Key Takeaways
- Dan Morehead argues history will no longer repeat itself when it comes to four-year cycles.
- He cautioned investors on the price impact of a Bitcoin ETF.
- He also suggested that diversified crypto assets would outperform Bitcoin alone.
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Dan Morehead, Founder and CEO of Pantera Capital, claimed that the four-year crypto price cycles that investors have grown accustomed to “are done.” In addition, he believes we can expect less volatility, on both the upside and downside.
Bitcoin Price Likely to Stabilize Going Forward, Says Morehead
In Pantera Capital’s October Investor Letter, Dan Morehead wrote:
“The first halving reduced the supply of new bitcoins by 15% of the total outstanding bitcoins. That’s a huge impact on new supply and it had a huge impact on price. Each subsequent halving’s impact on price will likely taper off in importance as the ratio of reduction in the supply of new bitcoins from previous halvings to the next decreases.”
Morehead suggested that as cryptocurrency markets mature and the space sees more institutional adoption, volatility will decrease. Deep bear markets, such as ~83% corrections “are a thing of our primordial past,” he opined.
Less volatility would be a significant change from the pattern cryptocurrency investors have grown accustomed to over the last decade. Moreover, as Morehead himself puts it, “we probably won’t see any more of the 100x-in-a-year rallies either.”
Morehead also advocated for diversifying beyond Bitcoin, noting that there are “compelling opportunities in the 150 other tradable tokens.” Furthermore, Morehead believes there will be far greater returns in crypto than in the public markets. Given the amount of competition and sophisticated, massive hedge funds involved in the space, he said, “It’s really hard to have alpha in the public markets.”
As a counterpoint to the excitement around possible Bitcoin ETF approval later this month, Morehead expressed caution, writing, “Will someone please remind [me] the day before the bitcoin ETF officially launches? I might want to take some chips off the table.” However, an important distinction should be drawn here: he fears a possible sell-off upon the launch of the ETF rather than upon the approval of the ETF. There will be a lag between these two events.
The Cycle Theory Debate Persists
He is not the only prominent figure in crypto who thinks the traditional patterns in crypto cycles might be changing. Some popular crypto analysts, like Benjamin Cowen, argue for so-called lengthening cycles. This is where the classic boom-and-bust four-year crypto cycles become longer. In other words, instead of the current cycle ending this year, Cowen suggests the peak might not happen this year. This is primarily because as market cap grows, it is simply harder to push up the price. On-chain analyst Willy Woo predicts that this will be the last four-year cycle too.
Launched in 2013, Pantera Capital was the first cryptocurrency fund in the U.S., when Bitcoin was at $65. It now has $4.8 billion in assets under management.
(Disclaimer: At the time of writing, the author of this piece owned BTC, ETH, and several other cryptocurrencies.)
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