How China is outpacing the U.S. in blockchain-based payment

Pantera Capital Founder and CEO Dan Morehead joins Yahoo Finance to discuss the environmental concerns surrounding Bitcoin and how China is outpacing the U.S. in the cryptocurrency market.

Video transcript

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- We've got a mixed picture for cryptocurrencies today, perhaps uncharacteristically so. Bitcoin pulling back a little bit. Ethereum, though, is higher, as is XRP. Haven't talked about XRP in a while. But it's among the cryptocurrencies trading higher today.

We were just talking with Mohamed El-Erian about his views on the regulatory environment, and maybe the US needs to catch up with China a little bit. That's been a hot topic. Also what's been a hot topic is the sort of climate environmental profile of crypto.

Joining us now to talk more about all of this, Dan Morehead, Pantera Capital founder and CEO. Dan, let's start on the environmental side of this, which has gained more attention this year, I think it's fair to say, with Elon Musk highlighting the issue, and others. Give us a scene-setter, if you will, where we are in the crypto world, in terms of how participants are thinking about the environmental factors.

DAN MOREHEAD: I think the environmental issues come up just recently, and it's focusing exclusively on one of the three letters in the acronym ESG-- just the E part and, mainly on just one of the blockchains, Bitcoin. And Bitcoin does use electricity to provide security, so it does consume a large amount of electricity. Many of the other blockchains don't. They use proof of stake or some other consensus mechanism like XRP, which don't consume electricity. So I think when we have a broader discussion about the whole concept of ESG, people realize that blockchain's fantastic for ESG.

- Dan, good to see you here. Crypto is really, across the board, most of them are well off their highs. How are you investing your funds? Where are you seeing opportunities right now?

DAN MOREHEAD: Yeah, so, volatility does bring opportunity. And from peak to trough, in April to recently, Bitcoin, as an example for the industry as a whole, went down 53%. So that gives you great entry opportunity.

Fortunately, we're launching a new fund that invests across the whole spectrum of assets, and we're happy that the markets have pulled back a bit here. I think the macro story is so positive. There's so much money being printed, and then so many institutions are coming into the space that over the next 12 months, the markets are going to resume their rally.

- What's your terminal value on Bitcoin now?

DAN MOREHEAD: Yeah, it's a good question, is that a lot of pundits always throwing out big prices. We did a study that showed the number of people using Bitcoin over the years and the price of Bitcoin, and both of those data series went up by an order of magnitude every two years. And if that kept going, that would put Bitcoin at $700,000 when everybody with a smartphone uses it. I think that 10 years' time is a reasonable forecast.

- Dan, I'm curious. When we talk to a lot of crypto folks on this program, and we hear about institutional interest or institutional adoption. And as someone operating in the space, what does that mean to you? Because we kind of get the sense that a lot of folks define it differently.

Certainly, you have, you know-- is it traditional large pension-type institutions calling you and asking about it? How does that kind of come down for you guys?

DAN MOREHEAD: Yes, we've had a few institutions eight years ago, you know, at the beginning of all this. But these days, we have a lot more endowments. Endowments seem to be earlier into this space than pensions.

But we're talking to all kinds of big institutions these days that are actively engaging. And there is a sense that there's some kind of on-off switch, and it's going to go from off to, now, on. It's more of a continuum. You know, we've had many institutions subscribing over the last couple of years. And I think two or three years from now, everyone will realize that blockchain is an asset class by itself, and they'll have a blockchain team and a blockchain allocation.

- And Dan, I do want to ask you, about what I alluded to-- our conversation with Mohamed El-Erian in his op-ed that he wrote in "FT" about how China is sort of setting the tone when it comes to crypto integration because they are not treating it as skeptically as US regulators. Do you think that's true as well? And do you think that the US system is at risk of falling behind as a result?

DAN MOREHEAD: Oh, I think it is true. China is six years ahead of the United States in building a blockchain-based payment system. The former CFTC Chairman Chris Giancarlo wrote a great op-ed in the "Journal" in 2019, calling it America's Sputnik moment when China announced their blockchains. And there is going to be a competition amongst nations to have the payment [? rail ?] of the future.

- Dan, thanks for your time this morning. Dan Morehead is Pantera Capital founder and CEO.