Finance 2.0 :: Pantera Blockchain Letter, December 2019

Pantera Capital
Dec 10, 2019 · 15 min read

Dear Community,


Bitcoin and blockchain are like early-stage venture — but with a real-time price feed. If you stare at it too closely, it’s hard to hold it. But if you view it like venture, a five-to ten-year investment that you put in the back of your portfolio, it’s a much better way to think of investing in this space.

Cambridge Associate’s, a leading institutional investment advisor, published a research report earlier this year concluding that investors begin exploring this area with “an eye toward the long term”. We like to emphasize that perspective.

Any investor in Bitcoin since 2010 who has held bitcoin for three and a quarter years has seen a positive return.

Many investors enter as the market surges up and few during the bear markets. The median drawdown from peaks is 57%. We’re 62% below the December 2017 highs now. We believe we’re at one of those times where, instead of cutting losses and exiting at the lows, investors should be looking at this asset class with a venture-style mindset.

Bitcoin Price Cycles

Bitcoin has gone through eight major bull and bear cycles since December 2010. The median bull market duration is 158 days with an 11x return. The median drawdown is 113 days with a decline of 57%.

I would admit that in the 2014–15 Crypto Winter, I had more of a worry in the pit of my stomach. Was blockchain really going to work? Would it succumb to some of the real obvious regulatory risks that existed at that time?

Today, the underlying fundamentals are much stronger than they were in the 2014–15 Crypto Winter. With leading endowments and companies like Yale, Fidelity, JPMorgan, and ICE now in blockchain — coupled with scalability improvements — I think we’ll continue on the same logarithmic trend.


As you may already know, we hosted our annual Pantera Blockchain Summit in late October. The purpose is to bring industry leaders, academics, regulators, and lawyers together to discuss the most important topics in blockchain.

We thought you might be interested in these fireside chats with two of the earliest pioneers in the space, Jeremy Allaire and Wences Casares.

Jeremy Allaire Fireside Chat

Jeremy Allaire, founder and CEO of Circle, sat down with Dan to discuss his perspectives as an early adopter and entrepreneur in the cryptocurrency space. Watch it here.

“When the iPhone came out, no one could’ve imagined Uber — maybe just a few entrepreneurs. The kinds of things you can do when you connect the dots between this infrastructure — no one’s even thought of them yet. So that’s actually what’s most exciting to me.”

Wences Casares Fireside Chat

Wences Casares, founder and CEO of Xapo, spoke with Dan about why he originally became interested in Bitcoin and how Xapo has evolved throughout the years as one of the earliest custody and wallet solutions in the market. Watch it here.

“I think we’re not too far from a point where Bitcoin will be the most widely held asset ever in the history of civilization. I can see that happening sometime in the next three years, maybe five years.”


We believe that the most interesting application of blockchain technology is the idea of creating a new open financial system — often referred to as decentralized finance (DeFi).

If you look at information revolutions prior to the internet like radio or television, they only revolutionized access to content. Very few actually changed the way you create new information. So if you think of television, there are very few people who are on it — networks and writers maintain control over content and the dissemination thereof.

The internet, unlike historical information revolutions, not only revolutionized access to content, it democratized the creation of that content. Anybody (even your dog) can post something on the internet.

So when applied to finance — you can see how the world could look very different 10–20 years from now.

But what might that look like? Below we’ve laid out some of the basic primitives of any financial system and provided a general sense of how these might look in the new open financial system.

The market has already begun creating solutions for many of these primitives. But there are, in our opinion, three main barriers that are preventing these technologies from really taking off. We initially published these in A Crypto Thesis at the start of this year.

  1. Scalability
  2. Fiat Onramps
  3. Nascent Infrastructure

We want to provide an update on how these have developed over 2019.


We have seen marked improvement with scalability and fiat onramps, and smaller steps forward on the infrastructural side. At Pantera Blockchain Summit in October, there were two panels discussing scalability and blockchain infrastructure. We encourage you to watch the replays as they provide unique insights from experts in these fields.


Scalability has taken a leap forward over the past year, especially the last few months. 0x has partnered with StarkWare to enable hundreds of transactions per second. Similarly, Uniswap has a pilot with Plasma Group that allows 100s of trades per second. BloXroute recently went live on Ethereum, which will increase throughput on the network. Ethereum has already seen increased throughput by about 25%, and with bloXroute, it could go up 10 times its current rate over the next year. Uniswap and 0x will probably be in production sometime in the latter half of 2020.

