- Morehead mentioned that the financial industry is currently not dealing with a rising interest rate environment, stating that there is a “failure of imagination.”
- When asked about the current inflation rate, Morehead stated that core inflation is at 4.4%, which is more than double the Federal Reserve’s target.
- Speaking about the cryptocurrency market, Morehead pointed out that the correlation between cryptocurrencies and the S&P 500 is currently only 0.2, historically being at 0.1.
Dan Morehead, the founder of Pantera Capital, shared his thoughts on Bitcoin while evaluating the current economic outlook in the United States in a program he attended on October 5, 2023.
Interesting Bitcoin Prediction from the Founder of Pantera Capital
Dan Morehead, the founder of Pantera Capital, discussed various topics such as Treasury interest trends, the Federal Reserve’s inflation approach, the impact of interest rates on stocks, and the current state of the cryptocurrency market during a program he attended on October 5, 2023.
Morehead stated that the financial industry is currently not dealing with a rising interest rate environment, saying that there has been a “failure of imagination.” He argued that the Federal Reserve has been saving the market by lowering interest rates for the past 40 years, but this era has come to an end. Morehead predicted at least a 5% Federal Funds rate and a 10-year Treasury yield two years ago and believes that interest rates will continue to rise because the real normal interest rate for the Federal Reserve is above 1% inflation, which has not yet been reached.
When asked about the current inflation rate, Morehead stated that core inflation is at 4.4%, which is more than double the Federal Reserve’s target. He also mentioned that wage inflation is at 4.5% and continuing to rise. Morehead does not agree with the idea that interest rates are already very high, emphasizing that the Federal Reserve’s target is to keep inflation below 2%, a target that has been significantly exceeded. He also pointed out that it would take two years for the “owner-equivalent rent” factor to fully play out for inflation, even if housing prices remained stable. He emphasized that inflation could still rise by 1.1% due to factors from two years ago.
Morehead warned that if his predictions about rising interest rates are correct, stocks are significantly overvalued. He suggested that based on the current valuation of the S&P 500, stocks should be 20% lower. Morehead argued that stocks could be associated with risk factors rather than interest rates, noting that there have been two 13-year periods in which stocks did not rise, indicating the potential for long-term stagnation.
Morehead’s Views on the Crypto Market
When discussing the cryptocurrency market, Morehead mentioned that the correlation between cryptocurrencies and the S&P 500 is currently only 0.2, historically being at 0.1. He believes that cryptocurrencies are cyclically affected by the actions of the Federal Reserve. Morehead also noted that Bitcoin has been in operation without interruption for 14 years and accounts for about 50% of the total cryptocurrency market value. He stated that the market has been influenced by high-leverage platforms like FTX and Celsius, but such “intergenerational odd events” are no longer present.
Morehead recommended that asset allocators consider diversifying into blockchain technology and described it as a trillion-dollar asset class. He suggested that investors should allocate a few percentage points of their portfolios to blockchain:
“We are constantly talking to asset allocators. Putting money into bonds is probably dangerous. The real estate sector is coming from the highest levels in history. Stocks, in my opinion, are overvalued. This leaves a few asset classes such as real commodities and blockchain. Blockchain is a trillion-dollar asset class. So most institutions have virtually no exposure right now. They need to increase a few percentage points.”
Based on the average performance of Bitcoin, Morehead predicted that Bitcoin will double in value every year.
