Early Coinbase Angel Investor: Crypto Is “Essentially Worthless.”

• In 2012, Liron Shapira angel invested $10,000 in Coinbase and later sold his stake for $6 million.
• If he hadn’t diversified, Shapira’s stake would have been worth about $25 million when he left.
• The blockchain skeptic breaks down why he now believes all crypto is “essentially worthless”.

Despite making millions in crypto, Liron Shapira says the nascent space is “essentially worthless” and “everything should be shut down.”

This is a sentiment often expressed by bank managers in the bulge bracket, FOMO investors who lost their savings from risky bets, and those who have fallen victim to dodgy NFT projects.

As both an early bitcoin holder and angel investor in Coinbase, Shapira has uniquely positioned himself — whether purposefully or not — in a market prone to volatility and somehow emerged unscathed. Although around 50% of the 34-year-old’s net worth comes from investments in the industry, he has become one of crypto’s most vocal critics.

In 2007, Shapira began researching cryptography at the University of California, Berkeley. He later bought 200 bitcoins, when the token was trading around $5 each, an investment that would have been worth about $3.9 million on Tuesday, according to Messari. In the most bullish scenario, he the idea bitcoin may be “the world’s most optimal payment structure.”

Bitcoin was interesting, Shapira says, because it solved the “double-spend problem,” also known as when someone alters the blockchain to replicate a file, allowing a digital token to be used more than once.

“That’s the number one thing that blockchain does. You don’t have a middleman, and yet you prevent double spending on the ledger,” he told Insider.

Lacking giant returns, Shapira gradually sold all his holdings in a decision he describes as “the right way to play my hand based on the information at the time.” Every time he made more money from the initial investment, it was tempting to sell, he says, adding that he wasn’t sure if the token’s price increase would be sustainable.

Then came his most notable investment, Coinbase.

In 2012, he cut a $10,000 check through FundersClub — comparable to an AngelList syndicate — to the crypto giant.

He secured a stake nine years before the multibillion-dollar company went public for two reasons: founder Brian Armstrong, and the startup’s leadership to be the first official foray into bitcoin.

“It was very simple,” Shapira said, describing his investment thesis at the time. “If the bitcoin space is going to be big, it really seems like they’re the best picks and shovels.”

—Liron Shapira (@liron) 14 April 2021

Closing out Coinbase at the top

Over the years, however, Shapira became disillusioned with crypto. He now describes it as an ecosystem filled with “bloated minimal viable products (MVPs),” refers to projects that do not have a “logically coherent value prop story.”

After continuing to observe the space, while maintaining his stake in Coinbase, he saw Web3 startup pitches that didn’t seem realistic. “It just doesn’t do much,” Shapira said of blockchain technology. “It’s a very academic curiosity.”

A year before Coinbase’s stock price fell nearly 80% and the company was engulfed in controversy related to a former employee’s alleged insider trading scheme, Shapira left his position in 2021. By then, he had turned his $10,000 investment into $6 million, according to the tax filing his set by Insider. However, that same check size would have been worth $25 million had he not diversified over the years.

Exuberant returns are not unheard of in crypto, however. If someone bought one bitcoin for $10 in 2012, their investment would have jumped 189,770% to $1.89 million by Tuesday, according to Messari.

“At the time of the live listing, I thought it was ridiculous how much of my portfolio was in Coinbase, which I hardly believed,” he said. “My portfolio was skewed like crazy.”

After Coinbase went public, it was valued at $86 billion, something Shapira didn’t expect in his “wildest dreams,” but ultimately believed the space was close to crashing. He has since predicted that Coinbase shares would fall further, going so far as to hedge against the company he gave his first angel investment to.

“A lot of people on Twitter accuse me of going, ‘Wow, this guy is so bitter about crypto. He must have missed the boat,” Shapira said. “No, I secured the bag. I just think it sucks.”

‘Michael Burry of Crypto’

Shapira’s failed attempt at his first tech startup, called Quixley, gave him insight into what it’s like when young founders try to run a business, he said.

“I was 21 and didn’t know what I was doing. Somehow I ended up raising $170 million,” he added, citing Alibaba as a strategic investor. “It ended up crashing and igniting all the money. I know what it’s like to be on the Titanic when everyone acts like everything is fine.”

Now Shapira says he wants to be the “Michael Burry of the crypt,” hoping to become the Scion Capital hedge fund manager that was one of the first investors to predict the subprime mortgage crisis and then profit from its demise.

He has gained a following for his crypto criticism on Twitter, citing the popular blockchain game Axie Infinity as a “Ponzi scheme”, while calling out venture firms such as Andreessen Horowitz for backing its parent company Sky Mavis.

However, Shapira has never worked full-time in crypto, and currently has zero money invested in the space.

Asked why he remains vocal about an industry he no longer participates in, he replied: “The only reason I care is because I think it’s a good place to speak out and help the industry. I’m a natural contrarian , and I” I’m attracted to positions where a lot of smart people think the opposite.”

“It’s just multi-level marketing, and it’s a thing that destroys value and wastes everyone’s time,” Shapira said of crypto. “It’s pretty big, and even smart people are getting on board with it, so I’d love for it to just not exist.”