Bitcoin has definitely been one of the recurring buzzwords of 2017. Whether you’re a skeptic waiting for the so-called bubble to burst or a firm believer in the cryptocurrency’s potential, it’s there — everywhere. You can now even buy a Lamborghini for about 9 Bitcoins.
Top venture capitalists also see its value. Tim Draper, who is a founding partner at both DFJ and Draper Associates, has been an avid supporter of the cryptocurrency for years. He bought 30,000 coins in 2014, at about $600 each. Today, the value of those coins is $213 million, a 1,083 percent jump.
And the value kept rising this year, rocketing past $7,000 and then $11,000 in November. Bitcoin futures also began trading on Chicago’s CBOE last week. Although the cryptocurrency reached $19,700 last Sunday, it dropped to $12,500 this morning. This constant fluctuation is bound to make some investors uneasy. Not Draper, who tweeted:
Bitcoin true believers can confidently ride this volatility out. Global currency demand continues to grow unabated.
— Tim Draper (@TimDraper) December 22, 2017
Although the renowned VC owns Bitcoins, he isn’t just counting them, Scrooge McDuck-style. He is also betting on Bitcoin and blockchain as an investor. CB Insights listed Draper Associates as the fourth most active investor in this space.
We asked Draper a few questions about the cryptocurrency’s boom and the future of initial coin offerings (ICOs).
(This interview has been edited for clarity and length.)
VentureBeat: When did you first invest in Bitcoin and why?
Tim Draper: I bought coins because I believed that virtual currency could be better, more frictionless, and not subject to the whims of government. I think Bitcoin is a hedge against bad governance, and there seems to be a lot of that going on around the world.
VB: Cryptocurrencies have seen a tremendous boost this year. Will we see a similar streak in 2018?
Draper: The future I envision will be one where global cryptocurrencies will be commonplace and bigger than Fiat. That argues for a much larger value to crypto than we see today.
VB: Are you thinking of selling some of your coins now that they are priced at an all-time high?
Draper: For what? That would be like trading gold for shells. I have no interest in going back in time.
VB: Many compare the cryptocurrency to gold. Would you agree?
Draper: Not really. Gold is a physical good, difficult to transport, and impractical to spend — but it is very shiny. Bitcoin is much more useful.
VB: Is it worrisome that China decided to ban initial coin offerings (ICOs)?
Draper: I think governments like China will be the big losers as this technology spreads and is enhanced by brilliant engineers and entrepreneurs who can now move freely to other countries. The governments of the world are in competition for citizens, money, businesses, and entrepreneurs. China will lose them. Japan, who made Bitcoin a national currency, will be a big winner.
VB: Will ICOs ultimately replace IPOs?
Draper: ICOs are different — they’re more like Kickstarter campaigns than corporations. The best ones are sociological transformations.
VB: And do you think that down the line, top-tier VC firms will be investing in startups with Bitcoins rather than traditional capital?
Draper: I’ve already invested in companies with Bitcoin many times. I suspect that other investors will follow suit and the regulators will get on board, treating Bitcoin as they treat pesos, yen, and euros: as a currency. The benefits of investing with Bitcoin are that all accounting is done automatically on the blockchain, that smart contracts can replace fuzzy verbal contracts, and legal issues will be minimized.