Chamath Palihapitiya views Bitcoin as financial doomsday insurance.
The 43-year-old billionaire, venture capitalist and chairman of spaceflight company Virgin Galactic says on the Unchained Podcast that investors should apportion 1% of their portfolio to BTC and hope it never pays off.
“I just think that if people have been hard working, with their heads down, they should have an opportunity to make sure that they don’t get wiped out if the government itself just continues to make a string of bad decisions that then have rising consequences. And Bitcoin, to me, is the only thing that I’ve seen so far that is really fundamentally uncorrelated to that decision-making process and to that decision-making body. Because at the end of the day, any other asset class – equities, debt, real estate, commodities – they’re all tightly, tightly coupled to a legislative framework and an interconnectedness in the financial markets that brings together many of the governments that are sort of behaving this way.
And so it’s almost like a bet against the ruling class in some ways, and making sure that you have a small amount of insurance… Insurance is something that pays off 1,000 bucks to a buck. You want these massive, massive asymmetric payoffs, because you want to be sure that a small amount of insurance can basically make you whole. And that’s why I think that you should just take 1% of your portfolio, put it in Bitcoin, never look at it… and hope that that 1% goes to zero.”
Palihapitiya recently made headlines criticizing the US government’s coronavirus bailout. He called on lawmakers to let hedge funds and billionaires get “wiped out” instead.
The venture capitalist notes that while Bitcoin is a good hedge against traditional assets, investing in the cryptocurrency is not a strategy that will pay off due to a single event or moment in time.
Rather, he says Bitcoin’s success will rely on the sum of many bad decisions by governments, an outcome he says no one should want to happen.
“If your Bitcoin bet pays off, it will be cataclysmically destructive for the world. And that’ll have enormous consequences to many people we all know and care about who weren’t hedged in Bitcoin. And so you almost don’t want it to happen.”
Palihapitiya doesn’t really see any other path to Bitcoin’s success other than that complete financial breakdown. He believes there are much easier-to-use products that will serve as virtual payment mechanisms.
He also says his first investment in Bitcoin was a purchase of 1 million BTC back in 2010, when the cryptocurrency was valued at around $80. Today, that sum is worth more than $9 billion.
“There’s a well-known person in the Bitcoin ecosystem. His name is Wences Casares. He was the one that introduced it to me in 2010, and we were actually going to Las Vegas for his 40th birthday. And that’s when he pitched me on it. And I remember landing three days later, and I called my family office and said, ‘Buy a million Bitcoin.’ That’s how I started. It was $80 or something at the time. And it just sounded kind of really interesting.
But then it took me a few years to really understand it. I didn’t totally understand all of the mechanics of it and, to be honest with you, I’ve forgotten most of the mechanics now. I studied it… I made an underwriting decision to buy and to never think about it again. And, by and large, I’ve never thought about it again.
I remember my family office flipped out when Bitcoin was $20,000 a coin, they were like, ‘Uhhh,’ and I was like ‘Guys, don’t tell me, I don’t wanna know. Just take it off the balance sheet, don’t ever look at it, keep it at the cost, and don’t get psychologically affected by this number.'”