The Only Cryptocurrency This Billionaire Venture Capitalist Is Buying
Keeping track of smart money is an easy recipe for building a decent fortune. By simply imitating veteran investors, we can partly, if not fully, replicate their returns.
When I think of smart investors of the 21st century, one name that instantly pops up in my head is Peter Thiel. Last year I wrote a feature on his investment philosophy, in which I deciphered a few secrets of his success.
To me, Thiel is the epitome of a technology-focused smart investor. The man is among the pioneers of today’s biggest Silicon Valley giants. He’s known for smelling out money-making businesses while they are still ideas on a sheet of paper or merely a string of code on a nerdy programmer’s computer.
Thiel’s venture capital firm—Founders Fund—has provided seed capital to countless emerging businesses. The co-founder of Paypal Holdings Inc (NASDAQ:PYPL) has been an early investor in companies like Facebook, Inc. (NASDAQ:FB), Tesla Inc (NASDAQ:TSLA), SpaceX, Airbnb, Inc., LinkedIn Corp (NYSE:LNKD), Lyft, Inc., and Spotify—among dozens of others—lending young entrepreneurs a hand in getting their ideas off the ground.
But outside of this conventional spectrum of investing, Thiel is also known for investing in some very unconventional ideas.
Take, for example, his early investment in Privateer Holdings, a marijuana-focused private equity firm that owns a marijuana brand, a marijuana production setup, and a famous marijuana news publishing web site as its subsidiaries. Thiel invested in the company way before marijuana investing became a “thing.”
Another of Thiel’s unique investments under discussion today is in a cryptocurrency—an idea that most old-school billionaires have shunned. But Thiel obviously sees some potential in it that’s elusive to ordinary eyes.
To Thiel, his cryptocurrency investment is his hedge against the potential collapse of our financial system. He believes it’s the equivalent of “digital gold.” It’s the safe-haven investment that may pay off if everything else fails.
“It’s like bars of gold in a vault that never move, and it’s a sort of hedge of sorts against the whole world going falling apart,” says Thiel. (Source: “Peter Thiel is betting on bitcoin because one cryptocurrency will become the ‘online equivalent to gold’,” CNBC, March 15, 2018.)
Now, we all know that conventional billionaire investors account for doomsday-like scenarios in their investments, which is why precious metals like gold often make a tiny part of their portfolios. Thiel does the same, except, here too, technology takes precedence in his investments.
Thiel is talking about the granddaddy of all cryptocurrencies: Bitcoin (BTC). It’s the figurative seed that has germinated into a ginormous tree today, and under whose shade millions of investors of our age have found a safe haven. This tree has branched out over the years, giving birth to dozens of new breeds of cryptocurrencies.
Thiel first invested in Bitcoin back in 2012. More recently, Founders Fund has reportedly been racking up Bitcoin investments. Since mid-2017, in particular, when the fund began to invest more heavily in Bitcoin, the crypto price has multiplied manyfold.
Although it’s true that the price of BTC has tumbled from its all-time highs seen in December 2017, Founders Fund’s early 2017 investment has still quadrupled in value.
Chart courtesy of TradingView.com
Bitcoin, which was originally created with a goal to replace the fiat currency-based payments system, became more of a store of value over the years as its value climbed exponentially. Indeed, it has now emerged as the only plausible technology-based alternative to gold, and the recent dip in prices may have opened a momentary window of opportunity for new investors.
In the modern age, where technology reigns over virtually all industries, traditional investing maestros like Warren Buffett, George Soros, and Carl Icahn—whose prowess in picking technologies is known to have been limited—are losing their relevance. Young investors of Generation Y and Z are beginning to look for role models from within their generation.
Thiel’s investment philosophy has always been enlightening. Thiel is known for investing in disruptive ideas. Artificial intelligence (AI), virtual reality (VR), the Internet of Things (IoT), and now cryptocurrencies are just some of the tech buzzwords you’ll find constituting Thiel’s portfolio.
Now, Bitcoin is one disruptive concept whose success seems inevitable even if all other cryptos were to lose their significance in the future. Take note that Bitcoin is now trading close to its pre-bull market highs. But compared to its all-time high of $20,000, Bitcoin looks dirt cheap.
The recent crash in cryptocurrency prices has presented investors with a lucky chance to get in on this revolutionary idea. Now may be a good time to take a second look at Bitcoin.