If billionaires know anything, it’s how to make money work. When they invest in an asset, they do so with good reason. Find out why billionaires are investing in crypto.
Soros. Rothschild. Rockefeller. They’re all doing it. They’re all putting money into crypto.
If there’s one thing billionaires know, it’s how to make money work. When they invest, they do it with good reason. They have their finger on the pulse of what’s happening globally.
Here’s a handful putting their wealth into crypto assets – and why they’re doing it.
If anyone knows about money, it’s Paypal founder Peter Thiel. His venture capital fund started purchasing Bitcoin in mid-2017.
To Thiel, Bitcoin is a solid investment because, like the Winklevoss twins, he thinks it has a future as a store of value equivalent to gold. Speaking at the Economic Club of New York, he said, “It’s like bars of gold in a vault that never move, and it’s a sort of hedge of sorts against the world going to fall apart.”
He seems more skeptical of its future as a payment system, but that could easily be a mantle taken up by other cryptocurrencies. The viewpoint that Bitcoin will eventually become a stable store of value is widespread. Indeed, as Matt Hougan wrote in Forbes, Bitcoin’s early volatility is entirely a piece with gold’s history as a store of value.
Bitcoin’s design as a limited-supply currency makes it uniquely suited to this use case. Perhaps Thiel is correct that its use as a method of payment will remain limited – but different cryptocurrencies may fulfill that role instead.
The Winklevoss twins are most famous for their role in the founding of Facebook. But they’re also Bitcoin billionaires. Early adopters of cryptocurrency, they used the $65 million pay-out they received from Facebook to heavily invest in Bitcoin, and were rewarded by their portfolio growing to over $1 billion.
Why Bitcoin? Partially because of its potential to disrupt gold. Bitcoin’s ‘sound’ money qualities makes it an attractive store of value, an excellent investment proposition the twins feel is “a very under-appreciated asset” that could grow to rival gold’s $7 trillion market cap.
The twins also point to Bitcoin’s potential for disrupting the financial system as a whole. In response to crypto-sceptic comments from Warren Buffet, the Winklevoss’s accused the investment giant of having a “failure of imagination”, citing the technological superiority of digital currency as its primary value.
In an interview with The Times, he said he believes the world will have a single currency, and that it would be Bitcoin. He acknowledged that BTC doesn’t have the capability to operate as a medium of exchange right now – “it’s slow and it’s costly” – but was adamant that as more people get involved in solving Bitcoin’s technological limitations, the problems will go away.
And Dorsey is putting his equity where his mouth is, having begun allowing Bitcoin transactions on his mobile payments Cash App since 2014.
Anthony Di Iorio made his fortune as an early adopter of crypto assets. But Di Iorio is no speculator. He is credited as a co-founder of Ethereum, having invested heavily in its development. But now he uses his crypto-fortune to fund smaller, nascent crypto assets in which he sees potential.
After the financial crisis, Di Iorio says he studied economics, trying to figure out how the crash of 2008 happened. Speaking to Forbes he said, “I really started understanding what money really is – and that whole libertarian thinking about sound money.”
As such, his strategy is to invest early in crypto assets like Qtum, Vechain and Zcash, reallocating to the next nascent generation when the asset matures.
“Hedge Fund King” billionaire Steve Cohen entered the crypto space in a big way in the summer of 2018 by investing in Autonomous Partners, a crypto hedge fund led by venture capitalist Arianna Simpson.
Although the fund does dedicate part of its portfolio to big hitter crypto assets like Bitcoin and Ethereum, its investments are dominated by long-term positions in blockchain technology start-ups; in the technologies that will outlast early speculation.
The trick is identifying what is truly a useful application of blockchain, and what’s just buying into the buzz. In Simpson’s words, “it’s still up in the air if people want to do a number of things on the blockchain… It’s clear they want to trade, and they want to play games.”
Alan Howard is a British hedge fund manager who has amassed a fortune of $1.35 billion, earning him a place in Forbes’ 40 highest-earning hedge fund managers list. He is the co-founder of Brevan Howard Asset Management, which was once one of the top performing macro hedge funds in the world – controlling assets worth $40 billion at its peak in 2013.
Howard has reportedly made significant investments in crypto assets with his own money. He has also hired “at least one person” to work on digital assets, with plans to hire more, according to Bloomberg.
Although Howard is known to make riskier investments with his own money than through Brevan Howard, it’s still a ringing endorsement for crypto from an establishment financier. That he’s hiring staff is a particular indication that Howard considers the crypto asset class to be a long-term investment, rather than a speculative bet.
Now that this first wave of hedge fund managers and tech billionaires have shown the way, traditionalists like Soros are following.
And then the rest will come.