Dan Morehead - A Multi-Decade Transformation - TOKEN2049 Dubai 2025

Hey, so thank you so much. Um, I wanted to focus on the manic nature of our industry and really put it in a multi-deade perspective. A lot of people look at things in a really, really short term. When we launched our first funds, the entire market cap was $1 billion. And it seemed to me that it was the most compelling asymmetric risk roar trade I'd ever seen.

It's up three orders of magnitude and I still feel exactly the same way. I wouldn't want to invest in any other asset class uh at the moment and I think we still have a couple decades of this to go. And so I talk to investors all the time and I still hear people say, "Well, I guess I missed it." No, we're still in the beginning. The majority of institutions literally have zero exposure to the space.

So it's it's it's it's really starting. It's a global phenomenon. We've invested in 30 something countries. Uh I actually am glad to be here in the UEE. I think they have a fantastic regulatory regime.

They're encouraging blockchain to happen in their country. The largest investment we've ever made is based in the UAE. We're a large investor in Telegram's TON token. uh we also are investors in Bit Oasis and some other uh companies in the region. I wanted to start out with just keeping a perspective that manic stuff happens in our industry all the time, but it just keeps going up.

This is a 12-year log chart of the history of our investing in in Bitcoin and blockchain is pretty consistent. Yeah, there's some bubbles. there's some bad things that happen, but the the perspective to keep is we've been through three massive bare cycles. This is our fourth uh bull market in those years and all these kind of weird things like we're experiencing now. Uh there's a lot of geopolitical uh strange things happening.

They're not unusual. We've we've seen that before. I did want to make one comment on tariffs. Tariffs are driving a lot of the news, driving a lot of the market cycles. by local.

We've tried that. It's called the Middle Ages. It's not a good way to run the world economy. The graph on the left, I think, is fascinating. That is the proposed tariff regime in the United States, way bigger than the 1920s, just off the charts.

Um, in my professional investing opinion, that's either not going to persist or if it does, it will have a huge impact on other asset markets. But the but the thing I want to stress is I think blockchain is separate from that. The global trading systems like a meticulously built Swiss watch. If you try and kind of rip it all up overnight, it'll be value destroying to things like stocks, bonds, all those kinds of typical assets. The average of economist polls currently is if these stick, it'll raise inflation by one and a half percentage points and it will uh reduce GDP growth by one and a half% as well.

So all of those things are really bad for normal risk assets. And that's what brings us to a point that we've been making for 12 years. Super important is the separation of money and state. If you go all the way back, gold has been a great currency for 5,000 years. Gold is not controlled by any prince or president or any uh government.

Then we tried an experiment in fiat paper money. Hasn't worked very well for most countries. uh even the United States has 3% depreciation of its currency uh every year. It's a multi-deade thing, but I think the experiment in paper money is coming to a close. People are going back to hard money again.

People want to invest in things that you cannot quantitatively ease that you can't just print more of anytime you know you have a constituency that wants more of it. And if you think about it, ever since the the the tariff turmoil has happened, the only things that are up are stateless currencies, gold and digital gold, Bitcoin, and everything else is down. And I think that's a really important point uh for us. We've been making it for a long time, but this the whole kind of uh tariff stuff is is really changing that. So, one of the apps that's incredibly uh powerful already in blockchain, stable coins.

So, it takes all the beauty of Bitcoin and other cryptocurrencies and removes the volatility because there's a lot of uh users out there that want to use uh all the benefits of tokens, but they don't want the currency volatility. It's allowing literally five billion people on earth to access uh the financial system of the world which is is really uh an amazing accomplishment. There's already 250 billion dollars of demand for for stable coins and the you know the hugely important point in this time of kind of geopolitical stress is it takes people's money away from the control of banks, governments, all that. Anybody with a smartphone can operate a stable coin. uh and so I think it's going to be a huge uh product for us going forward.

That leads us into a bigger discussion about banks and kind of money generally. If I went on Twitter and announced a new stable coin that I was going to do and I was going to put 15 million of my own money into it and I was going to borrow 180 million 195 million of other people's money, sell it to the public, sell sell stable coins to people and I was going to go buy 210 million of super risky longdated assets. And I was going to promise the stable coin holders they could have incredible liquidity with one click on their smartphone. and they could have all their money back same day. And then when people ask, isn't that kind of crazy?

