Sunday 18 November 2018

The rise of the Bitcoin Billionaire: how cryptocurrencies are toppling the super rich

Cameron and Tyler Winklevoss
Cameron and Tyler Winklevoss

Joe Shute

The North American Bitcoin Conference opens in Miami next week and guest speaker Jeremy Gardner has a lot of yacht parties to attend.

So many, he jokes, that he may have to buy his own vessel to sail between them.

Despite being several weeks shy of his 26th birthday, this is no idle threat. Since first investing in cryptocurrencies in 2013, Gardner, who dropped out of the University of Michigan, has made millions through the likes of Bitcoin, Ethereum and Ripple.

In a few months Augur, the cryptocurrency-based platform he launched five years ago, which enables investors to predict the market, goes live. Already, he says, the total market value of all its tokens has reached $1.2bn.

“The past year has been insane,” Gardner says. “There’s a general sense of euphoria. Tens of thousands of millionaires have been minted practically overnight.”

There have been wobbles this week, with the South Korean government announcing on Thursday that it plans to ban cryptocurrency trading - sending the price of Bitcoin plummeting by 21pc in a few hours.

But as the new masters of the universe gather in Miami, it is in the knowledge that by the end of 2018, the total market value of cryptocurrencies could nearly double to hit $1 trillion.

For the uninitiated, cryptocurrencies – the first of which, Bitcoin, was released in 2009 - are entirely virtual tokens which are traded around the world and converted into real life money. Anyone can start one; at present some 1,000 varieties are listed.

Read more: The world of payments is changing and Ireland has the ability to lead the way - Visa Ireland chief Philip Konopik

Whether or not this proves to be the bubble analysts fear, the new digital gold rush is currently making investors very rich and catapulting some unfamiliar names into the pantheon of global money.

Last week it was the turn of Chris Larsen, a hitherto unknown (outside of tech circles) co-founder and co-chairman of a cryptocurrency called Ripple, who briefly found himself above Facebook founder Mark Zuckerberg in fifth place on the Forbes list of the world’s richest people with a net worth of $59.9bn.

It was not long before the value of his coin slipped and Larsen, who was born in 1960 and whose wife owned a cafe in Berkeley, California, just over a decade ago, fell back down the rankings.

Cryptocurrencies are a capricious game. Last month Australian investor James Gilbert, chief executive of the Malibu-based Crypto Co, became a billionaire for just 45 minutes.

But despite this seesaw nature of the investments, Gardner estimates the number of crypto billionaires could at present stretch into double figures – and is only heading upwards.

“It’s one of the most liquid financial markets we have ever seen,” he says. “I can easily sell millions of dollars of cryptocurrency in an instant.”

Actually pinning down who these billionaires are, however, remains tricky. Cryptocurrencies allow money to flow anonymously; it is why they prove so irresistible to the criminal underworld.

The Winklevoss twins – as revealed by the Sunday Telegraph last month – are the highest profile backers to cross the $1bn threshold. The pair, who attended Harvard with Mark Zuckerberg, won a $65m payout from Facebook in 2008 after launching legal action claiming he stole their idea and invested $11m of the proceeds in Bitcoin.

The 36-year-olds, known as the Winklevii, are regulars on the New York social scene and have been photographed dating a string of glamorous models. Just before Christmas they cut up the key to their Bitcoin fortune and secured each piece in bank vaults across America.

Then there is the Bitcoin founder, known as Satoshi Nakamoto, who is worth billions - though his identity has never been disclosed. One prevailing school of thought believes Nakamoto is in fact a collective of investors, although that too remains unproven.

Other names regularly touted as potential billionaires include Joe Lubin, co-founder of Ethereum, and Roger Ver, the so-called “Bitcoin Jesus” who renounced his US citizenship and now lives in Japan.

In December 2016 the now 38-year-old Ver posted a video online standing next to an acid yellow Lamborghini, urging would be investors to keep buying Bitcoin. The video finished with a slogan flashing across the screen: ‘old money is stuck in the past. New money gets better every day.’

However such conspicuous displays of wealth are rare among the original cryptocurrency investors.

Read more: The Big Tech Show: Bitcoin or bust

One reason, believes Garrick Hileman, a leading cryptocurrency lecturer and researcher at Cambridge University and the London School of Economics, is the fear of being targeted by organised crime gangs for their wealth.

On Boxing Day, a senior analyst at a UK-registered cryptocurrency exchange was kidnapped in Ukraine. He was released unharmed days later after a $1m ransom was paid in Bitcoin.

“The well documented anonymity of the currency makes it an ideal target for criminals,” says Hileman. “A lot of people are genuinely concerned about security and trying to be as inconspicuous as possible.”

Then there is the fact that cryptocurrencies were founded on libertarian ideals of bypassing banks and government institutions in the wake of the financial crash. Many of those who have profited from the start insist still they are not motivated by simply amassing money, rather than changing its very nature.

A few weeks ago the other Ethereum co-founder Vitalik Buterin, who is just 23, warned he would pull out of the project unless people stopped posting boastful photographs of super cars online.

“Need to differentiate between getting hundreds of billions of dollars of digital paper wealth sloshing around and actually achieving something meaningful for society,” he wrote on Twitter.

Gardner agrees. He still lives in a shared house in Silicon Valley, known as the “Crypto Castle,” and estimates he pays around $1000 a month on rent. Apart from treating his friends to slap up dinners and nights out, he says he rarely splashes his money around.

While admittedly he is regularly flown around the world on expensive trips, he only actually paid for his first ever business class flight a few weeks ago for a holiday to Bali - and only because he was suffering from a bad back.

“I’m OK if my net worth goes down 90 per cent tomorrow,” he says. “It’s just not what I do this for. The money doesn’t change who I am or how I conduct my life.”

But the newer investors in cryptocurrencies are far less likely to adhere to such ideals.

Where once online discussion boards centred around anti-bank and government rhetoric, now it is price valuation, property and investing

Eleesa Dadiani, a 29-year-old descendant of Georgian nobility who owns a Mayfair gallery, has recently established herself as a broker selling luxury goods in cryptocurrency. “Anything from Crown Estate properties to rare cars to precious stones”, she says.

Last summer she sold seven pieces including a gold sculpture of a Ferrari exhaust worth £25,000 in Bitcoin, and two other silver versions to buyers in Britain, Canada and Russia.

She is about to secure a £4m sale of four Formula One cars to a Chinese buyer paying in Litecoin.

“I believe in the crypto economy,” she says. “I don’t believe only a select number of people should have access to serious money.”

Will these Crypto billionaires one day overtake the traditional Silicon Valley giants in the rich list for good?

Tim Draper, a Silicon Valley venture capitalist who in 2014 won the auction for 30,000 Bitcoin seized by US Marshalls from the criminal underworld, has one simple answer: “yes”. 

A new clutch of billionaires is on the make. And in the process, the old world order may well be turned on its head.

Telegraph.co.uk

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