency policies.
The crowd favorite – which I also strongly support – and which will be the subject of our long-in-the-works letter on currency reserves (which we’ll send out as our September Blockchain Letter) is:
U.S. STRATEGIC BITCOIN STOCKPILE
“Many Americans do not realize that the United States government is among the largest holders of bitcoin….
“The federal government almost has 210,000 bitcoin or 1% total supply that will ever exist. But for too long our government has violated the cardinal rule that every bitcoiner knows by heart: ‘Never sell your bitcoin’.
“And so as the final part of my plan today, I am announcing that if I am elected, it will be the policy of my administration, United States of America, to keep 100% of all the bitcoin the U.S. government currently holds or acquires into the future, we’ll keep 100%….
“This will serve, in effect, as the core of the Strategic National Bitcoin Stockpile.
“And so as I take steps to transform that vast wealth into a permanent national asset to benefit all Americans.”
– Former President Trump, Bitcoin 2024 Conference in Nashville, July 27, 2024
Before President Trump spoke third-party candidate Robert F. Kennedy Jr. gave a speech at Bitcoin 2024 promising a much larger reserve.
“I intend as President of the U.S. to sign an executive order on day one, directing the DOJ and the U.S. Marshals to transfer the approximately 200,000 bitcoin held by the US government to the US Treasury, where it will be held as a strategic asset.
“I will sign an executive order directing the U.S. Treasury to purchase 550 bitcoin daily until the U.S. built a reserve of at least 4 million bitcoins and a position of dominance that no other country will be able to usurp. Our nation holds approximately 19% of global gold reserves. This policy will give us about the same proportion of total bitcoin. The cascading impact from these actions will eventually move bitcoin to a valuation of hundreds of trillions of dollars.”
– Robert F. Kennedy Jr., Bitcoin 2024 Conference in Nashville, July 27, 2024
Shortly after Trump’s speech, Senator Cynthia Lummis (R-WY) read out her own legislative proposal to amass an official U.S. federal reserve of 1 million bitcoin over five years.
“This is the Bitcoin Reserve Bill. I’m reading from the text, in the Senate of the United States, to establish a bitcoin strategic reserve, a network of secure storage vaults, purchase program and other programs to ensure the transparent management of bitcoin holdings of the federal government….
“When Satoshi Nakamoto, in January of 2009, mined the first bitcoin, he brought about an asset that will change the world, and this is our Louisiana Purchase moment.
“This bitcoin reserve that we’re going to create will start with the 210,000 bitcoin that President Trump just mentioned, and pull it into a reserve stored in geographically diverse vaults, and that’s only the beginning. Over five years the U.S. will assemble 1 million bitcoin – 5% of the world’s supply.
“It will be held for a minimum of 20 years and can be used for one purpose: reduce our debt.
“This bitcoin is going to be transformative for this country. As President Trump just said: ‘we are printing too much money, we are spending too much money.’ We printed in 22 months during COVID, the same amount of money that had ever been printed in the history of the United States. Well, no more.
“With a strategic bitcoin reserve, we will have an asset that, in that period of time before 2045, can cut our debt in half.”
– Senator Cynthia Lummis, Bitcoin 2024 Conference in Nashville, July 27, 2024
For those interested, here is President Trump’s Bitcoin 2024 Speech: Transcript, Video
BIPARTISAN SUPPORT
Representatives Khanna (D-CA 17th District) and Nickel (D-NC 13th District) were there – emphasizing what should be obvious:
“I don’t really see why it’s partisan. Being against bitcoin is like being against cell phones.”
– Congressman Ro Khanna, CNBC Interview, July 26, 2024
Amen. Satoshi gifted this technology to the world.
“Keeping this in the bipartisan space was really my main focus in Nashville, and it’s what I’ve been working on in Congress.”
– Congressman Wiley Nickel, Bitcoin Magazine Interview, August 2, 2024
SONIC BOOM
“Kamala Harris’s advisers have approached top crypto companies to ‘reset’ relations between her Democratic party and a sector that has come out as an important backer of Donald Trump, her rival for the US presidency.
“Members of the vice-president’s team have contacted people close to crypto companies about meeting in recent days, said four people with knowledge of the matter. Those include leading exchange Coinbase, stablecoin company Circle and blockchain payments group Ripple Labs, two of the people said.”
