Pantera Capital reflects on FTX situation and importance of DeFi in latest Blockchain Letter update

Pantera Capital CEO, Dan Morehead, posted a tweet late last night addressing the fallout of the ongoing FTX situation and how it highlights the importance of what Pantera is building.

FTX underscores the importance of what we are building here – a more efficient, decentralized, and open financial ecosystem.

As my co-CIO @joeykrug writes: “The journey may not always be easy or smooth, but it is necessary.”

Thoughts on this week: https://t.co/WH3YJLBeVD

— Dan Morehead (@dan_pantera) November 11, 2022

Morehead’s statement is elaborated upon in the latest update to Pantera’s ‘Blockchain Letter’ — a monthly letter that covers a range of topics focused primarily on and around the blockchain ecosystem.

Updated Nov 11 by Pantera co-CIO Joey Krug, the latest addition to Blockchain Letter summarizes the FTX and Alameda Research fallout and the mitigations of permanent capital loss.

“Our approach towards situations like these first focuses on safeguarding the portfolio as much as possible.”

Pantera aims to minimize “exposure to centralized counterparties in general” while ensuring that trade flexibility is maintained.

Addressing the concerns surrounding their exposure to the FTX event, the firm explains that their main “risk/losses” are derived from their Blockfolio acquisition proceeds — denominated in FTT and FTX stock.

“We liquidated as much of this FTT as possible on Tuesday, November 8th. Prior to the collapse, on Monday night, our FTX equity and FTT token positions totaled under 3% of our total firm AUM.”

Having swiftly implemented precautionary measures after the FTX and Alameda fallout, Pantera speculates the likelihood of a regulatory response — though they are “cautiously optimistic it will yield medium- and long-term positive results.”

Reflecting upon the situation, Pantera highlights the “need for decentralized, trustless protocols that allow users to trade, hold, and transfer their assets without relying on entities like FTX, Celsius, or Voyager.”

The need for centralized intermediaries is acknowledged within the Blockchain Letter, suggesting the likely event that such entities will be “subject to stricter oversight of reserves, audits, and risk controls.”

“On a personal level, the implosion of FTX has reminded us of what we’re doing here. Our mission – as a firm and as an ecosystem – is not to replicate the risks and inefficiencies in traditional finance. It is to build a more efficient, decentralized, and open financial ecosystem.”