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When a successful, well-known venture capitalist like Tim Draper is investing in Bitcoin with some $18 million of his own money, you know he must have a really good reason.
Draper was the sole winner of the 29,656 bitcoins auctioned off June 27 by the U.S. Marshals Service. Those bitcoins had been seized by the federal authorities that shut down the notorious Silk Road website last fall.
He beat out 44 other registered bidders of an impressive group that included SecondMarket's Barry Silbert, the Winklevoss twins, CoinBase, and Pantera Bitcoin.
The winning bid has not been disclosed, but the stash was worth about $17 million on the day of the auction, when the Bitcoin price was about $570.
Since Draper won all the bitcoins, he almost certainly bid above that price. A relatively conservative bid of $600 would have cost Draper a cool $18 million. Today (Wednesday) the Bitcoin price is about $622, making the stash worth about $18.4 million.
But Draper, a founding partner of Draper Fisher Jurvetson, isn't worried about such day-to-day fluctuations; he says he's investing in Bitcoin because of its potential to disrupt the financial world.
Bitcoin Will Be as Transformative as the Internet
"I think Bitcoin is as big a transformation to the finance and commerce industry as the Internet was for information and communications," Draper told FOX Business on Tuesday. "I'm very excited about Bitcoin and what it can do for the world. It's going to open up the world in an even bigger way than the Internet did."
Such talk echoes what other prominent Bitcoin venture capitalists have been saying, most notably Marc Andreessen, a co-founder of Netscape and a partner with Andreessen Horowitz.
And like Andreessen, what Draper says and does carries a lot of weight in venture capital circles.
He's been a venture capitalist for 28 years, having learned the ropes from his father and grandfather, William Draper, who is considered the tech industry's very first venture capitalist. (Tim's son, Adam, is also a venture capitalist.)
And over the years he's built up a very impressive track record, having invested in Skype, Hotmail, Box, SolarCity Corp. (Nasdaq: SCTY), Tesla Motors Inc. (Nasdaq: TSLA) and Chinese search engine company Baidu Inc. (Nasdaq: BIDU), just to name a few.
Now that Draper is investing in Bitcoin - and not just through his venture capital firm, but with his own money - it's a good indication that the digital currency will make its mark on the tech world as did many of his other investments.
And as one might expect, Draper has some very specific plans for his new investment in Bitcoin - and it's not the usual payment processors or Bitcoin mining companies you would assume.
Why Draper Is Investing in Bitcoin Now
One of the uses of Bitcoin that Draper is most excited about is how it could help people in emerging markets.
"Bitcoin is a great alternative for some of these economies where inflation really saps the strength of a country's economy," Draper told CNBC on Monday. "I expect Pagos in Argentina, Pagatech in Africa, and in Mexico, Coincove - all these [Bitcoin] companies will really thrive because people in those countries are not as confident in their own governments' fiat currency."
Putting his venture capital where his mouth is, Draper has invested in Pagatech through another of his VC firms, Draper Associates.
And in May Draper was part of a group that invested $4 million in a startup called Vaurum, a company designed to facilitate the use of Bitcoin by financial institutions, particularly in emerging markets.
"With the help of Vaurum and this newly purchased Bitcoin, we expect to be able to create new services that can provide liquidity and confidence to markets that have been hamstrung by weak currencies," Draper said in a statement.
Basically, Draper is planning to use his investment in Bitcoin to help jump-start the revolution in finance that he envisions.
"It's money that can now be put to good use," Draper told the Financial Times. "A lot of people are hoarding their Bitcoins. I can allow it to proliferate throughout the world. This is a long-term, big opportunity for the world."
UP NEXT: Some are wary about investing in Bitcoin because of the sometimes wild price gyrations. There's no doubt that's true, but with Bitcoin -- as with the stock market -- a long-term view can help put such volatility into perspective. These two charts show why the Bitcoin price will soon start to accelerate to the upside...
- Financial Times: Draper to Use Bitcoin Hoard to Fund New Marketplace
- FOX Business: Why Tim Draper Bought All Those Bitcoins
- CNBC: Why VC Tim Draper Bought All Those Bitcoins
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.