Take 13 to1 leverage on your stable coin, right? Like, you know what? What's going to happen if the markets go down? How are you going to do deal with that? I'd be honest.

I would say, hey, if the markets go up, I'm going to keep all the profits. And if the markets go down, I'm going to stiff the taxpayer. That would break the internet, right? Everyone would completely freak out. If you replace the word millions with billions, that's Silicon Valley Bank.

They took a bunch of money, a little bit of equity, borrowed a ton of money, bought a bunch of risky assets. The super irony is the US government was on both sides of their balance sheet. They were the majority of their assets. They were just investing in treasury bonds and the US government ultimately paid all the depositors. So, it's a really, really terribly designed stable coin.

This is a multi-deade prediction, but banks are like landlines. We don't need them. Stable coins will ultimately replace the depository taking function that we're all used to with banks. So, that brings me to the the topic at hand is, you know, I want to give you all since we've been investing for over a decade in this space, a bit of a a view of where we're going. And it's so important when everyone's freaking out about short-term things to be thinking about it that anything of value can be expressed on the blockchain.

Unbelievable. Probably own um you can transfer to literally anyone with a smartphone pretty much free, pretty much real time. Super important is governance is now back to the people. We're choosing how we want things to run. We're choosing how networks work.

We're choosing how we do things, not some some bureaucrat somewhere. And I think the biggest positive impact of blockchain is billions of people will soon be able to access the global financial markets. That it's just an amazing empowering thing. Um, we're in this because we're trying to help our LPs uh make a great return. And so we've we've we're so encouraged to see the incredible talent from academia, from business that's coming into this.

Um there's already a hundred billion that's been invested in the space. Uh there's about a half a billion people that are using blockchain already. I think that's, you know, that has been growing an order of magnitude every two or three years. I think that'll keep growing. The reason we're excited about it, the total addressable market, as investors like to say, is staggering.

Uh, crypto is still only about three trillion. The the markets it's going after are literally the biggest on Earth. Tens of trillions, hundreds of trillions. Um, and you know, blockchain has applications usefulness in essentially all of those different things. And the reason we're really excited is it feels like, you know, we've been in the space for uh 12 years.

Uh, feels like there's some really, really big things going on. The first one over the last three or four years there's some massive headwinds regulatory uncertainty all kinds of really bad things were happening in our space uh few years ago a bunch of overlevered uh projects blew up and you know just all kinds of really bad things it's literally 180 now like all those things are in the past all kinds of really good things previous panel was talking about scalability uh we've been invested in arbitrum starkware block route a bunch of projects that massively scaling uh blockchain. So, our view is it's kind of like the the dialup to broadband moment. I'm old enough to remember uh mo AK modems that were like screeching and the internet sucked. Now, there's so much bandwidth.

It's great. That's the same thing that's happening with blockchain. It was not that functional and now it's getting very functional. One of the transactions that's happening right now that I love, I've been waiting for for 12 years. I think digital gold is now overtaking old school gold.

So, uh, that flows into the Bitcoin ETFs, massive records, way bigger than, uh, any projections. Um, there's been 30 billion more money go into Bitcoin ETFs than into gold ETFs. Even in this rally, Bitcoin has a predictable uh, schedule of issuance. you know where they keep digging up, you know, more gold. And then a huge one is the United States has a strategic bitcoin reserve.

This is so important. The US already owns 1% of the world's bitcoins. Countries like China own about that as well. I think that GCC countries uh here in the Gulf are probably going to be accumulating. Some of them already officially have announced that they're they're buying Bitcoin.

I think within the next few years there's going to be essentially like an arms race to get into Bitcoin strategic reserves. Uh both with countries that are aligned with the west and then the ones that are adversarial realize it's very difficult to have your entire country's savings like China for example thousand years of savings are saved in US treasury bonds. If anything bad happened US could cancel those. That is a very strange way uh to to protect your savings. protecting it in Bitcoin, I think, is much better.

And then the US uh has 11 million years of workers wages buried in a stone pyramid in Kentucky in gold. That's obviously very antiquated. That's what the Pharaohs did 40 centuries ago. I think that'll uh be transferred into um crypto, Bitcoin uh over the next few years. And the excitement that we have in investing now is there's just so much happening right now.

So many good things uh products that we've been working on for years and years and years are really finding fit now. And what I would say so there's a couple stats on uh how blockchain is really really taking off and actually being used. Uh 250 million people are using a wallet every month. It's it's just seems inevitable that within six seven years something like that 2.5 billion people will be doing it.