Plasma is a scaling technique that enables higher throughput and lower latency without requiring additional collateral/capital requirements. We have seen solid progress on plasma research, in particular, Matic Network has launched a pilot on the main Ethereum network using this and is currently working on spec’ing out more complex application support over the next couple months.

Finally, a new piece of technology has come out called rollups which enables 10x-50x scale improvements (but no latency improvements), which is what Uniswap used for their scaling experiment. So now what’s left is to productionize all of this. We think a great deal will happen over the first 6 months of 2020 and, in the second 6 months of the year, applications will actually go live using many of these solutions. By the end of 2020, it will be achievable for an application to have access to over 100x the throughput Ethereum has today, and 1/10th the latency.

Fiat Onramps

Onramps have progressed quite well over the past year. Bakkt launched their futures contracts in September and their volumes are quickly grinding up, recently doing over $43mm in daily volume. They plan to launch more products in the future as well which is exciting!

On the consumer side, Wyre (as well as a slew of competitors) have launched products that enable users in less than 30 seconds to onboard dollars into their crypto wallets as ether, bitcoin, or Dai, without leaving the wallet or app. It’s a really great user experience and greatly helps solve the onramp problem. We believe costs of onramps will fall as competitors come online, and expansion outside the United States will happen in 2020.


We have seen the slowest progress of the three barriers in infrastructure. One step forward has come with the launch of Alchemy. Alchemy makes interacting with Ethereum nodes cheaper and more performant, but it only addresses part of the infrastructure problem. It is still difficult to *interface* with an Ethereum node, to fetch data from it, and to display that data in an application. It is also quite slow, even with Alchemy style solutions.

Unlike scalability and fiat onramps that have seen vast improvements over the past year with even more expected improvements in 2020, infrastructure improvements are likely to move at a slower pace. Our expectations are that changes will take about 5 years to play out.

Fortunately, we view infrastructure as a soft barrier. Things may be more difficult to accomplish, but even with it not fully developed, building apps is still *possible*. On the other hand, scalability and onramps we view as hard barriers — without them, apps won’t get usage. The progress we have seen in these hard barriers and our expectations going forward have us very optimistic about the coming years.


As decentralized finance grows in popularity, so is the infrastructure and development within this sector. We brought together five members of prominent companies and services that are enabling the transition to a more open and accessible financial system.

We encourage you to visit this page to watch the discussion which was moderated by Marc Bhargava, Co-Founder and President of Tagomi. Below are highlights from the panel.

“Right now what you’re tending to see is participation and interest from smaller AUM institutions. But it’s really about bringing institutions of “different stripes”, I (earlier) described, together to a place where they can trade the commodity, hedge the future, and really do the things they need to do to manage the risk in their business.”

– Thomas Chippas, CEO of ErisX

“This is a money game, it’s all about value transfer. Liquidity is the user experience. If I am going to trade $1 million worth of capital or I want a loan, that’s got to come at the price of liquidity. So the more slippage I’m incurring, the more I am basically going to get charged fees or it looks as a less valuable product.”

– Mike Dunworth, Co-Founder and CEO of Wyre

“Based on selfishness and cost structure, if something costs 1000th of what the other system is, people are going to use it, and people are going to adopt it, and big businesses are going to adopt it, and they’re going to use it, and I think that that’s just getting started now.”

– Tyler Spalding, Co-Founder of Flexa

“The entire world of payments is built on these very old and antiquated systems that is basically built on top of a series of debits and credits. I just sent someone a Venmo two days ago. It costed me $25 to send them money — they’re in the United States, they don’t live very far away. And the reason that is, is because basically, that transaction was me giving an IOU to my credit card company, who’s giving an IOU to Venmo, and then who’s giving an IOU to my friend, who’s eventually going to get the money in some form or another.”

– Ethan Beard, SVP Ripple Xpring


Bakkt Futures Ramping Up

Bakkt’s physical settle bitcoin futures contracts have begun ramping up in volume as more institutions get on-boarded.

5,671 contracts totaling $43mm were traded on November 27th alone. At this point, $43mm is a fraction of the total volume traded across major exchanges — but 15% of CME future’s average volume is respectable so early in the launch. Bakkt’s end-to-end regulated digital asset ecosystem may be the bit of fuel that drives the next phase of adoption led by institutions.

