A year ago, the market cap for the entire cryptocurrency industry was over $800 billion and it has since, fallen by over 80 percent to its current valuation of $135 billion. This period came to be known as the “crypto-winter.”
Pantera Capital, a blockchain investment fund based in San Francisco, released a study that charted the price of Bitcoin in 2013 and compared it to 2017, based on the real-time and projected valuations. The report suggested that top cryptocurrencies, despite a decline in the prices, saw their fundamentals remain resolute.
In 2013, Bitcoin first shot up above the $1,000 mark and then closed the following year just above the $300 mark, with many referring to this period as the first crypto-winter. Dan Morehead, the CEO of Pantera, stated that he had, “more of a worry,” during the first winter as that was Blockchain’s first test. The technology survived and the currency it powered only surged over the following years.
With respect to the current bearish market, he said,
“Today, the underlying fundamentals are much, much stronger than they were in the 2014–15 crypto winter.”
According to Morehead, the stronger fundamentals in the current bear market is due to the rise of institutional interest. The digital assets trading platform Bakkt, backed by NYSE and ICE, is set to launch this year, Fidelity has launched a crypto-custody solution division and more recently, JP Morgan introduced a US dollar-backed cryptocurrency called “JPM Coin.”
“People have been talking for years about the impending institutional wave of money coming into the markets and I think we now actually have the required conditions for that to happen.”
When asked if retail investors drove the cryptocurrency market and when institutional investors would begin to flock in, Morehead stated that institutions were risk-averse and they preferred a more conservative approach, especially with something as volatile as cryptocurrency.
He added that several custody giants would join the likes of Fidelity and State Street to provide solutions to the cryptocurrency industry, looking at the wider institutional interest. However, the prices need to rise for this to happen. Morehead stated,
“I think that’s been the gating factor: that large institutions want a more institutional custodian like Bakkt or Fidelity. And once those come in, people will start buying and that’ll start the price moving up. But the massive amount of investment probably won’t occur until the prices have already really gotten going.”
Commenting on the ongoing blockchain scaling debate, Morehead stated that it would take a few years for the impact of scaling success to manifest as a success. Morehead compared the lack of scalability of major cryptocurrencies such as Bitcoin [BTC] to streaming Netflix on a mobile device in the 90s, advising these proponents to be patient. He added,
“These protocols will scale. Even if it takes years for it to happen, you shouldn’t discount that eventuality out of the price today.”
Pantera had recently secured over $125 million out of its $175 million venture fund, which is the company’s third cryptocurrency venture fund. Their maiden fund back in 2013, when the first crypto-winter stormed through, was just $13 million, following which the second rose to $25 million.
In light of their whopping $175 million target, Pantera stated in August 2018, that this was a “function of how fast the space is moving, the talent coming in, the opportunities, and the sizing of rounds.”