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Why would I sell the currency of the future for the currency of the past: Draper Associates Founder

Yahoo Finance’s Zack Guzman is joined by Tim Draper, Draper Associates Founder at the 2021 Bitcoin Conference in Miami.

Video Transcript

ADAM SHAPIRO: Bitcoin right now is down. It's trading at roughly-- what have we got here? $36,977 a coin. But Zack Guzman is live in Miami at Bitcoin 2021. And he's got a guest who was in early with Bitcoin when it was what you could call cheap. Zack?

ZACK GUZMAN: Yeah, thanks, Adam. Fair to say early with Bitcoin. I'm here with legendary VC and founder of Draper Associates, Tim Draper. Thanks for taking the time.

TIM DRAPER: Terrific. Thanks for having me.

ZACK GUZMAN: Yeah, good to see you again.

TIM DRAPER: Great to see you again.

ZACK GUZMAN: And you just came off the panel. It's been a busy day here at the conference, but a lot of talk right now about where we're at in the adoption cycle here. We don't like talking about price targets so much. But yours is up there. So I'd like to open with that. 250--

TIM DRAPER: Mine's starting to get conservative. 250K by the end of '22 or the beginning of 2023. And my thinking is that, at that point, people are going to realize that there is a better currency. They'll start being able to spend it, maybe with Open Node at retail. They'll be able to buy groceries with it. And at that point, it's going to soar because why would you ever hold on to a currency that is fiat when you can hold one that's crypto that does everything else that the fiat does?

ZACK GUZMAN: Yeah. That's always one of the interesting things because it seems like you've had that price target for a while. You've been looking for 250,000. And it sounds like you were surprised that other things hadn't come along to knock Bitcoin off its track. And that's kind of, I guess, one of the staying power and one of the beliefs is--

TIM DRAPER: Well, I've always known that it was going to be very volatile relative to the dollar. In some ways, you could argue that the dollar is very volatile against Bitcoin, as it slowly works its way out of our lives and out of the system. But for now, yeah, it seems very volatile.

But every big change in the world, every transformation goes through fits and starts. And we expect plenty more to come, although I think the amplitude of the vicissitudes are going to be smaller.

ZACK GUZMAN: Yeah. Less volatile. And we're already kind of seeing that as we're sitting here in this range-bound $30,000 range.

Well, let's talk about sustainability because that's one of those things that we've heard issues among institutional investors. Kevin O'Leary was talking about it potentially being a problem. And then we saw Elon Musk come out.

As a VC, I mean, what do you look at that as maybe an issue that could be overblown. What are your thoughts on whether or not it is?

TIM DRAPER: So I think institutional investors, they've been operating in dollars for a very long time. And they're thinking, oh, this has always been our safe haven. Everything's been safe. Well, now they're seeing big, rampant inflation coming. They're seeing people with a little less confidence in the dollar. They're seeing threats from digital yuan or whatever.

But what they're starting to realize is, as fiduciaries, they really need to get some Bitcoin so that they have some sort of a hedge against the inflation that's coming.

ZACK GUZMAN: Yeah.

TIM DRAPER: And many fiduciaries are starting to recognize that. But some will come in and go out. And they'll get political pressures or whatever pressures to leave the system or come back into the system. But longer-term, we all know that it's just better currency. And eventually, the customer is going to recognize that it's just better currency to operate with a currency that is completely free and open and completely trusted.

ZACK GUZMAN: So it sounds like you also-- kind of in the other camp, right? We've heard from Kevin O'Leary talking about-- I don't know-- that he wants to be certain his coins aren't blood coins, as he calls them, ones from China. A lot of yours came from the Silk Road, Ross Ulbricht when you won that auction over Bitcoin.

TIM DRAPER: Yeah, free Ross. Let's get him out of jail. I mean, the guy's an amazing entrepreneur. We need more entrepreneurs.

ZACK GUZMAN: Really? That's the way you look at it?

TIM DRAPER: We need the world to have people who are out there, willing to take risks and try things. And when you start putting too many regulations on people, put them in too small a box once the government controls everybody, you don't have that freedom. And you end up more like North Korea than South Korea.

You end up with the government control and abject poverty and a miserable lifestyle instead of free and open and transparent world.

ZACK GUZMAN: I mean, obviously, there are problems with Silk Road in terms of what they were selling, maybe not necessarily the transactional currency they chose, Bitcoin. But when it--

TIM DRAPER: It was a platform.

ZACK GUZMAN: When it comes to that, I mean, are there issues around-- it sounds like you wouldn't care where your Bitcoin came from, obviously, if you got in the Silk Road. Some people would look at that as dirty Bitcoin. But you--

TIM DRAPER: I bought the Bitcoin from the US Marshal's Office. What are you talking about?

ZACK GUZMAN: Well that's the thing.

TIM DRAPER: Where do you get your-- aren't you in the media? Where do you get your facts?

ZACK GUZMAN: No, no. I'm saying--

TIM DRAPER: I bought that from the US Marshal's Office.

ZACK GUZMAN: No, no, for sure. I'm saying that that's the right way to go. And I'm saying that there's probably no distinction between dirty Bitcoin or clean Bitcoin or whatever, right?

TIM DRAPER: Wait. I don't know what you're talking about. Bitcoin is Bitcoin. And it is an extraordinary new currency.

ZACK GUZMAN: Yeah

TIM DRAPER: And I don't know where you come up with this weird thought of it.

ZACK GUZMAN: No, it's not my thought. Kevin O'Leary was talking about it matters now when institutional investors are getting into this space. They care where the Bitcoin comes from, whether it's a Chinese miner or a US miner.