Bakkt is continuing to launch new products. Last month, Bakkt Warehouse rolled out custody support for institutions — Pantera was one of the launch partners. This month, Bakkt Bitcoin Monthly Options contracts launched December 9th. They also launched cash settled futures in Singapore.

bloXroute Launches Blockchain Distribution Network V1

BloXroute recently launched version 1 of their “layer 0” scalability solution based on, what they call, a Blockchain Distribution Network (BDN). The solution is focused on the networking component of scalability and facilitates faster propagation of blocks and transactions throughout the network. Version 1 currently supports Ethereum and Bitcoin Cash with more blockchain integrations on the way.

You can read more about the launch in their medium post.


Our Capital Formation partners and occasionally investment team members will be traveling to a bunch of cities over the next months to discuss the blockchain disruption with our partners and potential investors.

We also have organized group lunches in some cities, should you want to meet other investors who share your interest in blockchain. If you are interested in attending one of our group lunches, please fill out the form on this page and we will be in touch regarding availability.

  • Qatar, December 11
  • Kuwait, December 12
  • Brazil, December 16–January 3
  • New York City, January 7–10
  • San Francisco, January 14, Group Lunch | 12pm
  • Palo Alto, January 15, Group Lunch | 12pm
  • Boston, January 17 | including a Group Lunch at 12pm
  • New York City, January 21–22
    ○ January 21, Group Lunch | 12pm
  • Chicago, January 23 | including a Group Lunch at 12pm
  • Miami, January 27–31
  • Detroit, February 4–5
  • Raleigh, NC, February 12
  • London, February 17–20
  • Toronto, February 26–27

If you are interested in a meeting, please contact Pantera’s Capital Formation team at +1–650–854–7000 or

The future has arrived,


“Put the alternative back in Alternatives”



If you would like to receive additional information on Pantera’s funds, including the Private Placement Memorandum, Limited Partnership Agreement, or Subscription Documents, please fill out the form on this pageto begin the subscription process.



Intro to Blockchain Conference Call
Tuesday, January 7, 2019 9:00am PST / 18:00 CET / 1:00am CST (Jan. 8th)
Please register (in advance) via this link:
Meeting ID: 127–229–864

Long-Term ICO Fund LP Performance Call
Tuesday, January 21, 2019 7:00am PST / 16:00 CET / 11:00pm CST
Open only to LPs of the fund.

Digital Asset Fund LP Performance Call
Tuesday, January 21, 2019 9:00am PST / 18:00 CET / 1:00am CST (Jan. 22)
Open only to LPs of the fund.

ICO Fund LP Performance Call
Tuesday, January 21, 2019 10:00am PST / 19:00 CET / 2:00am CST (Jan. 22)
Open only to LPs of the fund.


Recordings of recent ICO, Digital Asset, and Venture Fund III conference calls are available on this page.



Pantera is actively hiring for the following roles:

  • Systems Engineer
  • Investor Relations Associate
  • Administrative Assistant

If you have a passion for blockchain and want to work in Menlo Park, San Francisco, or New York, please follow this link to apply.

Interested in joining one of our portfolio companies? The Pantera Jobs Board features 400+ openings across product, engineering, finance, marketing, and other functions. Visit the Jobs Board here and apply directly or submit an application for our Talent Network here to join our resume database.


Some good material to start with on the development of blockchain technology and cryptocurrencies as speculative instruments:

Additional information on blockchain regulation:


You can subscribe our publications, including the ones listed below, by visiting Pantera’s website or by e-mailing

Blockchain Letter

A monthly letter with our thoughts on significant market and ecosystem-related developments. Also, includes our thoughts on blockchain venture capital and news on our portfolio companies for accredited investors.

Blockchain Investor Letter

Public Letter plus exclusive information for accredited investors.

White Papers

Periodic, original blockchain research and academic papers.

  • “A Crypto Thesis” by Pantera Co-CIO Joey Krug [2019.01.08]. Joey’s insights on crypto and blockchain innovations what is still needed for user and institutional adoption. Informative and detailed primer for anyone considering investing in the space.

Follow us on Twitter and Medium for the latest blockchain news and insights. @PanteraCapital, @Dan_Pantera, @JoeyKrug, and @Veradittakit.

Pantera Capital

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