Bitcoin Soars on Report Peter Thiel Is Buying Massive Amounts

Thiel's Founders Fund bought between $15 million and $20 million in bitcoin

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Jan 03, 2018
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After starting the new year on a negative note, bitcoin soared on Tuesday when reports said that Peter Thiel's Founders Fund was making a massive bet on the cryptocurrency.

Thiel was an early investor in Facebook (FB) and is the co-founder of PayPal (PYPL).

According to a report from The Wall Street Journal, Thiel's Founders Fund bought between $15 million and $20 million in bitcoin. The venture capital firm told investors that after the virtual currency's surge in 2017, those investments are now worth hundreds of millions of dollars.

It is still unknown whether the firm has sold any of its holdings, or when Founders Fund made the decision to buy bitcoin. The firm's bitcoin investments are spread across multiple funds, including one that was launched in mid-2017, according to Business Insider.

Sources have told WSJ that the firm began investing before the recent volatility.

News of the Founders Fund's massive bet on bitcoin sent the virtual currency soaring over 13.5% to $15,000 on Tuesday.

Bitcoin was trading at around $1,000 at the start of 2017, but soared to over $20,000 at its peak. The virtual currency went from being a "fringe area of Wall Street," as WSJ calls it, to being the hottest topic in the financial world.

Concerns over cybersecurity and liquidity have kept many mainstream investors at bay. The virtual currency's most recent plunge has also scared away some investors. Just last week, South Korea warned that it would be cracking down on cryptocurrency trading. At one time, South Korea accounted for one-fourth of the global bitcoin trading activity.

On Saturday, Dennis Gartman called bitcoin "one of the silliest ideas" he had heard in a long time.

"When bitcoin falls, and it shall, it'll trade under $5,000," he said. "Whether it does it next week, next year, six months from now, it'll happen. And then I think we'll find at the margin money that had moved into bitcoin and away from gold will move away from bitcoin and into gold."

Still, investors are taking the Founders Firm's investment in bitcoin seriously. After all, the firm is one of the most successful in Silicon Valley, with more than $3 billion assets under management. Founders Firm has taken stake in over 100 companies, including Airbnb Inc., Facebook, Lyft and SpaceX. Recently, the firm has invested in Polychain Capital and Metastable Capital, two crypto-focused hedge funds that invest in blockchain companies.

Thiel said at a conference in October that people are "underestimating" bitcoin. He compared the virtual currency to gold.

"If bitcoin ends up being the cyber-equivalent of gold it has a great potential left," he said.

Bitcoin's rise on Tuesday comes after a tumble on the first day of the year. The cryptocurrency was down to $13,440 in late afternoon yesterday, extending its fall from a peak of $19,511 on Dec. 18.

The virtual currency was up 3.6% on the first day of 2017, hitting $998. Bitcoin closed the year up more than 1,300%.

The cryptocurrency's incredible surge in 2017 brought it to Wall Street as futures contracts.

Disclosure: Jacob Maslow does not have any bitcoin or cryptocurrency holdings.