Founders Fund, the venture capital firm founded by billionaire Peter Thiel, closed almost all of its eight-year bet on cryptocurrencies shortly before the market began to collapse last year, raising about $1.8 billion.
The San Francisco-based fund made its first investment in bitcoin in early 2014 and continues to invest in crypto. About two-thirds of the overall investment was used to buy bitcoins, people close to the fund said.
The founders of the Fund sold out of the majority of all cryptocurrency portfolios at the end of March 2022 – before the market of digital assets became swept up in the crisis in May last year, said one of the people close to the fund.
The fund currently has no significant exposure to cryptocurrencies, the people said. The winding down of such crypto bets has not been reported before. The founder of the Fund declined to comment.
Thiel, a big supporter of the Republican candidate and supporter of former US president Donald Trump, was one of the earliest major investors to buy large amounts of bitcoin and later became bullish on the digital currency.
In April 2022, around the same time Founders Fund sold most of its cryptocurrency holdings, Thiel said he was optimistic about bitcoin’s future. He told a cryptocurrency conference in Miami that “we are at the end of the fiat money regime” and suggested the price – which was then trading at about $44,000 – could increase by a factor of 100.
Thiel said JPMorgan chief executive Jamie Dimon and BlackRock boss Larry Fink “need to allocate some money to bitcoin”, adding: “We need to push back on them.”
The price of bitcoin, which was first launched in 2009, has risen dramatically from about $750 in 2014 to an all-time high of more than $65,000 in November 2021. However, its price has been volatile in recent years, with several falls in value. , including a drop to about $15,500 in November last year, a two-year low.
The digital asset market has been rocked by the 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 further damaged in November when FTX, the second largest digital currency exchange, was closed due to creditors of more than $3 billion, and its founder Sam Bankman-Fried was charged with various fraud charges.
By December, bitcoin had lost roughly three-quarters of its value from its peak and more than $2tn had been wiped off the value of the global crypto market.
Some Silicon Valley blue-chip investors have piled into digital currencies in recent years, though most have focused their investments on equity stakes in crypto businesses rather than buying cryptocurrencies outright.
Some exceptions to this include crypto A16z – the crypto arm of venture capital firm Andreessen Horowitz – which raised $4.5 billion in funding last year and also invests directly in crypto coins and tokens.
Additionally, Paradigm, a crypto venture founded in 2018 by Coinbase co-founder Fred Ehrsam and former Sequoia Capital partner Matt Huang, raised $2.5bn in funding by the end of 2021.
But many large financial institutions stay away from cryptocurrencies due to fears about cyber security and links to money laundering and drug trafficking. In 2017, JPMorgan’s Dimon called bitcoin a “fraud”.
The shift of the Founder’s Fund in crypto, which has become one of its core positions, is one of about nine exits from venture funds created between 2020 and the end of last year that allowed to generate approximately $ 13bn for investors.
Other exits also include initial public offerings of companies that have been backed since their initial fundraising, such as Airbnb and Palantir, the data analytics group that Thiel co-founded.
Thiel founded PayPal in 1998 and became one of Silicon Valley’s most successful investors, including being the first venture capitalist to back Facebook.
The Fund’s founder has more than $11bn under management, including $5bn of capital raised through two funds last year, and has taken stakes in more than 100 companies, such as Elon Musk’s SpaceX, ride-hailing app Lyft and defense technology group Anduril.
Most recently, the fund is in talks to take an equity stake in OpenAI, the developer behind the chatbot ChatGPT, for $29bn.