Buying Bitcoin in 2013 Compared to Buying Gold

In 2013, Dan Morehead, founder and managing partner of Pantera Capital, made a striking comparison when discussing Bitcoin’s potential. He likened investing in Bitcoin at the time to buying gold during the Iron Age, emphasizing the groundbreaking nature of the cryptocurrency. “I was discussing Bitcoin with an investor yesterday, and he replied somewhat dismissively, ‘It’s just like buying gold.’ No, it’s like buying gold in 1000 BC,” Morehead wrote in an investment memo dated August 2013.

This analogy, bold for its time, encapsulated the transformative vision Morehead had for Bitcoin. In July 2013, Pantera Capital launched the Pantera Bitcoin Fund when Bitcoin was valued at just $74 per coin. Few investors were willing to gamble on this nascent asset, which many viewed as speculative and unstable.

Morehead’s confidence in Bitcoin stemmed from its ability to disrupt the traditional financial system. He believed that Bitcoin could go one of two ways—either fade into obscurity or appreciate by orders of magnitude. “At that time, only 1% of financial wealth had encountered Bitcoin,” Morehead explained. His foresight paid off, as Pantera’s initial investment has since grown by over 130,000%.

Bitcoin’s rise has redefined what it means to invest in revolutionary technologies. Morehead’s analogy to gold reflects Bitcoin’s role as a digital store of value and a hedge against inflation, much like gold has been for centuries. This vision guided Pantera’s strategy and helped it navigate the volatile early years of cryptocurrency adoption.

Pantera’s Vision: Bitcoin’s Path to Mainstream Adoption
Pantera Capital’s journey to success was far from smooth. Bitcoin’s price dropped by 87% in December 2013, just six months after the fund’s first purchase. This significant crash highlighted the extreme volatility of cryptocurrencies, which deterred many potential investors. Despite this setback, Morehead and his team persevered.

In those early days, Morehead traveled extensively to promote Bitcoin as an investment opportunity. Over the course of 170 meetings with potential investors, Pantera Capital raised a modest $1 million. This challenging experience underscored the skepticism that surrounded Bitcoin in its infancy.

Even with limited initial success, Morehead maintained his belief in Bitcoin’s potential to revolutionize finance. He pointed out that the cryptocurrency’s supply was fixed and its decentralized nature made it immune to the inflationary pressures affecting fiat currencies. For Pantera Capital, these attributes made Bitcoin a compelling addition to any investment portfolio.

Bitcoin was also beginning to gain traction outside the investment world. Morehead recounted how Pantera used Bitcoin to pay for hotel stays through the online booking platform Expedia. During one extended trip to promote the fund, Pantera spent 88 Bitcoins on accommodations. At today’s prices, this amount is worth over $8.6 million. Reflecting on this, Morehead joked, “We coulda bought two hotels [with that money]!”

This anecdote underscores the growing acceptance of Bitcoin as a medium of exchange, even in its early years. Companies like Expedia were among the first to adopt cryptocurrency payments, paving the way for broader mainstream usage.

Today, Bitcoin has achieved what Morehead calls “escape velocity.” With over 300 million people worldwide holding the cryptocurrency, it is no longer a fringe asset. Speaking on CNBC’s Squawk Box, Morehead stated that about 5% of global financial wealth is now exposed to Bitcoin. This figure, he believes, will continue to grow as regulatory frameworks mature and institutional adoption accelerates.

Bitcoin’s Future: A $15 Trillion Asset?
Dan Morehead remains optimistic about Bitcoin’s long-term potential. He believes the cryptocurrency is on the cusp of a new era, driven by increasing institutional involvement. Recent developments, such as BlackRock and Fidelity’s applications for spot Bitcoin exchange-traded funds (ETFs), signal a shift in how traditional finance views digital assets.

“These ETFs are kickstarting a massive transformation,” Morehead said, emphasizing their role in bringing Bitcoin to mainstream investors. Spot ETFs allow investors to gain direct exposure to Bitcoin without needing to hold the asset themselves, making it more accessible to a broader audience.

Morehead predicted that Bitcoin’s total market capitalization could eventually reach $15 trillion. At this valuation, the price of a single Bitcoin would soar to approximately $740,000 a 667% increase from its current level. He suggested that this milestone could be achieved by April 2028, citing growing adoption and the institutionalization of Bitcoin as key drivers.

The journey to this valuation, however, is unlikely to be smooth. Bitcoin’s history is marked by extreme volatility, as evidenced by the 87% crash in 2013. Such fluctuations are a natural part of any emerging market, but Morehead believes that Bitcoin’s fundamentals make it uniquely resilient.

He argued that Bitcoin’s fixed supply and decentralized structure provide a level of security and predictability that fiat currencies cannot match. In a world where central banks frequently intervene in financial markets, Bitcoin offers an alternative that is immune to such manipulation.

Furthermore, Morehead highlighted the role of regulatory clarity in fostering Bitcoin’s adoption. The United States, in particular, has been slow to establish clear guidelines for cryptocurrency trading and investment. However, recent progress on this front has encouraged institutional players to enter the market, further legitimizing Bitcoin as an asset class.

The Legacy of Early Bitcoin Adoption
Pantera Capital’s success story is a testament to the power of visionary investing. By recognizing Bitcoin’s potential early on, Morehead positioned his firm at the forefront of a financial revolution. The Pantera Bitcoin Fund, which began as a high-risk experiment, has become one of the most successful cryptocurrency investment vehicles in history.

This success has had a ripple effect on the broader cryptocurrency industry. Pantera’s early investments helped fuel the development of a robust ecosystem, including infrastructure for trading, storage, and payment processing. Today, Bitcoin and other cryptocurrencies are integrated into a wide range of financial services, from peer-to-peer payments to institutional-grade custody solutions.

Morehead’s analogy to gold in 1000 BC continues to resonate. Just as gold became a cornerstone of global finance over centuries, Bitcoin is carving out its place as a digital store of value. While it remains a relatively young asset, its impact on the financial landscape is undeniable.

As Bitcoin approaches mainstream acceptance, the lessons of Pantera’s journey remain relevant. Visionary investing requires not only foresight but also the courage to endure volatility and skepticism. For those willing to embrace these challenges, the rewards can be transformative.

Pantera Capital’s story serves as a reminder that the most significant opportunities often arise in uncharted territories. Bitcoin’s evolution from a niche technology to a global asset highlights the potential of innovative ideas to reshape industries and create lasting value.

https://cointelegraph.com/news/buying-bitcoin-2013-buying-gold-in-1000-bc-says-pantera