In an exclusive interview with Protos, Tim Draper says he’s still as bullish as ever on bitcoin. The venture capitalist and investor in early tech companies like Hotmail, Skype, Tesla, and even Theranos says he’s never sold his BTC and instead is still buying it up.
Draper bought the 30,000 bitcoin seized by police from Silk Road, auctioned by the US government for a total of $17 million in 2014. The Tezos and Coinbase investor is a firm believer that bitcoin will replace the US dollar to become the world’s main global currency.
Fiat, he says, is a thing of the past — as more women buy up bitcoin, it will eventually be used for retail payments.
In this email interview, Protos tries to challenge Draper about his idealism. We also ask him about the speculative nature and excess leverage which the bitcoin market has become known for.
Protos: The use of Bitcoin for payments is insignificant compared to its use as a speculative asset by rich investors. Do you think that excessive speculation has killed the Bitcoin dream?
Draper: No. Speculators are part of the process. All new industries go through periods of elation and depression before they find their place in society. Think of the dotcom boom and bust and then boom again. The second boom was many times greater than the first, but no one wrote about it, it just happened.
Protos: Do you see it as a potential risk for the Bitcoin market that someone holding a considerable portion of the supply on leverage can be potentially forced to sell its holdings?
Draper: Markets tend to stabilize over time. The extremes in an industry tend to happen in the first inning. We are in the first inning. No one should borrow more than they can repay, but of course, it happens.
Protos: Why are you so confident that Bitcoin will win the payment war when there are many other competitors: CBDCs, other cryptocurrencies, and companies such as PayPal and Visa who are constantly increasing clients?
Draper: CBDCs are a bridge to Bitcoin. They just bring people into the use of digital currencies gradually. Other cryptocurrencies are (except a few like Tezos) centralized, and the consumer would again be at the mercy of a centralized force. The retailer is smarter than letting that happen.
PayPal charges 3%, Visa (banks) charge 2 1/2%. Bitcoin through OpenNode can charge basis points, and it can be a faster more efficient network than either of those alternatives. Retailers will care a lot. They run on slim margins. Bitcoin could double their profits.
Protos: We get the idea of Bitcoin as a sovereign asset which no government can touch or interfere with. However, do you ever have doubts that this idea may never get traction with the public and as a result Bitcoin is becoming this alternative asset for idealistic rebels, speculators, criminals and gamblers?
Draper: I don’t have those doubts. Idealists drive our future. Speculators are a natural occurrence in any marketplace. The blockchain keeps perfect records. I think criminals would rather use paper fiat that can’t be easily traced. Gamblers are usually defined as playing games with expected values lower than 1. Bitcoin has a very high expected value.
Protos: You also believe that bitcoin is the currency of the future and that fiat currencies including the dollar will become something of the past, but how would this work in reality if bitcoin’s value has to be measured by something else? Doesn’t the existence of bitcoin actually strengthen the dollar as it opens up more access to it?
Draper: Not really. As the dollar and other fiat currencies are managed by less and less responsible bureaucrats, dictators and politicians, they will be printed in larger and larger volumes and their value will fall against better alternatives like Bitcoin.
Protos: Did you sell any of your Bitcoin?
Draper: No. I continue to be a net buyer. Draper Startup Houses accept Bitcoin for rent. Draper University accepts Bitcoin for tuition. Meet The Drapers sponsors can pay in Bitcoin.
Protos: Do you hedge your Bitcoin position by shorting it in the futures market?
Protos: What would you say to central bankers today especially in relation to their efforts to introduce CBDCs?
Draper: Their efforts to introduce digital fiat currency will make nice bridges to Bitcoin use. Trust in Bitcoin will outperform trust in bureaucracy over time. In many cases it already has.
This interview has been lightly edited for clarity — all views expressed belong to Draper. For more, follow us on Twitter and Google News or listen to our investigative podcast Innovated: Blockchain City.