Founders Fund, the enterprise capital agency co-founded by billionaire Peter Thiel, closed virtually all of its eight-year guess on cryptocurrencies shortly earlier than the market started to crash final yr, producing about $1.8bn in returns.
The San Francisco-based fund made its first funding in bitcoin in early 2014 and went on to take a position massive sums in crypto. About two-thirds of its general funding was used to purchase bitcoin, stated folks near the fund.
Founders Fund offered out of the overwhelming majority of its complete cryptocurrency portfolio by the tip of March 2022 — earlier than the digital property market turned swept up in a disaster in Might final yr, stated one of many folks near the fund.
The fund at present has no vital publicity to cryptocurrencies, the folks stated. The winding down of its crypto guess has not beforehand been reported. Founders Fund declined to remark.
Thiel, an enormous backer of Republican candidates and a supporter of former US president Donald Trump, was one of many earliest mainstream buyers to purchase massive sums of bitcoin and has subsequently been loudly bullish on the digital foreign money.
In April 2022, about the identical time that Founders Fund offered out of most of its cryptocurrency holdings, Thiel stated he was optimistic about the way forward for bitcoin. He informed a cryptocurrency convention in Miami that “we’re on the finish of the fiat cash regime” and prompt its value — which was then buying and selling at about $44,000 — may improve by an element of 100.
Thiel stated JPMorgan chief govt Jamie Dimon and BlackRock boss Larry Fink “must be allocating a few of their cash to bitcoin”, including: “We have to push again on them.”
The value of bitcoin, which was first launched in 2009, surged dramatically from roughly $750 in 2014 to an all-time excessive of greater than $65,000 by November 2021. Nevertheless, its value has been risky lately, with a number of main collapses in worth, together with a drop to about $15,500 in November final yr, a two-year low.
The digital property market has been rocked by a disaster since Might final yr, forcing high-profile crypto corporations reminiscent of Terraform Labs, Celsius, Voyager and Three Arrows Capital into chapter 11.
Market sentiment in direction of crypto was broken additional in November when FTX, the second-largest cryptocurrency trade, shut down owing collectors greater than $3bn, and its co-founder Sam Bankman-Fried was charged with a number of fraud fees.
By December, bitcoin had misplaced about three-quarters of its worth from its peak and greater than $2tn had been wiped off the worth of the worldwide crypto market.
A number of blue-chip Silicon Valley buyers have piled into digital currencies lately, though most have centered their investments on fairness stakes in crypto companies moderately than shopping for cryptocurrencies immediately.
Some exceptions to this embody A16z crypto — the crypto arm of enterprise agency Andreessen Horowitz — which raised a $4.5bn fund final yr and likewise invests immediately in crypto cash and tokens.
Equally, Paradigm, a crypto enterprise agency based in 2018 by Coinbase co-founder Fred Ehrsam and former Sequoia Capital companion Matt Huang, raised a $2.5bn fund in late 2021.
However many massive monetary establishments stayed away from cryptocurrencies over fears about cyber safety and their hyperlinks to cash laundering and drug trafficking. In 2017, JPMorgan’s Dimon referred to as bitcoin a “fraud”.
Founders Fund’s shift on crypto, which had been one in every of its core positions, was one in every of about 9 huge exits the enterprise fund made between 2020 and the tip of final yr that allowed it to return roughly $13bn to buyers.
Different exits additionally included the preliminary public choices of corporations it had backed since their early fundraisings, reminiscent of Airbnb and Palantir, the info analytics group that was Thiel co-founded.
Thiel co-founded PayPal in 1998 and went on to turn out to be one in every of Silicon Valley’s most profitable buyers, together with being the primary enterprise capitalist to again Fb.
Founders Fund has greater than $11bn below administration, together with $5bn of capital raised throughout two funds final yr, and has taken stakes in additional than 100 corporations, reminiscent of Elon Musk’s SpaceX, ride-hailing app Lyft and defence tech group Anduril.
Extra just lately, the fund is in talks to take an fairness stake in OpenAI, the developer behind chatbot ChatGPT, at a valuation of $29bn.