– Financial Times, “Kamala Harris Campaign Seeks ‘Reset’ with Crypto Companies”, July 27, 2024
FREE AT LAST
“The ability to bring resources and opportunities and access to the marketplace to the people who need it most, that’s what Bitcoin is about. That’s what this is about. Giving the average American a chance to make their own decisions at home. No matter where you live, if you’re on the mountain top or in the valleys low, having a chance to democratize our financial footprint is an absolutely essential part of achieving the American dream. And whatever we can do, wherever we can do it, let’s get it done….
“As the Chairman of the [Senate] Banking Committee, the one thing that I will absolutely guarantee will be done is watching your legislation get a vote past the Banking Committee, and we’re going to fight to make it a law in the United States setting Bitcoin free, here at home, free at last! Free at last! Thank God almighty, it’s free at last….”
– Senator Tim Scott, Bitcoin 2024 Conference Speech with Senator Cynthia Lummis, July 26, 2024
BITCOIN 2024 PANEL RECAP :: “BITCOIN – THE GREAT ASYMMETRIC OPPORTUNITY”
Panel Featuring: Dan Morehead, Founder and Managing Partner at Pantera; Anthony Scaramucci, Founder and Managing Partner at SkyBridge Capital; and Gary Cardone, Managing Partner at Cardone Digital Ventures
The Most Asymmetric and Most Inevitable Trade
Dan: “Anthony, we were at Goldman together when they did the GSCI and now everybody thinks of Commodities as an asset class. I was doing Emerging Markets in the ’90s, and now everybody thinks of Emerging Markets as an asset class. In probably five years, every institutional investor on earth will have a blockchain team. They’re going to have an allocation. It’s going to be like 800 basis points. And the reason I’m still so bullish, and I think it’s still so asymmetric, nobody has that allocation right now.
“This is the first trade ‘smart money’ missed, right? It’s all individuals like you in the audience that did this, almost all institutions have either zero or less than 1% of their assets in blockchain.
“It’s not only the most asymmetric trade I’ve ever seen, I think it’s the most inevitable trade I’ve ever seen. It might take longer than we all think. It might have some ups and downs, which it does, but basically everybody with a smartphone is going to be using blockchain in ten years. It’s just that obvious. So, that’s why I still think it is still very asymmetric because institutions have yet to really address it.”
And He’s Complaining?!?
Aaron: “You said to take gold’s market cap, it could take ten years, maybe. We don’t know. It’s hard to put a prediction on it, but why is it taking so long? Why is it taking so long for this to happen?”
Dan: “Aaron’s question is why I love this trade. We’ve been doing this for eleven years and during those eleven years, on average, bitcoin has doubled every year…and he’s complaining it’s taken so long. Now **that** is a great trade!”
The Political Pivot on Blockchain is the Biggest News in Crypto
Aaron: “Regardless of your personal views, if Trump wins, is that orders of magnitude better for Bitcoin or as a Bitcoin holder, how do you think about it?”
Dan: “I actually think it’s the biggest news in crypto….
“I think the former president changing his views in May is the biggest thing in crypto because whether he’s elected or the other candidate’s elected, everybody just changed. The SEC was getting an ETF for ETH out within a week. Everything changed. And I really think this is a sea change right now because now politicians see that crypto is popular. Think about this. The majority of Americans are under 40 years old. They all love crypto and they vote. And so politicians can put two and two together.”
The Killer App of Bitcoin is Bitcoin
Aaron: “Bitcoin’s token economy is developing. Does Bitcoin need to develop? This is the question. Does Bitcoin need to develop a robust token economy to be that asymmetrical bet? Like if the token economy fails to develop, is Bitcoin’s growth capped, or how do you think about it?”
Dan: “I think it is great that there are really cool projects being built on Bitcoin. Things like Stacks, those are great, but people sometimes say, ‘What’s the killer app of Bitcoin?’ Bitcoin’s the killer app of Bitcoin. There’s so much wealth being stored, so much saving, so much cross-border money flows. So, even if nothing else gets built on top of Bitcoin, it is an amazing development for the world.”
Watch the full panel here.
MAJORITY OF AMERICANS
“‘How did you go bankrupt?’
The other responds, ‘Two ways. Gradually, then suddenly.’”
– Ernest Hemingway, The Sun Also Rises, 1926
It doesn’t take a Poli Sci major to figure out why both political parties collapsed suddenly into blockchain.
The majority of Americans are under 40.
The spoils of the Fed’s policy errors and Congress money printing have gone almost exclusively to the minority of Americans who are older.
The majority of Americans are paying the price of these mistakes via their housing payments.
