Shalini Nagarajan

Pantera CEO Dan Morehead is confident we&#8217;ve already seen the worst of bitcoin prices, as crypto markets regain their footing following months of downward trajectory.



In a 2023 market outlook blog published Monday, Morehead reasoned that digital assets and blockchain will thrive despite last year’s carnage. Pantera itself believes there’s no better time than now to start a company in the space. 



Morehead’s surety stems from Pantera managing blockchain funds through three previous crypto winters, each one with “supposedly catastrophic events,” he said. Pantera is a long-serving crypto hedge fund with $3.8 billion in assets under management.



“For example, when Mt. Gox went down, it represented 85% market share — much larger than FTX today.” 



Morehead then compared bitcoin’s 54% drawdown, from Jan. 1, 2022 to Jan. 17, 2023, to Tesla, Meta and PayPal stock — all tanked slightly more, around 60%.



“Blockchain’s resilience in the face of a terrible macro market for risk assets and historic idiosyncratic disasters is impressive,” he said. “I believe that it [bitcoin] has already bottomed and we will see blockchain assets continue their 13-year 2.3x per year appreciation trend soon.”



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/12532699/embed#?secret=5XxhwTNTwM" data-secret="5XxhwTNTwM" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">bitcoin has now outperformed Meta and Tesla stock but still tracking behind Amazon</figcaption></figure>



Meanwhile, the Menlo Park firm’s co-CIO Joey Krug <a href="https://panteracapital.com/blockchain-letter/the-year-ahead/#joey-section" target="_blank" rel="noreferrer noopener">described</a> 2022 as the “biggest year of upheaval in crypto history,” and drew parallels to the year 2014 when many projects went bust amid general belief that the industry would die. 



He wrote that despite lower prices, the industry is much better placed than it ever was.



Krug flagged Ethereum’s moves to scale and reduce transaction fees as fuel to be hopeful, and that further upgrades could see fees shrink to just a cent (currently <a href="https://bitinfocharts.com/comparison/ethereum-transactionfees.html#3y" target="_blank" rel="noreferrer noopener">around</a> $3.90 on mainnet and under $0.20 on layer-2s). 



He further noted that developing smart contract-based systems has become much easier and more efficient, giving breathing room for new developers.



<h3 class="wp-block-heading">Bitcoin bottom or not, DeFi could lead the next crypto cycle</h3>



The end state, according to Krug, is a scenario where more people will opt for decentralized finance (DeFi) protocols and apps:



“The average person will have apps on their phone that give them access to DeFi, where they’ll be able to engage in financial transactions without banks/brokers, with lower fees, global liquidity, and markets operating 24/7. The internet, but for finance.”



DeFi protocols are the best places to borrow or lend crypto, said Krug, especially given that centralized businesses have either folded or are in the process of winding down. 



But getting DeFi adoption to grow would require crossing two hurdles: Increasing liquidity within DeFi and making the space easier to use.



Krug believes more institutional capital needs to come into DeFi, along with more regulated asset custodians that support Ethereum. Another way is to aggregate liquidity across multiple chains, layer-2s and liquidity pools, he said.



Regarding usability, Krug thinks DeFi user experience isn’t yet good enough to enable mass adoption. He highlighted crypto wallet interfaces, transaction fees in ETH and fiat on-ramps unable to integrate natively within dApps as problems that must be addressed.



“The solutions to this current suite of problems will take another two to three years to be solved and built out. Many of them, and the future innovations they enable, will provide excellent investment opportunities,” he said.



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Bitcoin Has Bottomed, Will Soon Make Yearly Gains: Pantera CEO

Sebastian Sinclair

<div id="highlights-block_621d6f95669de" class="highlights">
 <ul>
 <li>The developer wants to build a new team using the funds that will go toward its Meta Services suite of products aimed at budding Web3 developers</li>
 <li>The developer said it was aiming to to serve as an infrastructure layer for &#8220;the entire Web3 ecosystem&#8221;</li>
 </ul>
 
</div>



Subspace Labs, developer of the layer-1 storage and compute network of its namesake, announced Tuesday that it had raised tens of millions of dollars to pursue its lofty Web3 ambitions.



Funding from the $32.9 million strategic financing round, led by Pantera Capital, will go toward tripling the size of its protocol engineering team, Subspace said in a press release. Subspace will also use the funds to expand its integrations team to further connections between Polkadot, Kusama and Ethereum ecosystems.



Participation also came from the likes of Coinbase Ventures, Crypto.com, Alameda Research, ConsenSys Mesh, KR1, Hypersphere Ventures, Stratos Technologies, AVG Blockchain Fund, GSR Ventures and Eniac Ventures, among others. 



The developer said it would also use the new capital to build a new product team focused on attracting novice developers to use its Meta Services product. 



Those services are to eventually include a unified chain history API known as MetaBlock, a multi-chain storage service for NFT metadata called MetaVault and MetaSwap, a cross-chain asset exchange protocol, per the release.



Subspace defines itself as a relatively new &#8220;eco-friendly&#8221; and scalable layer-1 blockchain that is able to serve as an infrastructure layer for &#8220;the entire Web3 ecosystem.&#8221; Meanwhile, the Subspace Network is under active development and is being built with the Parity Substrate framework, the same tool used to build the Polkadot blockchain, per the release.



“Pantera is thrilled to join Subspace as an investor to support its mission to build the foundational infrastructure for Web3,” said Joey Krug, co-chief investment officer at Pantera. “The R&amp;D behind the Subspace Network’s scalability architecture will resolve critical issues holding back the growth of the blockchain industry as a whole.” 



“With the support of our investors, Subspace is re-envisioning the types of apps that can be stored on and secured by a blockchain,” said Jeremiah Wagstaff, co-founder and CEO at Subspace Labs. “We are excited to empower builders with the tools and services they need to unlock the next wave of innovation in Web3.” 



Founded in 2018, Subspace Labs was formed by protocol hackers Jeremiah Wagstaff and Nazar Mokrynskyi, who met via on GitHub. After several years of research and development, largely funded through a grant from the <a href="https://seedfund.nsf.gov/" target="_blank" rel="noreferrer noopener">US National Science Foundation</a>, the team raised $4.5 million in a seed round in June 2021.



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Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



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