The Edge Podcast - Investing in Crypto Bull Run with Pantera Capital

In this episode of The Edge Podcast which took place on February 17, 2024, DeFi Dad and Nomatic hosted Paul Veradittakit from Pantera Capital to discuss Pantera Capital’s investment strategy, blockchain’s future, insights into bitcoin, DeFi, emerging technologies, and more! Read our notes below to learn more.

Background

DeFi Dad (Host) – Host of Edge Podcast

Nomatic (Host) – Co-Host of Edge Podcast

Paul Veradittakit (Guest) – Managing Partner at Pantera Capital

Pantera Capital’s Crypto Vision: Innovation, Investment, and Insight

DeFiDad highlights Pantera Capital‘s extensive investment history in blockchain companies and token deals and mentions sectors they are bullish on, including Bitcoin, DeFi, decentralized social networks, modular blockchains, zero-knowledge proofs, crypto AI applications, and on-chain asset tokenization.
DeFiDad mentions the anticipation of leveraging Paul’s insights from over a decade of investing in crypto, highlighting the rarity of such experience in the space. He references “The Year Ahead,” a reflective write-up by Paul and his team, and suggests reading it for a comprehensive understanding of crypto progress.
Paul shares his background, explaining his journey from Los Angeles through various professional experiences, including law, economic consulting, and venture capital in mobile technology, before discovering and transitioning into the crypto space through an interest in Bitcoin and Coinbase, and eventually joining Pantera Capital.
Paul recounts his early curiosity and engagement with mobile technology and venture capital, leading to his fascination with Bitcoin’s disruptive potential. His exploration of Coinbase and connection with Pantera Capital marked his entry into the crypto venture capital world, driven by a belief in crypto’s ability to democratize finance, especially for the unbanked in regions like Southeast Asia.
Paul reflects on his decade-long journey in the crypto space, initially marked by a need for more technical and business expertise at conferences, leading to a long path toward attracting talent and venture capital.
Paul highlights the continuous learning and innovation driven by intellectual curiosity across various industries facilitated by crypto. He discusses the resilience required to navigate the volatility of the crypto market, highlighting a mission-driven approach focused on changing the world and reducing financial intermediaries’ fees.
Paul addresses the competitive landscape in venture capital, attributing Pantera’s success to its brand, resources, and autonomy to act swiftly. He describes Pantera’s approach as startup-like within the early-stage crypto ecosystem, highlighting the firm’s role since 2014 as a pioneer in institutional Bitcoin investment and problem solvers for investors.
Paul mentions Pantera’s dual focus on serving limited partners and entrepreneurs, aiming to be the BlackRock for crypto by offering a range of investment products and educational resources. He highlights the diverse investor base and the goal of providing significant returns while educating LPs about the crypto space.
For entrepreneurs, Paul aims to position Pantera as a top value-added investor, leveraging the firm’s extensive network, experience, and initiatives such as research fellowships, talent acquisition, and governance participation to support portfolio companies.
He stresses the importance of understanding and addressing the needs of portfolio companies in a scalable manner, highlighting continuous improvement and the recruitment of high-caliber talent to maintain Pantera’s leadership in the space.

Building Successful Firms and Investing in Crypto Startups

Paul recognizes the complexity of building a firm and culture, sharing experiences from executing deals to providing liquidity and highlighting the extensive journey they’ve undergone.
Paul shares his approach to managing his responsibilities at the firm, focusing on offering advice to portfolio companies while delegating other tasks to a larger team for efficiency.
DeFiDad asks about the essential qualities Pantera looks for in founders and the pattern recognition developed from a decade of investing in crypto startups.
Paul highlights the importance of targeting large markets for significant returns and the necessity of identifying potential home runs in founders for a large fund like Pantera.
He highlights the value of experience and domain expertise in founders, citing examples of serial entrepreneurs who have successfully navigated challenges in their ventures.
Paul highlights the critical role of determination and relentlessness in founders, sharing stories of individuals who have gone to great lengths to achieve their vision, and showcasing the drive required for success.
He notes the significance of governance in the success of portfolio companies, mentioning that those with board involvement tend to be more successful, advocating for active participation and support.
Paul discusses the importance of product love and customer impact, suggesting that companies with products that deeply resonate with their users tend to succeed.
He stresses the value of strategic investment fits, where investors can add substantial value through their unique strengths or connections, enhancing the potential for mutual success.

Bitcoin’s Future and Decentralized Social Media

Nomatic asks about Paul’s predictions for Bitcoin, mentioning the rise of BRC-20 tokens and Layer 2 technologies, suggesting a potential increase in activity akin to a DeFi summer 2.0.
Paul says they are closely monitoring the situation, highlighting Bitcoin’s significant market cap and security features. He says the influx of institutional capital might be facilitated by recent developments, with hopes that Bitcoin and NFTs can provide diverse stores of value.
Paul explains the potential for Bitcoin in emerging markets, highlighting its role as a primary store of value and the emerging opportunities for DeFi activities facilitated by Layer 2 solutions and development efforts around NFTs and stablecoins.
Paul foresees significant potential in decentralized social media, highlighting the importance of timing, user experience, and the right team for success. He mentions the challenges faced by early decentralized platforms like BitClout but remains optimistic about the future, particularly for platforms that enable creators to monetize content and engage with audiences through NFTs and on-chain identities.
Paul says that the success of decentralized social media will depend on several factors, including the development of user-friendly features, the need for a recovery period following recent consumer crypto setbacks, and the potential for non-U.S. markets to lead adoption due to their openness to new consumer products and larger pain points.

