Pantera CEO calls 2023 ‘best time’ to start cryptocurrency company with $121 billion in VC funding

Cryptocurrency investment firm Pantera Capital released a “Year Ahead” letter to investors on January 23, revealing information that demonstrates the sustainable nature of the blockchain industry.

Dan Morehead, CEO of Pantera Capital, shared an overview of the company’s vision for 2023.

“Blockchain’s resilience in the face of a dire macro market for risky assets and historically unique disasters is impressive.”

Bitcoin has outperformed Tesla, Meta and PayPal in the last 12 months against the biggest tech companies. And Pantera’s data was cut off on January 17th, meaning it doesn’t take into account the ongoing rally in the Bitcoin price. As of press time, Bitcoin is now down 48%, putting it ahead of Square in the chart below.

technical performance against bitcoin
Source: Pantera Capital

In a letter to investors, Morehead said he was not surprised that Bitcoin had performed so well, citing the experience of the previous three bear markets. Furthermore, he made it clear that he believes the bottom of the market is over and gone.

“I believe it has already bottomed out and we will soon see blockchain assets continue their 13-year 2.3x appreciation trend.”

Stability of DeFi over CeFi

Pantera’s CO-CIO Joey Krug shared his prediction for 2023 in a letter, calling 2022 “probably the biggest revolutionary year in crypto history.” Comparing 2022 to 2014, Krug compared crypto projects that failed last year to projects that collapsed after the first Bitcoin halving. In particular, Krug noted that “many projects and companies exemplified the antithesis of the basic principles of cryptocurrency have exploded.”

Krug went on to identify a major problem with many of the “crypto” companies that have flourished in recent years. Crypto is built on permissionless technology and is always designed to eliminate the need for trust. However, many companies that failed in 2022 required users to trust them – it looks like trust has been exploited.

“Actual cryptocurrencies like on-chain, smart-contract, protocol-based cryptocurrencies really reduce these issues because you don’t have to hand over all your money to an entity that claims to, trust us.”

In addition, Krug took a swipe at those who oppose the relevance of smart contracts and “risky” DeFi credit issues. Certainly, he said, “it’s not the computer program’s fault that your loan defaults” due to a poorly designed smart contract.

Despite the failure of centralized exchanges, Kurg noted, “decentralized exchanges, which are primarily engaged in lending to unknown counterparties, have not exploded.” In an industry that has been severely tested over the past 12 months, the “explosion” has been CeFi, not DeFi. FTX, Voyager, BlockFi and Celsius, companies that used blockchain technology to secure their lending activities, continued to operate while they failed.

Krug attributed the success of DeFi to its trustless nature and a more sustainable risk management system.

In 2023, Krug noted that “despite the lower prices, I think the place is in better shape than ever.” Improvements in core infrastructure and developer tools were praised by Pantera’s CO-CIO, who believes the world’s financial systems will eventually be built on blockchain rails.

“The average person will have apps on their phone that give them access to DeFi, where they can conduct financial transactions without banks/brokers, with lower fees, global liquidity and 24/7 markets.”

In 2023 and beyond, work should focus on making DeFi as easy as possible and increasing liquidity in the ecosystem. Krug emphasized that these issues “will take another two to three years to be resolved.” So his vision for 2023 is that it will be a time to build.

The collapse of the blockchain sector

Pantera Capital General Partner Paul Veradittakit also summarized his thoughts with a breakdown of the important indicators of 2022. The chart below shows the level of investment across the crypto industry and shows DeFi and Gaming as the sectors with the most significant deal count.

bargaining sectors
Source: Pantera Capital

Pantera shows a high rise in cryptocurrency in 2023; noted, “we believe this is a great time to be building a company in the blockchain space.” In addition, the letter stated that it expects to deploy the $121 billion raised in the first half of 2022 to the crypto sector.

The full letter contains a detailed overview of 2022 and can be found on Pantera’s website.

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