The median-priced home is further from affordability than at any time since 1987.
They vote.
#BuyBitcoin.
DEPIN: THE NEW INDUSTRIAL REVOLUTION
By Erik Lowe, Head of Content
The Industrial Revolution was a transformative era that reshaped economies through productivity boosts enabled by breakthroughs in large-scale machine manufacturing. During this period, there was a transition from predominantly localized agricultural economies to urbanized industrial centers. Out of necessity, societies centralized.
However, while centralizing production created efficiencies, it also brought challenges. Factories were vulnerable to disasters like fires or other single points of failure like malfunctioning machinery.
Although we’ve undergone a series of ‘Industrial Revolution’ phases over the last few centuries driven by new technological advancements, many core issues inherent with the centralization of resources and human capital persist in modern-day companies. Additionally, with the regulatory red tape of an increasingly large government, there is currently higher cost and friction to building a business at scale.
Now, however, we believe there is a new phase underway — a re-envisioning of how businesses, services, and networks can be formed and managed. Decentralized Physical Infrastructure Networks (“DePIN”) may usher in a new age of productivity, but rather than through centralization, it will be driven by the power of decentralization.
What Are DePINs and What Are Their Advantages?
“Decentralized physical infrastructure networks (DePINs) use token rewards to incentivize the deployment of hardware-based networks and the completion of real-world tasks.”
– Messari Classification System
At their core, DePINs are decentralized marketplaces that connect suppliers of a resource with buyers. Instead of a single company being responsible for the production of a resource, as is typical in traditional models, a network of independent operators collectively makes up the supply side. These operators are incentivized to contribute their own resources (often in the form of physical hardware) through economic rewards, such as tokens or payments, aligning their interests with the success and growth of the DePIN ecosystem.
DePIN is touted for its potential to revolutionize physical infrastructure networks across a range of industries like cloud computing, wireless networks, and cloud storage. For example, Helium Network is a decentralized wireless infrastructure network for IoT (“Internet of Things”) devices that allows operators to deploy wireless hardware and earn Helium tokens as a reward for expanding the network’s coverage.
A key differentiator between DePINs and their centralized counterparts is who the stakeholders are. Instead of value accruing to rent-seeking intermediaries or companies, it is distributed to operators who collectively own and run the network.
While many DePIN projects are interesting for their novel approaches, the question arises: “If my existing services work just fine, what additional value would a DePIN version provide me?”
The benefits of DePIN can be boiled down to a number of key advantages:
Robust, resilient, and secure – the redundancy and distribution of node operators allows for more consistent network uptime and resistance to single points of failure inherent in physically centralized systems. Security or fraud risks associated with closed systems can be mitigated by blockchain-based networks that are transparent, immutable, and auditable.
Affordability for users – since DePIN projects are run by a network of operators, operational overhead of centrally run companies like physical maintenance and legal costs are less impactful to price, allowing savings to be passed down to users.
Community-driven decision making – decisions by a handful of company execs may not always be in the best interest of users and/or operators, and in some cases, are primarily for their own personal gain. In DePIN, decisions are made by the community of tokenholders which may lead to healthier ecosystems that benefit network participants in a more equitable way.
Growing the gig economy – the nature of work has changed over the last few years, with more people wanting the freedom of independent work or looking for sources of passive income. DePIN networks often take advantage of latent labor supply and the capacity for someone to do multiple things within their pre-existing routines – such as someone making a few food deliveries on their route home from work.
Better products and services – a strong DePIN flywheel has the potential to create superior products compared to their centralized versions. As user demand increases, growth is captured by tokens with strong value accrual mechanisms. Those tokens, in turn, incentivize more operators to contribute, further improving the product and attracting more users. This is the DePIN Flywheel.
While we believe DePIN holds significant promise, it is not without challenges. Issues such as regulatory hurdles, potential security concerns, and the dependence on widespread adoption are potential barriers. However, the potential benefits make it a concept worth exploring.
Below we share two case studies on projects that are pioneering the DePIN revolution.
DePIN Case Study :: GEODNET
By Cosmo Jiang, Portfolio Manager, and Eric Wallach, Investment Analyst
GEODNET is building the world’s largest decentralized Real Time Kinematics (RTK) network powered by a community of satellite miners to enable IoT at scale. This disrupts incumbents by building an affordable, global, real-time decentralized data marketplace.
