• Pantera Capital announced a new $600 million blockchain fund that has already raised $375 million
  • The fund’s minimum investment is $1 million, limiting it to institutional investors

Venture capital money is pouring into the digital asset space at a record pace this year, with $3 billion allocated to the space in the first quarter of 2021 alone, according to data from Pitchbook

Cryptocurrency investment manager Pantera Capital is launching a new blockchain fund and it is already more than halfway to its goal of $600 million. 

Pantera CEO Dan Morehead announced the fund, which will have closings every fiscal quarter, on a call with investors Wednesday. The first closing for the fund was completed in June with $375 million raised. 

The fund will invest in three categories; venture equity, early stage tokens and traded liquidity tokens, such as bitcoin. The largest allocation will be toward venture equity. It is designed to protect against short-term volatility that can be nerve wracking for investors. 

“The new fund is able to capture the often-large swings in value between equity and tokens,” Dan Morehead, CEO and co-chief investment officer of Pantera, wrote in a letter to investors. “Tokens reset quickly. In May, tokens dropped 55% in the span of a few weeks. On the other end of the spectrum, venture equity is very slow moving.” 

The venture capital structure is a 10-year commitment, which helps investors to overlook day-to-day fluctuations in the market, Pantera said. 

Pantera, which manages $5 billion in assets, began investing in the digital asset space in 2013, when convincing institutional investors to enter the digital asset space was a challenge.  

“Our first institutional, or outside LP, venture fund was in 2014, and it was a slog,” said Paul Veradittakit, partner at Pantera. “It was so tough to fundraise, we raised about $25 million for that one, mostly from high net worth individuals and family offices, and it was just venture.” 

Things have changed since then, and it’s mostly due to institutional investor interest, Verdittakit said, which really picked up earlier this year. 

“Because of what was happening last year with DeFi, investors really opened up to the possibility of getting exposure to tokens,” he said. “A lot of investors think that it makes sense to have exposure to everything, and they want to defer to a fund manager versus trying to decide which strategy to deploy and when.” 

Regulation, Verdittakit said, is a common concern for investors, given the current lack of clarity in the space, but further oversight is an indication that the industry is growing.

“I think there’s been a lot of regulatory progress, both in terms of custody and in terms of licensing, there’s obviously some potential concerns around DeFi, but I think it probably doesn’t get regulated, up to a certain extent, unless the space gets large enough,” he said. “If space gets large enough, then the project will have matured and it’s a good problem to have. We’ll see what happens but we’re obviously going to do whatever we can as a firm to push forward regulations.” 

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    Casey Wagner is a New York-based business journalist covering digital assets and macro economics. Prior to joining Blockworks, she reported on markets at Bloomberg News. She graduated from the University of Virginia with a degree in Media Studies.