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Peter Thiel’s Founders Fund Makes Monster Bet on Bitcoin

  1. Few mainstream investors have bought large sums of bitcoin, scared off by concerns about cybersecurity and liquidity

    Peter Thiel exits an elevator after a meeting at Trump Tower in New York. PHOTO: EDUARDO MUNOZ/REUTERS
    Rob Copeland
    Updated Jan. 2, 2018 4:41 p.m. ET

    One of the biggest names in Silicon Valley is placing a moonshot bet on bitcoin.

    Founders Fund, the venture-capital firm co-founded by Peter Thiel, has amassed hundreds of millions of dollars of the volatile cryptocurrency, people familiar with the matter said. The bet has been spread across several of the firm’s most recent funds, the people said, including one that began investing in mid-2017 and made bitcoin one of its first investments.

    Founders and Mr. Thiel, 50 years old, are well-known for early investments in companies like Facebook Inc. that sometimes take years to come to fruition. The bitcoin bet is quickly showing promise. Founders bought around $15 million to $20 million in bitcoin, and it has told investors the firm’s haul is now worth hundreds of millions of dollars after the digital currency’s ripping rise in the past year.

    It isn’t clear if Founders has sold any of its holdings yet. The bet hasn’t been previously reported.

    Bitcoin vaulted last year from a fringe area of Wall Street interest to the most talked-about asset in the financial world. The currency, essentially a digital form of money with no government or central bank behind it, started 2017 trading around $1,000, then shot to near $20,000 as individual and institutional investors alike ramped up speculating on its rise. From its all-time high reached in November, the price chopped almost in half over the next month. The cryptocurrency ended December at $13,860, according to CoinDesk, up 1,331% on the year.

    Bitcoin spiked 8% Monday afternoon, adding as much as $18 billion in market value, after The Wall Street Journal reported Founders’ investment.

    Relatively few mainstream investors have bought large sums of bitcoin, scared off by concerns about cybersecurity and liquidity, as well as more mundane fears of investment losses. JPMorgan Chase & Co. Chief Executive James Dimon famously called the digital currency a “fraud,” while Bridgewater Associates founder Raymond Dalio said it was a bubble. Even some of those who do own it are cautious about speaking too publicly, lest they draw the attention of hackers.

    The late-year price plunge has also spooked some. On Dec. 22, the prominent investor Michael Novogratz said he was delaying launching a crypto-focused hedge fund for outside investors, stating “we didn’t like market conditions for new investors.” South Korea announced last week it would crack down on cryptocurrency trading, an ominous sign given that the country at one point accounted for as much as one-fourth of global bitcoin trading activity.

    Founders began buying in for its investors before the recent volatility, the people familiar with the matter said.

    The billionaire Mr. Thiel is an outspoken libertarian who co-founded digital payments service PayPal Holdings Inc. and made headlines as a prominent booster of President Donald Trump. He serves on the president’s technology advisory council. Mr. Thiel previously ran a multibillion-dollar hedge fund focused on global macroeconomic trends, and had some success navigating the financial crisis before racking up investment losses by investing in havens and missing out on the subsequent rebound.

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    As a venture capitalist, Mr. Thiel and Founders fund are among the most successful in Silicon Valley. Founders has more than $3 billion under management and has taken stakes in more-than 100 companies, including Facebook, Airbnb Inc., SpaceX and Lyft. More recent investments include the crypto-focused hedge funds Metastable Capital and Polychain Capital, which puts money into blockchain companies.

    Mr. Thiel made the decision to buy up bitcoin together with Founders’ other investment partners, a person familiar with the matter said.

    In an October onstage interview at an investment conference in Saudi Arabia, Mr. Thiel described cryptocurrencies as “charismatic.”

    “While I’m skeptical of most of them, I do think people are a little bit underestimating bitcoin, specifically, because it is like a reserve form of money,” Mr. Thiel said. “If bitcoin ends up being the cyber equivalent of gold, it has great potential.”

    By buying bitcoin outright, as opposed to backing other companies doing business in the space, Founders would seem to be breaking with its investing tradition, an investor said. But in communications with investors, Founders representatives have sought to cast the investment as a high-risk, high-reward wager similar to its other venture bets, the people familiar with the matter said.

    The representatives have told firm backers that a cascade of cash into technology companies has stretched their valuations to historic highs, making stakes in startups as dangerous a risk as ever. Bitcoin, on the other hand, could multiply several times over in the coming years.