Below is our high-level investment thesis:
Product Differentiation: GEODNET’s RTK network provides GPS data that is better (precise to 1cm vs standard GPS accurate to 2 meters), cheaper (10x+ savings), and scales faster through a global community-built network.
Large TAM: GNSS is a $200bn+ market. Public companies like Trimble ($15bn market cap) and Hexagon ($30bn market cap) have $10bn revenue and $3bn EBITDA.
Growth flywheel: Miners earn $GEOD for contributing to the network by purchasing and installing a GNSS base station. These incentives have driven 5.5k devices to be added to GEODNET’s network, more than either of its large public competitors.
Traction: In less than three years, GEODNET has reached ~$1mm of recurring revenue, with a network of 7.6K+ miners (and more in backlog), matching/surpassing the network size of publicly traded incumbents.
Value accrual: 80% of GEODNET revenue is used to buy and burn the $GEOD token.
DePIN Case Study :: Hivemapper
By Cosmo Jiang, Portfolio Manager, and Eric Wallach, Investment Analyst
Hivemapper is a decentralized mapping network that uses cryptocurrency incentives to crowdsource high-quality, up-to-date global map data. By leveraging community contributions, Hivemapper aims to disrupt the digital mapping market dominated by centralized tech giants by offering fresher, more comprehensive, and cost-effective map data.
Below is our high-level investment thesis:
Secular Trend: The digital mapping market is growing rapidly, projected to reach $37B by 2026, driven by increasing demand from enterprises, logistics, and the burgeoning Advanced Driver-Assistance Systems (ADAS) or autonomous driving sector.
Competitive Differentiation: Hivemapper’s crowdsourced model enables map data that is 20-100x fresher and has a significant cost advantage over traditional mapping methods by competitors (e.g., $300-550 per contributor vs. $500K per Google mapping vehicle).
Fundamental Inflection: Hivemapper has nearly ~150K contributors and has mapped over 14.38M unique road kilometers, or 24% of global unique roads, at a rate 5-6x faster than Google Maps. The network has also secured multiple enterprise customers that is reflected in on-chain revenue.
Catalyst: The launch of the Hivemapper Bee dashcam this year meaningfully improves data quality and the contributor experience. Increasing adoption of ADAS and autonomous vehicles, coupled with new EU regulations mandating intelligent speed assistance systems in vehicles, are secular drivers of demand for fresh, detailed map data.
Key Risks: Competition from large cap established players; regulatory challenges in data collection across jurisdictions; high upfront costs for contributors in emerging markets; execution risks in managing a complex token reward system.
DEPIN THEMATIC CALL HIGHLIGHTS
The panel discusses the challenges and strategies in building decentralized physical infrastructure networks (DePIN), emphasizing the role of crypto incentives. The panelists highlight the importance of balancing supply and demand through targeted incentives to ensure network scalability and stability. Key priorities involve maintaining reliability and avoiding oversupply.
Market Size Potential for DePIN
DePIN represents a major unlocking of resources that can enable productivity boosts akin to the Industrial Revolution.
“If you think about how big unlocking infrastructure is, it’s not hyperbole when people say, ‘DePIN can enable trillion-dollar markets’. With the great projects that are in DePIN today, and the incredible viral cycle between deployment and usage that DePIN creates, it’s really going to improve the infrastructure on the planet tremendously.”
– Mike Horton, Project Creator of GEODNET
“We measure success in terms of market share. How much of compute is being used is on Akash compared to how much of compute is being used on a global scale. And for me, the number is very concrete. The number is $50 billion in revenue by 2032.
“If you look at the growth of the market and the market size, it will be ~$600 billion by 2032 with the current growth. If you can capture 10%, I would consider that as a success scenario.”
– Greg Osuri, Founder of Akash Network
Advantages of DePIN
By nature of their design, DePIN products or services may offer cost savings for end-users compared to centralized services.
“Google Street View vehicles cost between $350,000 to $500,000 each, covering expenses such as the vehicle, sensor package, driver, car insurance, and gas. This high cost limits the frequency of updates.
“Hivemapper, on the other hand, avoids these costs by utilizing user-contributed dash cam footage, with the primary expense being image storage, which has been optimized to reduce costs.”
– Ariel Seidman, Co-Founder and CEO of Hivemapper
“For Akash Network, cost and access are key advantages. Traditional cloud providers make high-density GPUs expensive and often unavailable on-demand. Akash offers these resources at significantly lower costs, such as H100 GPUs at $1.50 per hour compared to Amazon’s $12 per hour.”
