Dan Morehead, founder and CEO of Pantera Capital, believes that the cryptocurrency market may be undervalued in comparison to artificial intelligence stocks, which have experienced a significant surge. Morehead expressed this view at a New York event on Tuesday, framing the disparity as one of the largest he has witnessed between the two sectors.
In his opinion, although AI holds long-term importance, its current valuation appears to be at its peak. In contrast, he views cryptocurrency as being considerably underpriced. Pantera's internal data supports this perspective, with an index of leading AI companies trading 33% above its logarithmic trend over the past four years, while bitcoin has fallen short of its historical trajectory, currently standing at 43% below its trend. Morehead describes this as the largest divergence in history.
This disparity has arisen as investor enthusiasm has shifted heavily towards AI, with substantial funding rounds and rising public market valuations. Conversely, the cryptocurrency market has struggled to regain momentum despite broader adoption and regulatory progress in the US. Morehead notes that the majority of institutions still lack exposure to cryptocurrency, leaving room for future demand.
He observes that only a small minority of large investors currently hold digital assets, even as the asset class matures. This dynamic is in contrast to AI, where investors have rapidly priced in expected growth. For Morehead, this imbalance presents an opportunity for those willing to take a longer-term view.
He also references the structural cycles in cryptocurrency markets, pointing to the four-year cycle associated with bitcoin's supply schedule. If past patterns hold, he suggests that the market may remain in a weaker phase in the near term, even as the long-term outlook remains positive. Beyond relative valuations, Morehead links cryptocurrency's appeal to broader macro trends, describing digital assets as a hedge against currency devaluation.
He notes that inflation and monetary expansion have driven investors towards scarce assets, resulting in a significant devaluation of paper money. Morehead sees a convergence between AI and blockchain technologies, with Pantera investing in several projects at their intersection.
He argues that the two sectors are interconnected, stating that there is no scenario in which AI is important without cryptocurrency playing a part. Pantera views cryptocurrency as a relative value trade for the time being.
As capital continues to flow into AI, Morehead's thesis is based on the idea that markets will eventually rebalance, drawing attention back to digital assets that remain underpriced in his view.