Peter Thiel’s fund wound down 8-year Bitcoin bet before market crash

It's weird to think that they "generated" 1.8bn. If I made 1.8bn selling sandwiches, you could probably find evidence of it somewhere, like in product packaging in dumps. But here the only thing left behind is a bunch of guys going "Yeah I left my position open and drained my life savings by accident."

Like, every bit of that money represents money that someone else lost, and basically nothing else. I can't wrap my head around it.

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In Feb 2022, when I saw crypto ads during the Super Bowl, it seemed like a warning sign that something was about to go bad and the existing players were looking for suckers.

Here's the google cache:

https://webcache.googleusercontent.com/search?q=cache:8E9sp-...

First, bubbles typically uncover something revolutionary but because of the hype and hoopla, leverage, and endless promotion, the markets overshoot what is possible currently to a ridiculous extent and most lose huge sums of money. In the aftermath where once the sky was the limit everyone swears the idea off and leaves it for dead.

An example: the Florida land boom of the 1920's. This is one of the wildest stories that many people who live in Florida don't even know about. They don't realize that nearly all of Florida was developed within the past 100 years and that major cities like Miami, Boca Raton, West Palm Beach, and on up the coast were created during this boom basically out of thin air by speculators. Throughout there were shameless promotions including one orchestrated by Charles Ponzi after he was released from prison as well as the creation of South Beach, the founder of whom ended up losing everything after spending huge amounts on land plots and promotional advertising. Anyone studying that era will see amazing similarities to the crypto bubble.

But the interesting part of that story is that those who were engaged in land speculation in Florida were absolutely correct in seeing the potential for the area as were the rest of the promoters and speculators of which there were many. But the population and development of the time just wasn't enough to keep up with the spend at the time. Essentially they were early.

With crypto, it was pretty much ignored until it wasn't. Then it hit a critical mass and the promoters seeing an opportunity to grift, came out of the woodwork. Once it hit a critical mass in price, people started to believe the hype and retrofitted use cases to it. Then after it crashed, most said "see I knew it was a stupid idea." Jamie Dimon was saying this as recently as this morning on CNBC.

This is the second part of the story that's interesting. Many people argue "crypto has no tangible value, it's just fake money." Well, that may be true but those same people take as self evident that things like gold, Monet and Van Gogh paintings, and tons of other things that arguably have no tangible value are worth vast sums of money. It's all subjective.

The bottom line is that things are worth what groups of people believe they are worth at a given time. This is a very difficult concept for most to wrap their minds around because it seems counterintuitive. Amazon stock is clearly worth $2 trillion because it's a massive company built by a forward-thinking genius. But when it was worth a few billion most thought it was too expensive. At each point in time the price wasn't right or wrong, it just reflected what people agreed it was worth.

With cryptos they aren't inherently valuable or worthless, they are worth something if there is at least one person who is willing to pay for it, regardless of how stupid you think it is.

So I would not be that surprised to one day see cryptos reemerge with new and better and clearer use cases which in hindsight will seem obvious but still very few will have capitalized on them. I'm not inherently bullish on crypto either. I've never owned any. But I also have been around enough to know that the crowd is smarter than I am and just because it seems stupid that something is happening in the market does not make it wrong. The fact that even now the price is over $20k is somewhat telling that the popular narrative is in complete disagreement with the fundamentals.

It is always a good idea to use a heavy doze of skepticism when confronted with statements about someone's brilliance at market timing. Especially when those statements are not backed by any evidence. Peter Thiel previously had to disclose more of his trading and, other than his decision to put half a million in a tiny startup called facebook made a long time ago, he has not shown any brilliant market timing.