TIM DRAPER: Mine has just gone from one place to me.

ZACK GUZMAN: Yeah.

TIM DRAPER: So they know exactly where my Bitcoin has come from.

ZACK GUZMAN: Yeah.

TIM DRAPER: Mine is probably-- if I were-- if I were-- I'm never going to sell it because why would I? What would I sell it into?

ZACK GUZMAN: Listen, let's just be clear--

TIM DRAPER: Why would I sell the currency of the future into the currency of the past?

ZACK GUZMAN: You and I are in the same boat here.

TIM DRAPER: It's like taking euros and buying drachma with it.

ZACK GUZMAN: Well, you guys are the same-- you and I are in the same boat. I mean, I'm on the same page, where it seems like there is a little bit of an overblown take in terms--

TIM DRAPER: I think Kevin's right. People are going to say, wait, this is a better asset class than fiat cash.

ZACK GUZMAN: Well, same thing like-- if you're saying, oh, I want to be in cash, no one asks you where your cash came from, right?

TIM DRAPER: That's interesting. But now, I mean, really, the criminal element has all gone to cash. They don't want to use Bitcoin because there's a perfect record of everything that happens on the blockchain.

ZACK GUZMAN: Exactly.

TIM DRAPER: Yeah. So that's what's kind of beautiful about the blockchain. You can see, actually, where your currency has come from. And that's good because you can have NFTs. You can have a lot of these technology that allow for people to have a complete thread to where things came from. That'll matter when you're buying your organic salad or whatever.

ZACK GUZMAN: Yeah. And you want to be more sustainable.

TIM DRAPER: Yeah. Because you'll have this path. And that path will come from the Bitcoin blockchain. Very exciting.

ZACK GUZMAN: To wrap up, I mean, when you think about that, it sounds like we're in agreement that there might be some overblown risks when people look at risks to the adoption cycle. Are there other ones that stand out to you as maybe one that could knock it off of hitting that $250 or $250,000 price target that you see?

TIM DRAPER: The other cryptocurrencies.

ZACK GUZMAN: Potentially that.

TIM DRAPER: There are always new technologies that come along. But I do feel like we've standardized on Bitcoin. There's a lot of trading and whatever in other currencies, cryptocurrencies.

ZACK GUZMAN: Yeah.

TIM DRAPER: But I think the-- I mean, you see from this incredible conference--

ZACK GUZMAN: Exactly.

TIM DRAPER: --that Bitcoin is really the standard. And that is where most of us are going to go. But it's always great to have competition.

ZACK GUZMAN: Yeah.

TIM DRAPER: It's always great to have entrepreneurs doing interesting things with the new technologies that are out there. And if they're wild and interesting enough, then we'll back them at Draper Associates.

ZACK GUZMAN: So I mean, is there one other than Bitcoin? I know you're in a Bitcoin tie. I know we're at a Bitcoin conference. I know it's maybe uncouth to ask it about other projects that you're really into right now.

TIM DRAPER: Well, I love the ones that are taking, first, that have really brilliant teams behind them and are taking a new approach at something. So Aragon is this really interesting token that's built-- they're starting with juries. And they're reforming what the nature of a jury is. And that could actually lead us to a liquid democracy, which takes humanity to another level.

ZACK GUZMAN: Yeah.

TIM DRAPER: I mean, all of a sudden, we've gone from being tribal to being global. And we've got a new governing system that's much more democratic.

ZACK GUZMAN: What about Ethereum too? That's another one where some people might say it'll always be-- I don't want to keep quoting Kevin O'Leary here. But it's one thing that he pointed to at the conference that says Ethereum will always be silver to Bitcoin's gold.

You're wearing a Bitcoin tie. But you also appreciate new technology.

TIM DRAPER: I look at Bitcoin as the Amazon. And I look at all the other currencies as the other e-commerce companies.

ZACK GUZMAN: So your advice, maybe, to investors would be, take a chance, but not necessarily as big a chance on those. If you're building a portfolio, if people are looking at as--

TIM DRAPER: People do. They have a nice portfolio of different tokens. A lot of them are just copies of Bitcoin. And I don't think that's worth it.

ZACK GUZMAN: Yeah.

TIM DRAPER: Unless they've got something else--

ZACK GUZMAN: Not a big Dogecoin guy then, I suppose?

TIM DRAPER: Yeah.

ZACK GUZMAN: You're not in a Dogecoin tie for a reason.

TIM DRAPER: No. Although, it's kind of interesting. Dogecoin has sort of taken the imaginations of people a little. But as I talked to my Uber drivers and stuff, they say things, like, oh, yeah, Dogecoin because it's cheaper than Bitcoin. But they're not realizing that they can buy--

ZACK GUZMAN: A fractional piece of Satoshis--

TIM DRAPER: They can buy some Satoshis rather than buying this Dogecoin that has no support-- I mean, no engineering support to it.

ZACK GUZMAN: It's one of the biggest misconceptions, I think, out there is that you can buy pieces.

TIM DRAPER: I think you want to go where the ones that have good engineering support.

ZACK GUZMAN: Yeah. That's an important takeaway here. And it's important coming from you too, legendary VC here, Tim Draper, founder of Draper Associates. Appreciate you stopping by here and talking to us.

TIM DRAPER: Great, my pleasure. It's a great conference. People.

ZACK GUZMAN: Got to come out here.

TIM DRAPER: We're into the free country of Miami here.

ZACK GUZMAN: That's right. And we've got to put our fanny packs back on too. But Tim, appreciate it always. Love chatting. Guys, we'll send it back to you in the studio.