$10 Billion: Bitcoin Storage Service Xapo Reportedly Holds 7% of BTC's Supply in Cold Storage Vaults

Francisco Memoria
  • Bitcoin wallet and cold storage service provider Xapo reportedly holds 7% of the cryptocurrency's supply in its vaults on behalf of wealthy clients.
  • Per reports, this amount equals roughly $10 billion. It's so security-focused it even has a pulse scanner in its vaults, to stop criminals from accessing them using amputated hands.

Bitcoin storage service provider Xapo, a cryptocurrency startup that’s been on the market since 2014, reportedly holds about 7 percent of Bitcoin’s total supply in its vaults. The amount is being held in cold storage on behalf of clients, and equals about $10 billion.

According to Bloomberg, Xapo’s chief executive officer Wences Casares has spent the past several years pitching bitcoin to Silicon Valley millionaires and billionaires. Xapo itself has built a network of underground vaults, which span across five continents, including one in a decommissioned military bunker, to keep the bought bitcoins in cold storage.

Citing two unnamed clients, Bloomberg reports that the wallet and cold storage provider has an estimated $10 billion worth of bitcoin in its vaults. If the figure is accurate, it means Xapo – a four-year-old startup – has more “deposits” than 98 percent of the over 5,600 banks in the United States.

The company is reportedly overseen by the self-regulating Financial Services Standards Association, which ensures its members comply with anti-money laundering (AML) rules. Cryptocurrency funds praise its storage concept, despite the arguably centralized setup it has.

CoinShares’ CEO Ryan Radloff, the CEO of cryptocurrency investment firm CoinShares, which reportedly has over $500 million worth of bitcoin stored at Xapo, was quoted as saying:

“Everyone who isn’t keeping keys themselves is keeping them with Xapo. You couldn’t pay me to keep it with a bank.”

Ryan Radloff

Xapo’s backers now include LinkedIn co-founder Reid Hoffman and billionaire investor Michael Novogratz, who recently defended bitcoin in the scaling debate, noting its market cap “dwarfs bitcoin cash.” Their bet, Bloomberg notes, is that bitcoin is here to stay.

The cryptocurrency storage service’s business model is a successful one. Bitcoin’s late 2017 surge saw various criminals attempt to enter the market, which led bitcoin tycoons to resort to drastic measures, including fortifying their homes, hiding their identities, and studying self-defense.

Per Bloomberg’s report, it takes Xapo two days to retrieve bitcoin from its vaults. Before making transactions, it verifies the client’s identity and authenticates the request before conducting it.

First Block Capital, the first fully registered cryptocurrency firm in Canada, picked Xapo as its custodian after months of due diligence, which included a tour to the startup’s Swiss vault. Sean Clark, the firm’s founder, noted that the vault’s fingerprint scanners were even equipped with a pulse reader that would prevent amputated hands from being used. He was quoted as saying:

“Every part of their DNA is geared to security. Whenever we make big transfers they FaceTime us, we have duress words, if it’s big enough they’ll fly out to see us.”

Sean Clark

Grayscale Launches Ad Campaign Telling Investors to Drop Gold, Buy Bitcoin

Grayscale Investments, a cryptoasset management firm and a subsidiary of the Digital Currency Group, has recently launched an ad campaign that’s telling investors to drop gold, and instead invest on the flagship cryptocurrency bitcoin.

The campaign, called “Drop Gold,” will feature a 39-second commercial showing a man and a woman racing around a financial district, while seeing people burdened by the weight of bulky gold they’re carrying around.

The ad asks investors why they choose to put their money in gold, and questions whether they’re investing in the past. Grayscale’s ad is set to run all year on broadcast and cable networks, as well as on streaming services like Hulu.

The company’s goal is to get new buyers to put their money into its Grayscale Bitcoin Trust (GBTC) fund, which allows investors to gain exposure to the flagship cryptocurrency without actually managing bitcoin. Grayscale manages it for a fee.

According to Fortune, Grayscale CEO Barry Silbert believes investors will drop gold for BTC thanks to the ad campaign, as he believes it’s a superior store of value for being more practical and lighter than gold.

Silbert reportedly also believes new generations who grew up with the internet care less about gold, as he’s “highly confident” a 23-year-old with a gold bar would just sell it. Notably, gold’s worth if approximately of $8 trillion, while bitcoin’s market cap is below $100 billion.

Grayscale’s bet would see investors who hedge using gold, because they see it as a way to hold value superior to conventional assets like stocks and bonds, put their money in bitcoin instead of in the precious metal.

Behind the bet is what the firm believes is a generational shift in attitudes, and bitcoin’s performance so far this year. While gold has remained relatively stable, BTC has seen its value surge nearly 40%, outperforming the S&P 500 and most commodities.

Per Silbert, most investors are interested in gold because of an aggressive marketing campaign made by the World Gold Council in 2004, promoting the first gold exchange-traded fund (ETF). The ETF’s launch coincided with soaring gold prices. Grayscale’s CEO was quoted as saying:

Question what you’ve been told by the World Gold Council for the last 20 years. We’re not suggesting you should go sell your Microsoft stock and buy Bitcoin, but it should be an allocation.

Notably, Grayscale’s GBTC has been growing over time. As of December of last year, it held 203,000 BTC, over 1% of the flagship cryptocurrency’s supply. The firm’s Digital Large Cap Fund (DLC) has recently reduced its exposure to XRP, and increased it to LTC: