Pantera Capital CEO Dan Morehead states that after enduring a prolonged bear market, Bitcoin has reached an inflection point.
In a new update, Morehead says the industry has suffered enough pain from the collapses of Terra and FTX to prepare for a bull run.
Morehead asserts that after 35 years of market cycles, he’s learned markets can only stay down so long and investors can only endure so much pain. It’s been a full year since the failures of Terra/LUNA/SBF, which is enough time – crypto can rally now.
The CEO claims digital assets have decoupled from traditional markets. Therefore, any further weakness in equities or bonds may not significantly impact crypto as many expect.
In essence, Morehead believes the crypto bear market has lasted long enough that a turnaround point has been reached, regardless of traditional finance. The prolonged pain from major industry events has set the stage for a renewal, given his extensive market cycle experience.
Morehead states that blockchain has massively decoupled, though it’s difficult to perceive in real-time.
He notes for most of its history, blockchain assets had essentially zero correlation with risk assets. Using Bitcoin as a proxy, its correlation with the S&P 500 was 0.03 over the first 9 years – the ideal investment with huge historical returns and negligible correlation.
Unfortunately, excessively leveraged centralized entities and alleged criminal Sam Bankman-Fried caused the correlation to spike to 0.76 last year. Since blockchain is unrelated to interest rates, it should have very low correlation to main asset classes driven by rates like stocks, bonds and real estate. Bitcoin’s correlation with the S&P 500 is now back below 0.1.
In summary, Morehead argues blockchain historically exhibited almost no correlation to traditional assets, but centralized players and SBF distorted that correlation temporarily. He expects renewed decoupling as crypto fundamentals remain disconnected from interest rates, unlike other major asset categories.
To clarify, a correlation coefficient of 1 means assets are likely to move together, while a value near 0 suggests minimal relationship.
Morehead states Pantera, with returns up 41,960% by his estimate since inception, sees a BlackRock Bitcoin ETF as a potential catalyst for major upside.
He notes a BlackRock crypto ETF could have a big impact similar to when they launched an ETF for gold trading at $423 per ounce in January 2005. Gold now trades around $1950 per ounce, influenced by many factors but the ETF played a key role in its rise.
In essence, while a correlation of zero means assets are unrelated, a value of 1 signals they tend to move in sync. Morehead believes a BlackRock Bitcoin ETF could propel crypto to new highs like gold’s rise from $423 to over $1900 after the firm launched a gold ETF.