– Greg Osuri, Founder of Akash Network
“Google Street View vehicles cost between $350,000 to $500,000 each, covering expenses such as the vehicle, sensor package, driver, car insurance, and gas. This high cost limits the frequency of updates.
“Hivemapper, on the other hand, avoids these costs by utilizing user-contributed dash cam footage, with the primary expense being image storage, which has been optimized to reduce costs.”
– Ariel Seidman, Co-Founder and CEO of Hivemapper
“For Akash Network, cost and access are key advantages. Traditional cloud providers make high-density GPUs expensive and often unavailable on-demand. Akash offers these resources at significantly lower costs, such as H100 GPUs at $1.50 per hour compared to Amazon’s $12 per hour.”
– Greg Osuri, Founder of Akash Network
Challenges of Building DePIN Projects
The panelists emphasized the challenges of building DePIN networks, citing the importance of balancing supply and demand.
“Breaking the chicken and the egg problem is an important aspect that the crypto incentives do. You have to think through the tokenomics carefully to ensure that there isn’t oversupply.”
– Mike Horton, Project Creator of GEODNET
“The oversupply issue or effectively just unleashing massive amounts of token to build up supply that never gets used is like – criminal – it’s a really, really, really bad place to be.”
– Ariel Seidman, Co-Founder and CEO of Hivemapper
Watch the full discussion here.
INVESTING IN APRIORI
By Jonathan Gieg, Senior Platform Associate
The Future of MEV
Blockchain technology advancements are being driven by the need for higher throughput, lower latency, and more efficient transaction processing. The emergence of high-throughput blockchains like Monad, which aims to deliver 10,000 transactions per second with a 1-second block finality, represent a significant leap forward in blockchain technology. However, as blockchains strive to optimize performance, they encounter issues such as Miner Extractable Value (MEV) inefficiencies, high gas fees, and centralization risks.
Why We Invested in aPriori
aPriori’s mission is to address the fundamental challenges in the MEV landscape on Monad by developing a high-performance infrastructure tailored for their network. Here’s why we are excited about aPriori:
Innovative MEV Infrastructure
aPriori is building a robust MEV infrastructure that enables Monad validators to source blocks from an external network of block builders, benefiting from MEV-related activities. Drawing inspiration from companies like Flashbots and Jito Labs, aPriori introduces core architectural changes to fit Monad’s unique design. aPriori’s solution involves partial-block auctions, allowing builders to construct the top of the block from searcher-submitted bundles while validators append the remaining transactions from the public mempool. This reduces latency and eliminates the need for simulating the entire block proposal.
Enhanced User Experience
By introducing structure to the MEV marketplace, aPriori helps decentralize Monad’s network and improves the overall user experience by reducing gas fees for users, driving sustainable incentives for validators, and minimizing validator and node traffic.
Strategic Liquid Staking Solutions
aPriori’s liquid staking product provides more flexibility and utility to stakers, allowing users to maintain liquidity of their holdings while accruing MEV and staking rewards. Leveraging their MEV infrastructure, aPriori creates a technical moat around their liquid staking solution. Their strong relationships within Monad’s ecosystem and with major oracle providers enable them to quickly create an oracle price feed, a critical component for driving DeFi adoption. This strategic positioning allows aPriori to address significant challenges faced by other liquid staking protocols.
A major strength of aPriori lies in its exceptional team, composed of industry veterans with extensive experience in blockchain and high-frequency trading. The executive team includes:
Ray, CEO: Led special projects at Jump Crypto and was a high-frequency trader at Flow Traders. Ray brings a wealth of experience in growing middleware from his role as a contributor at Pyth Network, where he helped expand the protocol across 30 chains, serving 150+ dApps.
Olivia, CTO: A former senior software engineer at Coinbase, Olivia designed and built the in-house distributed trace pipeline, handling traffic of 1 million traces per second. She brings expertise in infrastructure and high-availability systems.
We are thrilled to lead the $8 million seed round for aPriori as they continue to build the necessary infrastructure for MEV and liquid staking on Monad.
For more information about aPrior and to explore potential opportunities, please visit apr.io.
EQUITY RISK PREMIUM STILL NEGATIVE
A quick word on equities.
In my opinion, they are still over-valued relative to bonds.
As I said on CNBC Squawk Box, you can’t have record high yields at the same time as record high equities.
The equity risk premium had gotten negative. Something had to give – either bonds up in price, stocks down, or both. It’s happening.
