Peter Thiel Is Long on Bitcoin, a "Deeply Contrarian" Investment

Paypal. Facebook. Linkedin. Yelp. Those are just a few of the companies billionaire venture capitalist Peter Thiel had an early financial hand in helping bloom. His fiscal judgement is often sought, and Mr. Thiel was keynote guest at The Economic Club of New York’s luncheon hosted by Maria Bartiromo, where he was asked his latest thoughts about bitcoin and cryptocurrencies.

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Peter Thiel Remains Long on Bitcoin

Bitcoin’s price might be bottoming, and the entire mainstream business world is touting its demise, but billionaire investor and contrarian Peter Thiel remains constant: “I would be long on bitcoin,” he stated in an informal question and answer discussion with Maria Bartiromo at the august Economic Club of New York. King Abdullah, III, Mikhail Gorbachev, Herbert C. Hoover, John F. Kennedy, Margaret Thatcher, Winston Churchill have graced its luncheons, which these days are usually in the Grand Ballroom at The Plaza Hotel on 5th Avenue, New York City.

During a sprawling, many topic conversation at about the halfway mark of an hour session, Ms. Bartiromo reminded Mr. Thiel of their prior talk and his views on bitcoin, views widely credited with sending bitcoin’s price rocketing. She emphasized his telling her the world’s most popular cryptocurrency was misunderstood and that it was a “big opportunity.” She wondered if his enthusiasm remains.

“I’m not exactly sure,” Mr. Thiel attempted to clarify, “whether I’d encourage people to run out, right now, and buy these cryptocurrencies. The technology that people like to talk about is the blockchain technology. I am somewhat skeptical about how that translates into good investments.”

He then proceeded to compare the decentralized currency with an age-old store of value. “The one use case of cryptocurrency, of a store of value, may actually have quite a bit of a ways to go. I would be long bitcoin, and neutral-to-skeptical of just about everything else at this point…with a few possible exceptions. The question about something like bitcoin is whether it can become a new store of value. The thing it would replace is something like gold. I’m not talking about a new payment system. It’s too cumbersome to use for payments, for day-to-day transactions. The analogy it’s like bars of gold in a vault that never move. It’s a hedge of sorts against the whole world falling apart or something. There’s about 200 billion dollars worth of bitcoin, there’s 8 trillion dollars worth of gold. Many of the things that make gold attractive, would also apply to bitcoin; and many of the objections people have to bitcoin would also be objections to gold: it’s this weird currency that’s not backed by any government (same thing is true of gold), it’s not clear what the intrinsic value of bitcoin is (same thing is true of gold),” Mr. Thiel explained.

Money Is a Bubble That Never Pops

On the charge bitcoin is a bubble, Mr. Thiel reasoned, “It may well be a bubble. And most bubbles are unstable and end. One of my friends has this line, ‘Money is the bubble that never pops.’ So if [bitcoin] is money, it is bubble-like. The value of money comes from often the sort of social thing. You’d like to have a hundred dollar bill because everybody else would like to have a hundred dollar bill. If everyone decided a hundred dollar bill was worthless, you might not want to have a hundred dollar bill anymore. There is this bubble-like aspect to money, but it is one that can be quite stable. Even if bitcoin is bubble-like that doesn’t necessarily rebut it in this core use case for a store of value.”

He took the opportunity to discuss the broader crypto market’s Wild West aspects. “There are all these elements that remind me of ‘99-2000, that make me nervous: people playing fast and loose with the ICO rules, just like with the IPOs and the dot com bubble. You have the crazy promoter-type people where the people who exaggerate beat the people with the normal plan. And then they get beaten by the people who exaggerate a lot. There are a lot of very crazy, unhealthy dynamics. At the same time, it still strikes me as deeply contrarian. One thing that is very different from the dot com bubble in the late 90s is there are virtually no Wall Street analysts, no Wall Street banks that are pushing this in any way whatsoever [… Bitcoin and cryptocurrency] has been missed in New York City, it’s been missed, even more shockingly, in Silicon Valley. It is a technology that has emerged in this fairly distributed way.”

Ms. Bartiromo pressed Mr. Thiel why he so favors bitcoin. “My view is that there is going to be one cryptocurrency that will be the equivalent of gold. The one, all else being equal, that you should bet on is the biggest one. Gold continues to be gold because it’s the main asset class. It could be replaced by silver, but that doesn’t seem to be happening. There is a chance Ethereum could beat bitcoin. There is a chance some of the others have better features. Most likely you bet on bitcoin.”

And Ms. Bartiromo ended her line of questioning by asking what a lot of people are secretly wondering. Since the price of bitcoin has come down so radically, is Mr. Thiel buying more? He immediately gave his disciplined, cracked smile, declining to answer in specifics. However, in a surreal moment, considering the venue and its history, Mr. Thiel gave a brief explanation of Hodl and its quirky origins, and the assembled audience could be heard chuckling. “Maybe there is a 50 to 80 percent chance that it ends up being worth less. Maybe there’s a 20 to 50 percent chance it ends up worth a lot more. Probability weighted, it’s good.”

What do you think about Mr. Thiel’s latest thoughts on bitcoin? Let us know in the comments!

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