The Silicon Valley hype machine has gone full on crypto crazy.

The tech industry has a long history of overhyping technology that’s not ready for primetime, but you don’t often see overly opportunistic VCs shilling for fanatical founders.

Then there’s Tim Draper.

The famed venture capitalist is excited about cryptocurrency. How excited is he? Apparently really, really excited. “This is the most excited I’ve ever been as an investor,” Draper said, “and I was right there at the beginning of the internet.”

In a recent CNBC interview Draper declared crypto and bitcoin to be “the biggest thing that’s ever happened to the world,” he said, “bigger than the ice … the iron age and the bronze age and the internet age.”

Take a deep breath there, Tim.

Keep in mind, this is the same Tim Draper who was the first investor in Theranos – the same guy who fully supported CEO Elizabeth Holmes and her company even after they were shut down by federal regulators and forced to void thousands of bad blood tests.

Never mind that the SEC today charged Theranos and Holmes with “massive fraud,” stripping the founder of control of the company for duping investors out of more than $700 million.

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None of that seems to bug Draper; the third generation VC has already moved on from tiny needles to the next big thing, block chain currency.

Draper predicts the end of government-backed “fiat” currency like the U.S. dollar. “In five years you’re going to walk in and try to pay fiat for a Starbucks coffee, and the barista is going to laugh at you,” he said, “They’re not going to use fiat. Five years from now, none us of will be.”

Yes indeed, Draper has left Silicon Valley and arrived in Crazy Town.

He also believes that block chain currency will “open up” the world and enable each of us to “choose the government that’s right for us” like any other service. I don’t know exactly what that means, but it sounds way too utopian for me.

If you watch Draper’s breathless CNBC interview you’re bound to think he isn’t just breathing his own fumes but maybe even a little loony or at least on something you and I can’t get over the counter at the pharmacy.

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Then you find out that three years ago he predicted bitcoin would hit $10,000 in three years. On FOX Business, no less. He may have been right about that but he is not right about it replacing the U.S. dollar. Not in five years. Not ever.

In all fairness, it is a VC’s job to make lots of bets on behalf of their limited partners, most of which are going to be wrong. That said, I like my VCs to be a lot more objective and a lot less over the top. But then, that’s just me.

Also I don’t appreciate it when billionaire elites push self-serving messages on the gullible masses that aren’t quite as savvy about the wild wild west of high-risk investments. Even greedy Google and Facebook have banned cryptocurrency ads. Draper should take note.

As for the “and I was right there at the beginning of the internet” claim, whatever that means, that and CNBC calling Draper an “early internet investor” is, in my view, more hype. Early investments in Hotmail and Skype don’t qualify, nor do late investments in Tumblr and Twitter, IMO.

Image credit Wayne Williamson via Flickr

  • David Stringfellow

    Steve, I see that you are not putting yourself in the crypto fanatic category. But where do you stand on crypto in general? Do you think it will be a viable supplement for people such as the unbanked and perhaps others from third world countries which have no fiat system in place?

    • Steve Tobak

      Excellent question, David. I wrote this a couple of years ago: https://www.foxbusiness.com/features/is-bitcoins-wild-west-adventure-over. Not much has changed since then, really. Honestly, I don’t know what crypto’s potential is for the simple reason that, if its value/attraction is that it’s unregulated/unbacked, that by definition makes it too risky and volatile to replace fiat currency. It’s sort of the anti-fiat currency. So it remains useful for black marketers, speculators, doomsday preppers and, as you say, those from nations with unstable monetary systems. The rest of us will stick with fiat. For that dynamic to change, crypto has to go mainstream. Time will tell if/when that happens and, if it does, what form it takes and how much of its mystique it has to give up in the process. My crystal ball sort of goes foggy after that. 🙂

      • David Stringfellow

        Full disclosure – I’ve been working in the crypto space since mid-2013, when it started as a hobby. Now it’s a true second job. I have met my fair share of “colorful characters” but have also met some brilliant and passionate people who have very legitimate and rational goals for the new technology. These are not criminals or drug dealers by any stretch, nor are they preppers. Based on a lot of research and networking, I personally believe 2018 is the year that we will see limited adoption. Perhaps in 2019 we will see mainstream adoption by retailers and later by our legacy dark-ages banking system. Call it a hunch, but the introduction of options contracts by the CME and CBOE late last year and the thoughtful scrutiny by the IRS and regulators at the CFTC earlier this year seem encouraging in this regard.