My logic then, as quoted on CNBC:
Dan Morehead: “I think we have a failure of imagination. No working-age person has invested in a rising rate environment. I came to Wall Street in the 80’s. It was already six years into falling interest rates. Everything got bailed out by the Fed lowering rates for the last 40 years. We’re in a different regime. Two years ago, when Fed funds were zero and the 10-year was 1.34%, I predicted they would both go to at least 5.00%. We’re here. I think they’re going higher.
“Wage inflation is double the Fed’s target. We have record labor strikes going on right now. So, the Fed has to keep doing more. The 10-year note is flat to Fed funds. It’s typically at a term premium – 1.15% above the cost of funds.”
Joe Kernen: “Earlier today we had a guy on, Bob Michele, who said that inflation’s at 2.16% (if you take core CPI over the last 3 months and annualize it)…. What are you saying inflation is now? What number are you using?”
Dan Morehead: “Core inflation is 4.4%, more than double the quote ‘stable prices’ that the Fed targets.”
Joe Kernen: “He said inflation’s already at a point where rates are too high. That’s what he was saying.”
Dan Morehead: “They’re supposed to keep inflation under 2.0%, and it’s at 4.4% with wage inflation at 4.5% and increasing.”
Andrew Ross Sorkin: ”Right, the question is when you have, a Barry Sterling will tell you that what he would call real inflation he would think is when you really calculate the full thing. He would say we’re already there. And the question is whether you think the Fed either thinks we’re already there or even if you think that’s real.”
Dan Morehead: “At 2%?”
Andrew Ross Sorkin: “Yeah.”
Dan Morehead: “We’re not there. There’s an Owner’s Equivalent Rent measure in inflation. It takes two years to fully pass through. Even if houses stayed stable for the next two years, CPI will still go up 1.1% just because of previous housing increases, according to the Atlanta Fed. There’s still a lot more inflation from two years ago in the pipeline. The S&P/Case-Shiller U.S. National Home Price Index is still hitting new record highs.”
Andrew Ross Sorkin: “So, if you’re right, we’re talking about increased rates, nobody lowering rates in the next 12 months.”
Dan Morehead: “Yes. Maybe for several years. I think that’s what people are having a hard time thinking or getting their heads around – rates could stay up for five years.”
Andrew Ross Sorkin: “If that’s true then equities are wildly overvalued.”
Dan Morehead: “That’s true.”
Joe Kernen: “And you would think bitcoin would?”
Andrew Ross Sorkin: “But then I would think that crypto would be wildly overvalued too.”
Dan Morehead: “Equities are overvalued because the P/E is the same level it was when rates were falling, but now rates are much higher and rising. If you took the 50-year average equity risk premium with a 5.00% 10-year note, equities should be 23% lower than today.”
Rebecca Quick: “Wait, equities should be 23% lower today? Are you talking about the S&P?”
Dan Morehead: “Yes, the S&P. If you used the equity risk premium only in rising rate environments – like now – equities would be 43% lower. I’m not saying -43% is going to happen overnight, but we have to keep in mind there have been two 13-year periods where equities were flat – in the 2000s and in the 70’s, 80’s. We could easily see that again.”
Rebecca Quick: “You think -23% is going to happen and, if not, -43%?”
Dan Morehead: “Yes, I think equities are going to go down for the next few years. That’s why crypto is so relevant because blockchain is not tied to interest rates. That’s a pretty rare feature in an asset class.”
Link to interview here.
Have a wonderful August,
“Put the alternative back in Alts”
PANTERA FUND V
We’ve found that most investors view blockchain as an asset class and would prefer to have a manager allocate amongst the various asset types. This compelled us to create Pantera Blockchain Fund (IV) in 2021, a wrapper for the entire spectrum of blockchain assets. We are excited to announce the launch of its successor and our fifth venture-style fund, Pantera Fund V, in 2025.
Similar to its predecessor, Blockchain Fund (IV), we believe this new fund is the most efficient way to get exposure to blockchain as an asset class. It is a continuation of the strategies we have employed at Pantera for a decade across eight venture and hedge funds.
LPs have the flexibility to invest in just venture (Class V for “venture”), or in venture, private early-stage tokens, and locked-up treasury tokens (Class I for “illiquids”), or the all-in-one Class A.
