Peter Thiel’s fund liquidated 8-year bitcoin bet before market crash

Founders Fund, the venture capital firm co-founded by billionaire Peter Thiel, closed almost all of its eight-year bet on cryptocurrencies shortly before the market began to crash last year, generating about $1.8 billion in returns.

The San Francisco-based fund made its first investment in bitcoin in early 2014 and went on to invest large sums in crypto. About two-thirds of the total investment was used to buy bitcoin, people close to the fund said.

Founders Fund sold off the vast majority of its entire cryptocurrency portfolio by the end of March 2022 — before the digital asset market blew up in a crisis last May, one of the people close to the fund said.

The fund currently has no significant exposure to cryptocurrencies, the people said. The liquidation of the crypto stake has not previously been reported. Founders Fund declined to comment.

Thiel, a big supporter of Republican candidates and a supporter of former US President Donald Trump, was one of the earliest mainstream investors to buy large sums of bitcoin and has subsequently been vocally bullish on the digital currency.

In April 2022, around the same time Founders Fund sold off most of its cryptocurrency holdings, Thiel said he was optimistic about the future of bitcoin. He told a cryptocurrency conference in Miami that “we are at the end of the fiat money regime” and suggested that the price – then trading at around $44,000 – could increase by a factor of 100.

Thiel said JPMorgan CEO Jamie Dimon and BlackRock CEO Larry Fink “have to allocate some of their money to bitcoin,” adding, “We have to push them back.”

Launched in 2009, the price of bitcoin rose dramatically from about $750 in 2014 to an all-time high of more than $65,000 by November 2021. However, the price has been volatile in recent years, with several major collapses in value, including a fall to around $15,500 last November, a two-year low.

The digital asset market has been rocked by a crisis since last May, forcing high-profile crypto companies such as Terraform Labs, Celsius, Voyager, and Three Arrows Capital into bankruptcy.

Market sentiment toward crypto was further damaged in November when FTX, the second-largest cryptocurrency exchange, shut down owing more than $3 billion in creditors and its co-founder Sam Bankman-Fried was indicted on multiple fraud charges.

By December, bitcoin had lost roughly three-quarters of its value from its peak, and more than $2 billion had been wiped off the value of the global crypto market.

Several blue-chip Silicon Valley investors have piled into digital currencies in recent years, though most have focused their investments on equity stakes in crypto companies rather than buying cryptocurrencies outright.

Some exceptions to this include A16z crypto – the crypto arm of venture firm Andreessen Horowitz – which raised a $4.5 billion fund last year and also invests directly in crypto coins and tokens.

Paradigm, a crypto venture firm founded in 2018 by Coinbase co-founder Fred Ehrsam and former Sequoia Capital partner Matt Huang, raised a $2.5 billion fund in late 2021.

But many major financial institutions stayed away from cryptocurrencies due to cyber security fears and their links to money laundering and drug trafficking. In 2017, JPMorgan’s Dimon called bitcoin a “fraud”.

Founders Fund’s move into crypto, which had been one of its core positions, was one of about nine major exits the venture fund made between 2020 and the end of last year, allowing it to return roughly $13 billion to investors.

Other exits also included the initial public offerings of companies it had backed since its early fundraisings, such as Airbnb and Palantir, the data analytics group that Thiel co-founded.

Thiel co-founded PayPal in 1998 and became one of Silicon Valley’s most successful investors, including being the first venture capitalist to back Facebook.

Founders Fund has more than $11 billion under management, including $5 billion in capital raised across 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.

The fund is in talks to take a stake in OpenAI, the developer behind chatbot ChatGPT, at a value of $29 billion.