Tim Draper on Bitcoin: His Latest Thoughts, Including How He Came Up With His $250K Price Prediction

Legendary billionaire tech investor Tim Draper, the man who correctly predicted, live on air, in September 2014, that Bitcoin’s price would go from around $400 to $10,000 in three years, gave an interview yesterday to “The Bad Crypto Podcast” (Episode 120). In this very interesting exclusive interview, at Draper University, with co-hosts Rachel Wolfson (@Rachelwolf00 on Twitter) and Sarah Austin (@sarahaustin  on Twitter), Draper explains what he thinks about regulating ICOs, how he got into Bitcoin, how last month he came up with his $250,000 price prediction, and his advice for crypto beginners on how to get started investing in cryptocurrencies. Here are a few excerpts from this interview.

ICOs and Financial Regulators

• “Regulators, if they are light touch regulators, they are heros too, but if they are heavy-handed and they are saying ‘oh we regulate this thing and so now that there is this new thing, we’ve got to regulate that’… I think that’s the wrong approach to regulation… So, it’s like ‘hey, we regulate IPOs, so let’s regulate ICOs the same way’… Well, an IPO is a $4 billion business with thousands of employees and it’s not that big a deal to fill out a few forms… For an ICO, they are just starting to get going… And it’s usually 2 girls and a dog… really, do we want to spend our first $10 million on lawyers… so that we are well-protected from this dark cloud that stands over us? Or do we want to just fill out a quick form with a country that is less regulatory heavy?”

How He Got into Bitcoin in 2012

• “I backed… CoinLab… And I said ‘OK, go get me some of that Bitcoin, here’s $250,000’… So, he took that and some other money and he said ‘I am not going to get you the coin, but I’m going to make an ASIC so that we can mine the coin so that we can get it much cheaper’… So, he goes and designs and creates this ASIC and hands this off to this group Butterfly Labs… Well, Butterfly Labs took the ASIC after it was designed and mined for themselves for a long time before they finally said ‘oh, OK, now we will give it to you’… So, it was delivered about six months late, so Bitcoin from $6 to $36 during that time. Well, anyway, he mined some Bitcoin and he stored it at Mt. Gox… And then, of course, Mt. Gox disappeared the money, and we lost the whole thing… So, then I thought that’s the end … But then Bitcoin only dropped about 15% on that news… You would think it would have gone to zero… But no, it just dropped 15% and then it went up the next day and I thought ‘Oh, the biggest exchange just collapsed and they are still going… So, I thought… the world needs this. And then I thought who needs needs it? The unbanked… that’s like 3 billion people.”

Buying Bitcoin From the US Marshalls in June 2014 

• “When there was this opportunity to buy a lot of bitcoin from the U.S. Marshalls office that had been confiscated from the Silk Road guys, I thought ‘Well, this is a really interesting opportunity’…  And there were about 19 bidders and I knew most of them… they were all going to bid below market, so I thought ‘Well, I’ll just bid above market and we’ll see what happens’… And I got the entire all nine lots.”
• “And I looked so stupid. It was $632 when I bought it. It slid straight down to $180 and when it was $300 sliding down was when I made my prediction that it was going to be $10,000 in three years and everybody said ‘Oh, he is not only stupid, he’s crazy’ and they were right about both! And somehow, we hit the $10,000 in three years. It was exactly on the number and so then all of a sudden I was the visionary.”

Why and How He Made the ‘$250,000 by 2022’ Prediction 

• “‘I thought OK, it’s time for another prediction’ and I wanted to introduce my book [“How to be The Startup Hero”].”
• “So, it’s about four years out… the prediction that got me to $10,000 was they are going to make it easy enough to use so that anyone can start trading and then they can can use it for a store of value and people will say ‘that’s something I can get behind’… and that was the beginning… Now, I actually think people are going to be able to spend it on the street and it will be in a credit card kind of thing or off your phone… You’ll be able to spend your bitcoin… And so then I thought ‘OK, well then it starts replacing fiat currency. So, right now, there’s about $80 trillion worth of fiat currency. And the cryptocurrencies will expand that market . So, I think that the cryptocurrencies will eventually grow to maybe $100 trillion and fiat currencies will fall from $80 trillion to maybe down to $30 trillion because we won’t really want to use the currency that’s not as flexible or global or decentralized or secure as these new currencies are. And so people will move away from fiat currency… All the great engineers are now working on the cryptocurrencies, so they are the ones that are going to move the world and so, we as a society will be much more successful and more prosperous because currency will not have as much friction to it… A currency that is created where the trusted third party are about 200,000 watcing over each one of those trades… So, now have an amazingly big, huge market to go after and I predicted that maybe Bitcoin would end up with maybe a 20% market share and I sketched those out and so I think the asymptote is somewhere around $130 trillion but only maybe $100 billion will be crypto and then maybe 20% of that might be Bitcoin… Well, it’s going to take 10 or 15 years to get to that asymptote, so I am thinking that along the way we are going to have Bitcoin at $250,000 by 2022.”
• “Right now, there are 40 million Bitcoin wallets. I think that number will continue to grow and so will the value of Bitcoin by the square of that.”
• “And then I have a third way that I looked at valuing Bitcoin and that was ‘it’s in the spirits’… I just feel it.”
• “I think fiat will look like change. So, you’ll go in and try to buy coffee with fiat and the barista will laugh at you because they are going to say ‘What are you trying to give me here?’… But they will still take it… Like, I’m still taking quarters and dimes and nickels, but do you really have to buy this with quarters, dimes, and nickels?… Because there is so much more friction with fiat currency than there is with cryptocurrency. And I think you’ll be able to buy it with Bitcoin, Ether, or Bitcoin Cash, or any number of different cryptocurrencies and just do it on your phone or by then it might all be in Augmented Reality.”

Advice for Crypto Beginners

• “I think just get involved a little. So, go buy a little Bitcoin on Coinbase or put some crypto on a Ledger… A Ledger… is a hardware wallet. If you are worried about somebody taking your crypto, you can actually put it on a Ledger… And then when you pull that Ledger out and you are holding it in your hand, you suddenly kind of think ‘Wait a second, why am I paying for all these big bank buildings and all those employees when I can actually control my own money… It’s right here, it’s in my hands’.”

The whole interview is definitely worth listening to, and I would highly recommend it. You can either listen to this episode of “The Bad Crypto Podcast” through a podcast app on your phone or via their website. 

Feature image credit: “bitcoin” by “Steve Garfield” via Flickr; licensed under “CC BY 2.0”