As in all previous Pantera venture funds, we strongly support helping our LPs get access to deals in this fund. Fund LPs with capital commitments of $25mm or more will have the option to collectively co-invest in at least 10% of each venture equity, private token, and special opportunity deal that the Fund invests over $10mm in. There is no management fee or carried interest on co-investments for those with co-investment rights.
We will endeavor to offer co-investment opportunities, on a capacity available-basis, to other LPs as well. These co-investment opportunities are subject to 1/10% fees.
Pantera Fund V will have its first closing in Q1 2025. We are targeting $1 billion.
To learn more about the Fund, we invite you to participate in the launch call for Pantera Fund V.
The call will be held on Tuesday, September 17, at 9:00am PDT / 12:00pm EDT. You may register by clicking the button below.
Pantera donates 1% of revenue from all new funds to 1% For The Planet.
PANTERA CONFERENCE CALLS[2]
Our investment team hosts monthly conference calls to help educate the community on blockchain. The team discusses important developments that are happening within the industry and will often invite founders and CEOs of leading blockchain companies to participate in panel discussions. Below is a list of upcoming calls for which you can register via this link.
Early-Stage Token Fund Investor Call
Tuesday, August 13, 2024 9:00am PDT / 18:00 CEST / 12:00am Singapore Standard Time
Open only to Limited Partners of the fund.
Venture Fund II Investor Call
Tuesday, September 10, 2024 9:00am PDT / 18:00 CEST / 12:00am Singapore Standard Time
Open only to Limited Partners of the fund.
Pantera Fund V Call
An overview of Pantera’s fifth venture-style fund that offers exposure to the full spectrum of blockchain assets.
Tuesday, September 17, 2024 9:00am PDT / 18:00 CEST / 12:00am Singapore Standard Time
https://panteracapital.com/future-conference-calls/
Venture Fund III Investor Call
Tuesday, September 24, 2024 9:00am PDT / 18:00 CEST / 12:00am Singapore Standard Time
Open only to Limited Partners of the fund.
Opportunities in AI and Crypto
A discussion with members of EigenLayer and Sentient on the intersection of AI and crypto and the opportunities that are emerging.
Wednesday, September 25, 2024 9:00am PDT / 18:00 CEST / 12:00am Singapore Standard Time
https://panteracapital.com/future-conference-calls/
Blockchain Fund Investor Call
Tuesday, October 1, 2024 9:00am PDT / 18:00 CEST / 12:00am Singapore Standard Time
Open only to Limited Partners of the fund.
Join us in learning more about the industry, the opportunities we see on the horizon, and our funds.
PORTFOLIO COMPANY OPEN POSITIONS[3]
Interested in joining one of our portfolio companies? The Pantera Jobs Board features 1,500+ openings across a global portfolio of high-growth, ambitious teams in the blockchain industry. Our companies are looking for candidates who are passionate about the impact of blockchain technology and digital assets. Our most in-demand functions range across engineering, business development, product, and marketing/design.
Below are open positions that our portfolio companies are actively hiring for:
Nexus – Head of Marketing, Communities Development (San Francisco)
Omni Network – Senior Go Engineer (Remote)
Figure – Director, Capital Markets (San Francisco)
Sahara Labs – Product Marketing Manager (Remote)
Avantis Labs – Fullstack Engineer (Remote)
Bitso – Product Manager (LATAM)
Helika – Head of Marketing (Canada)
Ondo Finance – Product Manager (Remote)
Morpho – Product Manager (Remote)
SynFutures – Business Development Lead (South Korea)
Offchain Labs – Site Reliability Engineer (Remote)
Alchemy – Software Engineer, Rust (New York or San Francisco)
Starkware – Senior Software Engineer (Netanya, Israel)
0x Labs – VP of Engineering (Remote)
Obol – Chief Product Officer (Remote)
Flashbots – General Counsel (Remote)
Waterfall – Software Engineer (New York)
CoinDCX – Sr. Manager – BD – Wealth/Asset Management (Remote)
Braavos – Senior Full Stack Engineer (Tel Aviv)
Starkware – Business Development Manager (Remote)
Visit the Jobs Board here and apply directly or submit your profile to our Talent Network here to be included in our candidate database.
PANTERA OPEN POSITIONS
Pantera is actively hiring for the following roles:
- Investment Analyst, Liquid Strategies– (New York City)
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Marketing & Communications Lead – (New York City or San Francisco)
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Junior Accountant – (San Juan)
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Investor Relations Associate – (San Francisco)
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Senior Investor Relations Associate – (San Francisco)
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Lead Executive Assistant to Founder – (New York City, San Juan, or San Francisco)
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Executive Assistant to Founder – (New York City, San Juan, or San Francisco)
If you have a passion for blockchain and want to work in New York City, San Francisco, Menlo Park, San Juan, or London, please follow this link to apply. Some positions can be done remotely.
[1] Important Disclosures – Certain Sections of This Letter Discuss Pantera’s Advisory Services and Others Discuss Market Commentary. Certain sections of this letter discuss the investment advisory business of Pantera Capital Management and its affiliates (“Pantera”), while other sections of the letter consist solely of general market commentary and do not relate to Pantera’s investment advisory business. Pantera has inserted footnotes throughout the letter to identify these differences. This section provides educational content and general market commentary. Except for specifically-marked sections of this letter, no statements included herein relate to Pantera’s investment advisory services, nor does any content herein reflect or contain any offer of new or additional investment advisory services. This letter is for information purposes only and does not constitute, and should not be construed as, an offer to sell or buy or the solicitation of an offer to sell or buy or subscribe for any securities. Opinions and other statements contained herein do not constitute any form of investment, legal, tax, financial, or other advice or recommendation.
[2] Important Disclosures – This Section Discusses Pantera’s Advisory Services. Information contained in this section relates to Pantera’s investment advisory business. Nothing contained herein should be construed as a recommendation to invest in any security or to undertake an investment advisory relationship, or as any form of investment, legal, tax, or financial advice or recommendation. Prospective investors should consult their own advisors prior to making an investment decision. Pantera has no duty to update these materials or notify recipients of any changes.
[3] This section does not relate to Pantera’s investment advisory services. The inclusion of an open position here does not constitute an endorsement of any of these companies or their hiring policies, nor does this reflect an assessment of whether a position is suitable for any given candidate.
This letter is an informational document that primarily provides educational content and general market commentary. Except for certain sections specifically marked in this letter, no statements included herein relate specifically to investment advisory services provided by Pantera Capital Management Puerto Rico LP or its affiliates (“Pantera”), nor does any content herein reflect or contain any offer of new or additional investment advisory services. Nothing contained herein constitutes an investment recommendation, investment advice, an offer to sell, or a solicitation to purchase any securities in Funds managed by Pantera (the “Funds”) or any entity organized, controlled, or managed by Pantera and therefore may not be relied upon in connection with any offer or sale of securities. Any offer or solicitation may only be made pursuant to a confidential private offering memorandum (or similar document) which will only be provided to qualified offerees and should be carefully reviewed by any such offerees prior to investing.
This letter aims to summarize certain developments, articles, and/or media mentions with respect to Bitcoin and other cryptocurrencies that Pantera believes may be of interest. The views expressed in this letter are the subjective views of Pantera personnel, based on information that is believed to be reliable and has been obtained from sources believed to be reliable, but no representation or warranty is made, expressed, or implied, with respect to the fairness, correctness, accuracy, reasonableness, or completeness of the information and opinions. The information contained in this letter is current as of the date indicated at the front of the letter. Pantera does not undertake to update the information contained herein.
This document is not intended to provide, and should not be relied on for accounting, legal, or tax advice, or investment recommendations. Pantera and its principals have made investments in some of the instruments discussed in this communication and may in the future make additional investments, including taking both long and short positions, in connection with such instruments without further notice.
Certain information contained in this letter constitutes “forward-looking statements”, which can be identified by the use of forward-looking terminology such as “may”, “will”, “should”, “expect”, “anticipate”, “target”, “project”, “estimate”, “intend”, “continue”, “believe”, or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual policies, procedures, and processes of Pantera and the performance of the Fund may differ materially from those reflected or contemplated in such forward-looking statements, and no undue reliance should be placed on these forward-looking statements, nor should the inclusion of these statements be regarded as Pantera’s representation that the Fund will achieve any strategy, objectives, or other plans. Past performance is not necessarily indicative of or a guarantee of future results.
It is strongly suggested that any prospective investor obtain independent advice in relation to any investment, financial, legal, tax, accounting, or regulatory issues discussed herein. Analyses and opinions contained herein may be based on assumptions that if altered can change the analyses or opinions expressed. Nothing contained herein shall constitute any representation or warranty as to future performance of any financial instrument, credit, currency rate, or other market or economic measure.
This document is confidential, is intended only for the person to whom it has been provided, and under no circumstance may a copy be shown, copied, transmitted, or otherwise given to any person other than the authorized recipient.