Founders Fund, the enterprise capital agency co-founded by billionaire Peter Thiel, closed virtually all of its eight-year wager on cryptocurrencies shortly earlier than the market started to crash final 12 months, producing about $1.8bn in returns.
The San Francisco-based fund made its first funding in bitcoin in early 2014 and went on to speculate giant sums in crypto. About two-thirds of its general funding was used to purchase bitcoin, mentioned folks near the fund.
Founders Fund offered out of the overwhelming majority of its total cryptocurrency portfolio by the top of March 2022 — earlier than the digital belongings market turned swept up in a disaster in Could final 12 months, mentioned one of many folks near the fund.
The fund presently has no vital publicity to cryptocurrencies, the folks mentioned. The winding-down of its crypto wager 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 traders to purchase giant 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 mentioned 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 urged its value — which was then buying and selling at about $44,000 — might enhance by an element of 100.
Thiel mentioned JPMorgan chief government Jamie Dimon and BlackRock boss Larry Fink “should be allocating a few of their cash to bitcoin”, including: “We have to push again on them.”
The value of bitcoin, which was launched in 2009, surged dramatically from roughly $750 in 2014 to an all-time excessive of greater than $65,000 by November 2021. Nonetheless, its value has been unstable lately, with a number of huge collapses in worth, together with a drop to about $15,500 in November final 12 months, a two-year low.
The digital belongings market has been rocked by a disaster since Could final 12 months, forcing high-profile crypto corporations equivalent to Terraform Labs, Celsius, Voyager and Three Arrows Capital out of business.
Market sentiment in the direction of crypto was broken additional in November when FTX, the second-largest cryptocurrency change, shut down owing collectors greater than $3bn, and its co-founder Sam Bankman-Fried was charged with a number of fraud prices.
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 traders have piled into digital currencies lately, though most have centered their investments on fairness stakes in crypto companies fairly 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 12 months and in addition 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 giant 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 all its core positions, was one in all about 9 huge exits the enterprise fund made between 2020 and the top of final 12 months that allowed it to return roughly $13bn to traders.
Different exits additionally included the preliminary public choices of corporations it had backed since their early fundraisings, equivalent to Airbnb and Palantir, the information analytics group that Thiel co-founded.
Thiel co-founded PayPal in 1998 and went on to turn into one in all Silicon Valley’s most profitable traders, 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 12 months, and has taken stakes in additional than 100 corporations, equivalent to Elon Musk’s SpaceX, ride-hailing app Lyft and defence tech group Anduril.
The fund is in talks to take an fairness stake in OpenAI, the developer behind chatbot ChatGPT, at a valuation of $29bn.