Dan Morehead, founder and CEO of Pantera Capital, believes that the cryptocurrency market is undervalued in comparison to AI stocks, which have experienced a significant surge. Morehead expressed this view at a New York event on Tuesday, stating that the divergence between the two sectors is one of the largest he has observed. He noted that while AI is crucial for long-term growth, its current valuation appears to be fully priced. In contrast, he described the cryptocurrency market as being 'incredibly cheap'.
Pantera's internal data supports this perspective, with an index of leading AI companies trading 33% above its four-year log trend, while bitcoin has fallen 43% below its historical trajectory. Morehead attributed this disparity to investor enthusiasm for AI, resulting in substantial funding rounds and rising public market valuations.
Meanwhile, the cryptocurrency market has struggled to regain momentum despite increased adoption and regulatory progress in the US. Morehead emphasized that the majority of institutions still lack exposure to cryptocurrencies, leaving room for future demand. He also highlighted the structural cycles in crypto markets, citing the four-year cycle related to bitcoin's supply schedule.
If past patterns persist, the market may remain in a weaker phase in the near term, despite a positive long-term outlook. Morehead tied the appeal of cryptocurrencies to broader macro trends, describing them as a hedge against currency debasement. He noted that inflation and monetary expansion have driven investors towards scarce assets, resulting in a significant devaluation of paper money. Furthermore, Morehead sees a convergence between AI and blockchain technologies, with Pantera investing in several projects at their intersection.
He argued that the two sectors are interconnected, stating that there is no scenario in which AI is important without crypto being part of it. Pantera views crypto as a relative value trade for now, with Morehead's thesis resting on the idea that markets will eventually rebalance, drawing attention back to digital assets that remain underpriced.