    Thanks to its rise, the bitcoin investment is already estimated as the most valuable in the Founders’ most recent, $1.3 billion venture fund. People close to the firm said that the fund hasn’t made many investments yet.

    Founders has also warned investors that bitcoin does share one potentially perilous similarity with more traditional venture capital investments: The digital currency could be worth nothing, or close to it, in the end.
  2. How come after things soar in value people love to come out and brag about profits? Where are they when they put the investment in, in the first place?
  3. That $15k level on BTC is mighty strong resistance. (watching for the madness to return)
    I'm in on the break of ETH. (Buy all breakouts!)
    Monero appears to now be a favorite of the underworld. (already in that)
  4. I feel strong about private coins now that the IRS wants to get their beak wet
  5. Conspiring on how to pimp and pump the price ?
  6. Wonder what happens after it plummets....will they announce they sold every magical coin above $10000
  7. Should probably announce to the world how "bullish" you are on things when you need liquidity to close out your 10k BTC bet before you don't have the chance.
  8. Alchemist have been trying for centuries to make gold, unable so far. There are several crypto currencies already. Talking up your own book is one of the oldest tricks of the trade in finance.
  9. Negative news on bitcoin, "ET folks are all over it: scam, fraud, bubble, ponzi, tulips, crash!"

    Positive news on bitcoin, "ET folks say: fake, talking the book, need liquidity for selling"

    Yea, this is good place to learn and research investment. :finger:
  10. ET has a low threshold for bullshit for the most part. ET is also capable of recognizing a blatant bubble when we see one. Now combine the two.
  11. Touché. It's a shame, though, words don't make money and easy to talk a good game when you have nothing at stake. How about putting some skin in the game?

    I can put a couple of bitcoins on a bitcoin address, sign a message proving I own the bitcoins inside of it and I won't move them for six months. You go short 2 CBOE contracts and hold it for 3 months. Deal? (I have a lot more bitcoins but let's keep it friendly).

    You can easily verify the bitcoins by utilizing a watch-address on blockchain.info on the address to see if the coins move. If you don't know what i'm talking about, they're easy to google or I can send you links.
  12. Everything depends on each person, people draw their tools according to their knowledge and experiences.
  13. And there is objective truth: Bitcoin =/= Unobtanium
  14. I'm fairly certain your replying to a spam bot
  15. I met him before - very smart guy
  16. Is that an argument? So was Isaac Newton (lost money on tulips) or so is Bill Ackman (3 consecutive losing years).

    He is probably just talking up his book, like Elon does. (<<<also very smart guy, just can't make profits)


    Now Thiel is in the position that he could easily hire 20 top notch full time programmers and work on fixing bitcoin. Would their advancement be implemented that is another question, but if he really believes in bitcoin he might as well try to fix it.

  17. It is an argument that he will be hurt but not blow up.
  18. I keep hearing this lame dumb pathetic excuse as to why bitcoin should trade higher.....
    I find it extremely amusing that just because there is $9 trillion worth of gold floating around in the world that ohhh bitcoin is still cheap, who thinks that a value of something has to be worth X amount because a totally different product is worth Z amount, stop with the Fu$kimg lame comparisons, cryptocurrency is magic coins created out of thin air...the hype is just ludacris ....

    And peter theil has a huge investment in bitcoin so he will do anything and say anything to keep the masses buying....
  19. What if bitcoin stole gold's market share and it became nothing more than an industrial commodity?..... Thousands of years of relying on its value only to be replaced by some code?

    It's wild speculation but helps to look at different perspectives.
  20. I think Elon made a LOT of profits at some point.
    Am I wrong?
  21. Sure. And I was young at some point. I was obviously referring to his latest adventures, none of them profitable...
  22. Well, if I had his money and believed I was living in the matrix, I probably wouldn't worry too much about profits.
  23. I don't blame him, I blame his worshipers. Seriously, they would eat his shit, if he said eat gives you eternal youth.

    For the record, Paypal did make money, but he was more of an investor than a show runner there, and they even fired his ass for stupid ideas, like trying to switch to Windows...
    Since then he is living a rich kid's dream, he comes up with pet projects and the public (and the government in tax credits) finance him.

  24. I still want a Tesla.
  25. That is alright. As Cramer said:"Buy the car, not the stock, if you like Tesla."