In April 2022, about the same time that Founders Fund sold out of most of its cryptocurrency holdings, Thiel said he was optimistic about the future of bitcoin.
He told a cryptocurrency conference in Miami that “we’re at the end of the fiat money regime” and suggested its price — which was then trading at about US$44,000 — could increase by a factor of 100.
Thiel said JPMorgan chief executive Jamie Dimon and BlackRock boss Larry Fink “need to be allocating some of their money to bitcoin”, adding: “We need to push back on them.”
The price of bitcoin, which was first launched in 2009, surged dramatically from roughly US$750 in 2014 to an all-time high of more than US$65,000 by November 2021. However, its price has been volatile in recent years, with several major collapses in value, including a drop to about US$15,500 in November last year, a two-year low.
The digital assets market has been rocked by a crisis since May last year, forcing high-profile crypto companies such as Terraform Labs, Celsius, Voyager and Three Arrows Capital into bankruptcy.
Market sentiment towards crypto was damaged further in November when FTX, the second-largest cryptocurrency exchange, shut down owing creditors more than US$3b, and its co-founder Sam Bankman-Fried was charged with multiple fraud charges.
By December, bitcoin had lost about three-quarters of its value from its peak and more than US$2 trillion had been wiped off the value of the global crypto market.
Several blue-chip Silicon Valley investors have piled into digital currencies in recent years, although most have focused their investments on equity stakes in crypto businesses rather than buying cryptocurrencies directly. Some exceptions to this include A16z crypto — the crypto arm of venture firm Andreessen Horowitz — which raised a US$4.5b fund last year and also invests directly in crypto coins and tokens.
Similarly, Paradigm, a crypto venture firm founded in 2018 by Coinbase co-founder Fred Ehrsam and former Sequoia Capital partner Matt Huang, raised a US$2.5b fund in late 2021.
But many large financial institutions stayed away from cryptocurrencies over fears about cyber security and their links to money laundering and drug trafficking. In 2017, JPMorgan’s Dimon called bitcoin a “fraud”.
Founders Fund’s shift on crypto, which had been one of its core positions, was one of about nine big exits the venture fund made between 2020 and the end of last year that allowed it to return roughly US$13b to investors.
Other exits also included the initial public offerings of companies it had backed since their early fundraisings, such as Airbnb and Palantir, the data analytics group that was Thiel co-founded.
Thiel co-founded PayPal in 1998 and went on to become one of Silicon Valley’s most successful investors, including being the first venture capitalist to back Facebook.
Founders Fund has more than US$11b under management, including US$5b of capital raised across two funds last year, and has taken stakes in more than 100 companies, such as Elon Musk’s SpaceX, ride-hailing app Lyft and defence tech group Anduril. More recently, the fund is in talks to take an equity stake in OpenAI, the developer behind chatbot ChatGPT, at a valuation of US$29b.
Written by: Tabby Kinder and Richard Waters
© Financial Times
