Buy when there's blood in the streets.
That's the message we got from billionaire venture-capital investor and Bitcoin superbull, Tim Draper, earlier this month. With a new season of his streaming reality show called Meet the Drapers -- a Shark Tank-style reality show where entrepreneurs pitch three generations of Draper venture capitalists -- being filmed soon, along with a litany of speaking opportunities and a large social following, Draper has carved out a spot as one of the biggest names in blockchain.
Earlier this month, TheStreet caught up with Draper in Half Moon Bay, Calif. at the Crypto-Finance-Conference, an elite series of talks about crypto that originally was held in Switzerland, to get his thoughts on where Bitcoin prices are headed. After a big rise in 2017, cryptocurrency prices are mostly negative this year, with Bitcoin, the largest cryptocurrency, down over 50%.
Here's a condensed and lightly-edited transcript of our conversation.
TheStreet: How did you start out owning cryptocurrencies?
Draper: We started mining and we got a bunch of Bitcoin and we put it into this very secure exchange called Mt. Gox. So that money disappeared and then I thought: "Too bad."
[But] I thought virtual currency was really going to take off. We were going to have this new kind of currency and it was going to be awesome and I thought [Mt. Gox's collapse] was the end of it. But Bitcoin only dropped about 10% or 15% that day...on news that basically the biggest exchange just stole a whole bunch of money.[But then] I thought: Wait a second. People really need this. This is really important. And so I started buying a little bit at a time.
TheStreet: So right after U.S. Marshals seized 144,336 Bitcoins from the operators of Silk Road, you made a bid to buy into the then-nascent cryptocurrency. How much did you pay for the Bitcoin that you bought at the U.S. Marshals' auctions in 2014 and how many did you buy?
Draper: Small amounts, a little bit at a time. That price was about $2.50 and then it was starting to really rip and the U.S. Marshall's Office confiscated the Silk Road money from Bitcoin. They put it up for auction. The bidders were all...sort of venture capitalists and a couple of other people. They were all talking about what kind of a deal they were going to get. There were nine lots and how it was going to be below market. The market price for BTC was $6.18 at the time.
I thought: You know, if I want this stuff I might as well bid above market. Here was my thinking: Either this thing goes to nothing and -- you know, too bad -- or it goes sky-high and nobody's going to care that I paid 5% more for it. So I bid up to $632 and I didn't just get one lot, I got all the lots. So I was a little bit heavy in Bitcoin there for a while (laughs).
TheStreet: How much did you buy in total?
Draper: I think it was about 40,000 Bitcoins [Editor's Note: at current prices, 40,000 Bitcoins would be worth about $250 million]
TheStreet: What are your views on consensus, the idea that blockchains can self regulate through the hundreds of thousands of contributions from participants who verify and authenticate transactions on those blockchains? Have we mined enough for Bitcoin to be secure at this point?
Draper: Well I think it's a great way to have trust...It does use a lot of energy. What's great is that when you buy some Bitcoin or you move something on a block, it is secure and you know that all those people and all those computers are making sure that that block was moved properly. There are plenty of hacks around the crypto-world but the Bitcoin blockchain has never been hacked and you know -- knock on wood -- we don't think it ever will be.
I think that having that consensus brings an extra boost to confidence. In fact, I am more confident in my Bitcoin than I am in the U.S. dollars in Wells Fargo.
TheStreet: And so, it's a price worth paying, then?
Draper: Because they get hacked all the time. You know that's happening.
TheStreet: How do we use all this technology to make the world a better place?
Draper: The governments throughout the world have run this way, in fiefdoms -- it's like little tribes all around the planet. All of a sudden [now], there is this decentralized currency. It opens up the whole world. I mean the internet opened up the whole world and we all started to get to know each other. Geographic borders started to fall. Now [we have that[ at this virtual level. Let's call it the "virtuous level."
Now all of these currencies can be used anywhere and it's freaking out the fiefdoms. But for the free spirits of the world, people are saying: "Yes, this is awesome! I can go anywhere in the world and just pull out my Bitcoin and spend it and buy whatever I need to buy and it's not tied to a central location."
You know whenever I go by a bank -- actually when I walk by a bank with my son we go: "Huh, well that one will be for sale." The other thing we look at every time I look at a bank I think: "That's such a big, spectacular building and all those people that are coming out of that bank are wearing really nice clothes and that's all my money they are holding in that bank."
And in a different scenario, I plug a ledger in. I download some cryptocurrency and pull out the ledger and I say: "There's my bank."
That is secure, it's off the cloud and that is my bank and I don't need to make all of them -- I mean I'm happy that they are all rich -- but I don't have to make them rich. This is a great feeling. Some of the crypto investment space consists of curious investors. If you are a curious investor, do one thing: Go buy a ledger, plug it into your machine, download some Bitcoin [and] something else of whatever. Put it on there and get that feeling. That feeling is just magical.
TheStreet: How big of an impact do you think blockchain will have on the broader economy?
Draper: It's so important for everyone. This is the beginning of something that's bigger than the internet ever was. The internet went after information, communication, gaming, and entertainment. They are all $10 billion to $100 billion dollar industries -- maybe [one or two are] trillion-dollar industries.
Now the industry that this is going to change is finance. It encompasses commerce and banking and insurance and real estate. More broadly, medicine and healthcare are going to change because of smart contracts. Big Data with Deep Learning is going to determine if we have a headache. They're gonna say: "Oh, you take two aspirin in the morning." And me -- they're going to understand that I was in Fire Island and there is Lyme disease there and so I should check for ticks or take something preventative.
And no doctor's going to know that much about us.
Now all of that can be done virtually because I might say I'll have my pension and I'll have my Social Security in Chile and I'll have my medical insurance in Canada and I'll have my -- you name it, whatever government services there are -- that are provided independent of location.
Most of them can be provided virtually and if that's the case, then Bitcoin, blockchain, smart contracts, and Big Data are going to actually just change all of that so that those governments have to compete for that part of the business.
TheStreet: Cryptocurrency prices have not really recovered since June, when you shared your Bitcoin price target of $250K by 2022 with us. Has your target or your timeline changed at all?
Draper: This is going to be so big so if you see a dip, jump in. Maybe it will dip further but boy, I made that prediction and I'm sticking to it. $250,000 by 2022 for Bitcoin.
The author holds stock in investment holding company, Leucadia, and is a partner in an emerging technology marketing firm, Notability Partners. He holds no positions in cryptocurrencies nor in any companies that invest in them.