Evolving Ethereum and Tokenization: Efficiency, Privacy, and RWA Integration

Paul explains that the industry is witnessing significant modularity in Ethereum, leading to enhanced efficiency and decentralization across various components such as storage, sequencing, and layer-2s.
He highlights the focused application of zero-knowledge proofs in verticals like co-processor privacy, showcasing a platform by Axiom for historical state proofs that benefits developers in diverse applications.
Paul discusses the use of zero-knowledge proofs for preserving identity privacy across numerous applications and mentions the innovative use of this technology in semi-permissioned blockchains by banks for tokenizing real-world assets and enhancing banking functions.
DeFiDad asks about institutions’ increasing involvement with crypto through tokenized assets, pointing towards the growing interest in real-world assets (RWAs) and their potential impact.
Paul reflects on the historical context and evolution of RWAs, highlighting the opportunities presented by high-interest rates and the demand for tokenized treasury bill yields.
He mentions Ondo‘s leading role in tokenizing treasury bills, highlighting the benefits such as global access, 24/7 trading, and integration with DeFi ecosystems.
Paul acknowledges the potential shifts in the RWA space with changing interest rates and suggests future possibilities including tokenized stocks, real estate yields, and tokenized funds.
Paul recognizes the significance of stablecoins in the crypto ecosystem, mentioning the success of backed stablecoins like $USDC in the US.
He discusses the potential for various types of stablecoins, from centralized for cross-border payments to decentralized options offering yield to users. He highlights initiatives like Ondo’s stablecoin and the diverse approaches to providing value and stability in the crypto space, catering to different user preferences and needs.

AI, DePIN, and Blockchain’s Future: Insights

Nomatic asks about the re-emergence of AI and DePIN technologies, particularly in the context of computationally intensive applications coming onchain, the potential, and the real impact this time around.
Paul says that Pantera has not heavily invested in AI on the liquid side, mentioning investments in Tau, Bittensor, and Render, among others. He explains the potential for AI to improve if data and models are democratized, which could lead to better AI-based applications. He highlights the importance of tokens in achieving this by leveraging human capital.
Paul discusses the potential of DePIN technologies, highlighting the value of decentralized physical networks in various applications such as weather data. He highlights the significance of decentralization in increasing the accuracy and value of data and expresses excitement about the possibilities enabled by high-throughput blockchains like Solana for transparent and intensive computational applications.
Paul believes we are still in phase one of the bull run, citing recent events and the need for further education on Bitcoin. He mentions several factors that keep the market in early phase one, including the upcoming election and high-interest rates, suggesting that Bitcoin’s moment has yet to arrive.
On the topic of the four-year Bitcoin cycles, Paul says that the impact of Bitcoin halvings may diminish over time due to increased education, adoption, and reduced volatility. He notes the current year might be special due to a combination of ETFs and a potential increase in demand coupled with a reduced supply emission.
DeFiDad asks about Ethereum’s identity crisis and its implications. Paul recognizes Ethereum’s unique situation compared to other crypto crises, viewing it positively. He notes the concentration of developers within the Ethereum ecosystem and the increasing market share, suggesting Ethereum’s modularity enhances its potential as a settlement layer for blockchain transactions.
Paul discusses Ethereum’s competitors and the overall growth of the blockchain infrastructure ecosystem. He says that while some applications may better suit competitors like Polkadot, EOS, and Solana, the expansion of the ecosystem and Ethereum’s transition to proof-of-stake will ultimately benefit Ethereum by enlarging the user base and application possibilities.
DeFiDad says that Bitcoin’s limited utility, which was once criticized, is what makes it a powerful store of value and a globally recognizable brand. He asks where Paul allocates his time and energy these days, given the vast landscape of blockchain communities and investments.
Paul explains that he now focuses on a high level, helping to build the firm and strategize on execution. He spends time on board seats for portfolio companies, education, and talking about products to friends, aiming to bring Bitcoin more to the regular consumer.
He highlights his involvement in infrastructure and consumer sides, the importance of team diversity in interests, and the practice of thesis sprints to challenge and support investment ideas.
Paul highlights the importance of hands-on experience with products as the best way to learn and encourages trying out new things to understand and succeed in the crypto space. He mentions the value of resources like podcasts, blogs, and the Pantera website for education.

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Show Information

Medium: YouTube (Video)

Show: The Edge Podcast

Show Title: Investing This Crypto Bull Run with Pantera Capital

Show Date: February 17, 2024