Pantera Capital: Bitcoin Price Will Reach $67,500 by End of 2019

Siamak Masnavi

On Friday (27 July 2018), blockchain-focused investment firm Pantera Capital Management revealed via a blog post that Pantera Bitcoin Fund had generated a return of 10,136.15% (net of fees and expenses) over the past five years; it also said that it expected the Bitcoin (BTC) price to reach $67,500 by the end of 2019.

Pantera was founded in 2013 by former trader and hedge fund manager Dan Morehead, who is the current co-chief investment officer and CEO. It has over $700 million in assets under management (across two venture funds and four cryptocurrency funds).

Pantera's Bitcoin Fund had its five-year anniversary this month. So, the firm thought it would be interesting to share, via two emails sent out to investors by the CEO in 2013, the basis for its original (and still going strong) belief that Bitcoin would become a global currency and revolutionize how we deal with cross-border payments. Below, we highlight a few key sections from these two emails (we have used bold face used for emphasis).

Email Dated 21 August 2013 (With Bitcoin at $104.48)

  • "I wanted to share my strong conviction that bitcoin is about to melt-up... I believe bitcoin will explode through $200 within the next 6–8 weeks."
  • "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 B.C. 99% of the financial wealth has yet to address bitcoin. When they do, bitcoin is either going to be worth zero or $5,000 /BTC."
  • "It’s the first global currency since gold."
  • "It’s the first borderless payment system ever."
  • "If you plan to invest/invest more in bitcoin, it’s my opinion that 'now' is better than 'later'."

Email Dated 6 November 2013 (With Bitcoin at $253.69)

  • "I helped our Pantera Bitcoin Fund execute a million dollars overnight. The buying pressure on bitcoin was intense. Bitstamp’s 30-day volume is 4x what it was in July. Their overnight volume set a new record $13mm — 10x a typical day in a few months ago."
  • "In my opinion, it’s like deciding whether to buy Microsoft back in the day at $0.20 a share. It was hard to do when the stock was just at $0.10. In the fullness of time…clearly a great trade. I believe bitcoin right now is just like that."
  • "Now that Silk Road is gone, a new wave of sophisticated investors are entering. It feels like it’s happening. A melt-up which could be orders of magnitude."

Bitcoin Price History

Pantera says that if we look at a chart that plots Bitcoin's price since July 2010 in log scale, we would see that the Bitcoin price shows "very consistent exponential growth":

Pantera chart.png

Pantera says that projecting price through the end of 2019 using the historical trend line (shown in gold) would lead us to expect a BTC price of $21,000 by the end of 2018, and $67,500 at the end of 2019, and that, in fact, these are their current forecasts for Bitcoin.


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Safe Haven? Bitcoin Drops as Bond Yield Inversion Signals Economic Downturn

Neil Dennis

Bond markets have signaled an ominous warning that recession could be on the way but, so far, bitcoin has only responded with losses, indicating it may not be the best haven from global economic uncertainties.

The spread of key interest rates on differing government bond maturities in the US and the UK have inverted, as yields on longer-term debt such as 30- and 10-year bonds fall below the yields of five- and two-year debt.

Bond yields fall as prices rise, thus, such yield activity indicates that investors are buying more longer-term bonds as fears rise over short- and medium-term economic stability.

Indeed, bond-yield inversions have, in the past, heralded periods of economic downturn and recession. The last seven recessions, dating back to 1969, saw bond-yield inversions signaling them.

Market Reaction

Stocks reacted to the news with losses. On Wednesday, equity indices in the UK and Europe were between 1.5% and 2% lower in mid-afternoon trade, and US indices opened around 1.5% lower. Gold, one of the traditional hedges against periods of global economic uncertainty and geopolitical risk events, was 0.8% higher at $1,526 on the Comex exchange.

Bitcoin's price in the last 24 hours

But bitcoin - which has often been described as "digital gold" and has also been touted as a potential hedge - is down around 5% to $10,591. Other cryptocurrencies were mostly lower.

Bitcoin as a Risk Hedge

Although Wednesday's move suggested the price of bitcoin did not correlate well with risk aversion, the cryptocurrency rallied strongly during the period of heightened tension between the US and China at the beginning of this month when Beijing devalued the renminbi and the US accused it of currency manipulation.

So what is bitcoin's position in a crisis? Can it display similar hedging qualities possessed by gold, or do investors sell in times of heightened risk?

Grayscale, the bitcoin fund manager, published a paper earlier this month that said bitcoin was displaying an ever-more reliable store of value and spending characteristics similar to cash. Matthew Beck, the report's author, said:

With continued adoption, Bitcoin represents a transparent, immutable, and global form of liquidity that can provide both wealth preservation and growth opportunities.

Indeed, Beck used the US-China trade tensions as an example of bitcoin's attractiveness. Since President Trump first announced tariff hikes in May, bitcoin generated a cumulative return of 104.8% through to August 7, Beck said. He concluded:

The challenges faced by politicians and policymakers will be difficult to manage given the complexity of our global financial system. Bitcoin could be a useful tool in helping investors insulate their portfolios from any failure to manage these problems effectively.

Nigel Green at financial advisory deVere Group agreed:

Bitcoin is currently realising its reputation as a form of digital gold. Up to now, gold has been known as the ultimate safe-haven asset, but bitcoin – which shares its key characteristics of being a store of value and scarcity – could potentially dethrone gold in the future as the world becomes increasingly digitalised.

Risk Hedge Challenged?

As bitcoin performed well during the risks associated with the US-China trade war, it doesn't necessarily follow that it should do the same during periods of economic uncertainty. 

As global markets have witnessed in the past, during downturns and recessions any drop in the total pool of global investment can result in losses across asset classes. And during downturns, institutional investors adjust their portfolios to favor ultra-safe government bond assets.

Bitcoin has fallen for five out of the last six days, so it is presumptuous to suggest Wednesday's fall alone challenges the notion that it is a good hedge against global risks. We wait and see.