When Bitcoin (BTC 1.09%) charged back onto the scene late in 2020, it was driven in large part by a new breed of retail traders. Coinbase Global (COIN -1.07%) grew in popularity, Square (XYZ -1.70%) added Bitcoin trading, and even Tesla (TSLA 0.42%) began accepting Bitcoin for vehicle orders.
There are plenty of stories of small investors making hundreds of thousands of dollars, and even millions, in Bitcoin. But some of the really big money is being made by investors who were already extremely rich and got into Bitcoin before most people ever heard of it. And they continue to tout Bitcoin (called "talking their own book"). Here are some of the billionaires making even more billions with Bitcoin.
Image source: Getty Images.
Billionaires bet early on Bitcoin
Going back to the early days of Bitcoin, it was the technology that caught a lot of early investors' attention. Whether they saw Bitcoin as a way to store value in a digital form rather than gold (Peter Thiel), or whether they saw it as a better transaction technology, big names in Silicon Valley and Wall Street were early investors.
- Chamath Palihapitiya, who initially made most of his money working at Facebook (META -0.62%) and now runs investment firm Social Capital, said that he bought 100,000 Bitcoin tokens for about $100 each around 2011 and has said he would invest more since. It's not clear how much he still holds, but a 100,000 Bitcoin stake would be worth about $3.4 billion today.
- Cameron and Tyler Winklevoss have been touting Bitcoin since 2012, and while they haven't officially said how much they hold, reports put the number at about 100,000 -- again, worth about $3.4 billion today.
- Tim Draper purchased 30,000 Bitcoin units for $19 million, or $633 per coin, in 2014 and has been one of the most vocal bulls this year. He co-founded Draper Fisher Jurvetson in 1985 and is a well-known venture capitalist worth $1.5 billion, according to Forbes.
Notable mentions in the early Bitcoin investor network are Peter Thiel; Dan Morehead of Pantera Capital; and Michael Novogratz, formerly of Fortress Investment Group. These were already successful and already very wealthy investors making even more money off Bitcoin.
Backers of the Bitcoin infrastructure
As much money as Bitcoin is making for early investors directly, the companies behind Bitcoin, other cryptocurrencies, and the blockchain could make them even more money. And once again, it's not retail investors who are getting rich, it's wealthy venture capitalists making billions on crypto investments.
Venture capital firm Andreessen Horowitz invested in Coinbase's $25 million Series B funding round. According to an analysis done by CNBC, that round returned 381 times the initial investment at its Nasdaq debut price. Andreessen Horowitz had a $9.7 billion stake in the company, and that's not all it's investing in crypto. The firm has invested in over two dozen crypto-related start-ups and recently launched the $2.2 billion Crypto Fund III.
Founders Fund, a venture capital firm run by Thiel, has invested in companies like Bullish, which just agreed to a $9 billion SPAC deal, and BitDAO with its recent $230 million financing round, along with investing in Bitcoin itself.
Michael Saylor has quickly turned MicroStrategy (MSTR 0.75%) into a bet on Bitcoin with the firm now holding over 105,000 tokens. Saylor has been one of the most vocal Bitcoin backers in 2021.
Here are some of the other notable venture capital investments in crypto start-ups that could net billions more in profits:
- Pantera Capital invested in Bakkt (BTM), which is valued at $2.1 billion.
- Sequoia Capital has invested in Binance, a well-known blockchain ecosystem company.
- BlockFi, which is currently valued at $3 billion, counts Tiger Global Management, Bain Capital Ventures, and Winklevoss Capital among its long list of investors.
- Circle, who issues the digital dollar stablecoin USDC (USDC -0.00%), is a crypto finance platform last valued at $3.9 billion in a $440 million investment round earlier this year, counts Pantera Capital as one of its biggest virtue backers.
There's a lot of money going into cryptocurrencies and the infrastructure surrounding them. And the big-money investors got in before most of us had heard of crypto.
Building a Bitcoin mining rig. Image source: Getty Images.
Why the big bettors matter
Small investors should know what they're getting into with cryptocurrencies like Bitcoin. For better or worse, billionaires got their first, and they're likely to make moves that will protect their wealth in the crypto space. Here are some factors to keep in mind:
- Regulations are coming. The big players in venture capital and Wall Street have the power to write the rules they're playing by. That's why you've seen some big names come out against some of the crypto regulations and taxation proposals going through Congress right now. If it hurts their bottom line, they'll get lobbyists to push back on taxes and regulation.
- Billionaires can build confidence in a new currency. Bitcoin has been touted as a decentralized currency. But what really gives crypto validity is the centralization of power and influence in names like Palihapitiya, Elon Musk, the Winklevoss twins, Jack Dorsey, Thiel, Andreessen Horowitz, and others who can get people believing in crypto, and create the confidence that it will be a real store of value or a real currency. Bitcoin only has as much value as people think it has, and these names can build confidence better than almost any individual or media institution could.
- Talking their book. What should be taken with a huge grain of salt is what investors say about Bitcoin if it has a big impact on their net worth. If Michael Saylor or Andreessen Horowitz touts Bitcoin or investments around Bitcoin, I view those comments with skepticism because they have a BIG financial interest in cryptocurrency's success. So beware of where investors' incentives are if they're talking up an investment like Bitcoin.
Whether you're a Bitcoin bull or bear, this will be an interesting space to watch over the next decade. There are billions of dollars at stake, and some of the biggest names in investing will have a lot to say about the industry's future.
