How Institutions View Bitcoin (w/ Paul Veradittakit)

TL;DR

Pantera Capital's Paul Veradittakit discusses the progression of cryptocurrency from 2014 to 2018, highlighting the rapid growth and subsequent decline in the market.

Transcript

PAUL VERADITTAKIT: I can even tell you a little about when I joined Pantera in 2014 and how it's kind of progressed all the way until now. I mean, it's been crazy. So my background is mostly in VC. I mean I've been in a VC now for nine years. And so that's kind of what I brought to Pantera-- kind of like the hedge fund experience with Dan, you got ... Read More

Key Insights

• 😵 The cryptocurrency market experienced rapid growth in 2017 due to factors like Bitcoin's store of value and cross-border payment capabilities.
• 🥺 However, government regulations, lockup periods, and decreased liquidity in 2018 led to a decline in prices and the backing of many scam projects.
• 👣 The exit of quick-profit-focused funds created an opportunity for established firms like Pantera Capital to differentiate themselves through track record, network, and global connections.

Questions & Answers

Q: What factors contributed to the exponential growth of the cryptocurrency market in 2017?

In 2017, Bitcoin gained traction as a store of value and a means for cross-border payments. Additionally, the issuance of tokens on Ethereum allowed projects to raise capital from a global pool of investors, leading to a frenzy of speculation and rapid price increases.

Q: How did the government crackdown and regulatory uncertainties affect the cryptocurrency market in 2018?

The SEC cracked down on obvious scams, creating skepticism among investors. Exchanges, as gatekeepers, faced regulations that limited the listing of tokens. This, coupled with lockup periods for token sales, reduced liquidity and caused prices to drop.

Q: What happened to the capital that flooded into the market in 2017?

Many funds and investors seeking quick profits pulled back as liquidity decreased and institutions became more cautious. Some funds shut down, especially those without institutional backing. Established firms like Pantera Capital, with a long-term investment approach, weathered the storm.

Q: How has the cryptocurrency market attracted institutional investors and mega financial managers?

The hype around 2017 brought awareness to the space, leading institutions to explore participation through various avenues such as trading derivatives and setting up crypto funds. In response, entrepreneurs are creating infrastructure to facilitate institutional entry into the market.

Summary & Key Takeaways

• Paul Veradittakit joined Pantera Capital in 2014 when there were only 10 companies in the cryptocurrency space, but it grew significantly in 2015 with the emergence of exchanges and cross-border companies.

• The year 2017 was marked by the widespread adoption of Bitcoin and Ethereum, with token issuance becoming a popular way for companies to raise capital.

• However, the government crackdown, regulatory uncertainties, and decreased liquidity in 2018 caused many scam projects to back away, resulting in a decline in prices and capital backing.