That's how many people share photos on Facebook. Financial inclusion seems more important. So I think that is going to happen. A really good example of product market fit. Uh they just mentioned Salana on the previous panel.

They had 3.2 billion in revenues and they're trading at only 20some times revenues. If a stock investor finds an incredible growth company that's trading at only 20some times revenue, they're going to buy it. And so the fundamentals in blockchain are so obvious and so uh compelling that even normal investors are going to be coming into the space. So the opportunity uh we see three main things.

Uh we're trying to fund gateways to make it easier to use. Admittedly, blockchain's still a little bit clunky. So, we're investing in exchanges and stable coins and tokenization platforms, things that make it easier for people to to use blockchain. Uh, we're we're as well investing all kinds of developer tools, scaling solutions, things to make it more useful. And then obviously applications that that uh, you know, individuals want to use and those are they're starting to take off.

The two I want to focus on tokenization huge huge uh issue uh really really cool. I actually started out as the first asset back securities trader at Goldman in the 80s and now we're doing assetback tokens. So it's really cool to see that come full circle. There's a company called figure markets that has already done $40 billion of mortgages on the blockchain. That is really amazing and the press loves to write bad stories so they never write that story but that is incredible.

Um we're an investor in figure. We're also an investor ino's got a billion dollars of treasuries on the blockchain there. Again it's a great um function to help all the people on earth. If you're somebody that's living in, you know, Indonesia, how do you get access to US dollars? How do you get access to US treasuries?

Um, the US has a system called Treasury Direct where Americans only can buy treasuries. It's so bureaucratic and so backlog it literally takes a year to transfer your treasuries out of your account to like Maril Lynch or whatever. Super crazy. With Ono or blockchain, you can do it instantaneously, 247 uh to anybody on Earth. So, you know, those are the the things we're focused on.

The last big one that's super important, obviously AI is is really really important to the to uh the markets. There are a couple things that just have to use decentralization or digital currencies with uh AI. If you think about it, it's it's such a big important thing. I don't think we're going to want societyy's not going to want it all centralized into one person. Uh so even if economics doesn't force decentralization, I think governments ultimately will.

So we're investing in a few projects like Sahara AI, Cent that are doing decentralized AI. I think that's uh very very important. And last I want to wrap up with a couple thoughts about the markets since um those are very important. If right before the US election a genie showed you a crystal ball and said that a pro- crypto candidate would win, uh the pro crypto party would be in charge of the House and Senate. 54 anti-crypto people would be out of Congress.

There'd be executive orders with Bitcoin Strategic Reserve. Uh all all kinds of things like this happening. And you said the um the market would be only up 35% of they would say you were crazy. So although uh people are kind of freaking out about the markets right now, I think it's unbelievably cheap. Um, the way I think about it is our our Bitcoin fund has a 13-year compound annual growth rate of 85%.

So, being up 35% over three or four months, it's just kind of normal. Like, it's it's not even up. So, we're still very, very bullish on the markets. Bunch of great policy things are happening. And I wanted to make one other comment on the alternatives.

Um, I went on CNBC a year and a half ago and said you can have record high bond yields. They were about 5% at the time. and record high stocks. This is a graph of the equity risk premium, the gold line, and then the dotted line way above it is the 50-year average. Stocks and bonds are super expensive to their long-term average.

And that doesn't even count weird things like tariffs and the impact of um of uh you know, lower growth, higher inflation. So, if you're looking for a place to invest, the old school assets really do seem scary from an equity risk premium standpoint. Either bond yields have to go up 75 basis points or stocks have to come down quite a bit. Blockchain is the safest place to hide. And you're already seeing that this is the change in the price of uh Bitcoin, gold, and then the top 25 cryptocurrencies market cap weighted since uh a year ago.

It's it's the only place to hide in a admittedly confusing world. And here's the the last thing I want to share with you. In our second actually, our second summit where we gathered all the people in the industry together in 2014, Bitcoin's market cap was the same as Urban Outfitters. And so I said, I think when they dig up our society all Planet of the Apes style in a few centuries, Bitcoin's going to have had a bigger impact on the world than Urban Outfitters. We updated this a few years ago and it was L'Oreal just past Facebook, right?

Photo sharing is really cool and all, but I think financial inclusion for 5 billion people is going to be bigger. We have five left to cross off. Thanks,