Billionaire venture capitalist and entrepreneur Chamath Palihapitiya used to be one of the most bullish voices on Bitcoin (BTC). In January 2021, he had predicted that the leading cryptocurre
Billionaire venture capitalist and entrepreneur Chamath Palihapitiya used to be one of the most bullish voices on Bitcoin (BTC). In January 2021, he had predicted that the leading cryptocurrency would hit $200,000.
But over the years, he has become increasingly skeptical of the asset. When tech entrepreneur Peter Diamandis recently asked him if Bitcoin is cooked, the billionaire gave a stark answer.
Grayscale's head of research: Quantum computing is 'just another hurdle' Bitcoin will clear (3:10)After spending a few years leading advertising and growth at Facebook, Palihapitiya founded a VC firm called Social Capital in 2011.
He has launched several high-profile special-purpose acquisition companies (SPACs) as the Social Capital founder, earning the moniker "SPAC King."
A SPAC is a publicly traded shell company that is created with the sole purpose of acquiring or merging with a private company to quickly take it public.
Among the leading tech investors, Palihapitiya used to be extremely bullish on Bitcoin a few years ago.
When Bitcoin was trading around $130 in May 2013, he argued that it's "gold 2.0" and provides an "insurance" against uncertainty created by the 2008 economic crisis.
"I personally think that Bitcoin is already superior to gold."
He even recommended that it's "entirely rational" to allocate 1% of one's assets to Bitcoin, revealing he had done so.
When Warren Buffett called Bitcoin "probably rat poison squared" in 2018, Palihapitiya said that though he was a "disciple" of the veteran investor, the Berkshire Hathaway boss was wrong about the cryptocurrency.
In an interview in January 2021, he predicted that Bitcoin will eventually hit $200,000 because it's a hedge against uncertainty.
But he is not so certain about Bitcoin anymore.
In March this year, he said in a podcast that Bitcoin's inherent design could make it difficult for central banks to adopt it. The asset lacks fungibility and privacy, the two features he considers essential for central bank accumulation.
Bitcoin's transaction record is very transparent. If a coin has a history of association with criminal or sanctioned actors, it won't be treated just like any other coin and an institution could refuse to accept it, he explained. Similarly, its transparent ledger makes it very difficult for governments to keep their transactions private, he warned.
On Oct. 22, Palihapitiya appeared in the "Moonshots with Peter Diamandis" podcast in which the host asked what the billionaire thought of Bitcoin in the face of the "meteoric rise" of artificial intelligence (AI).
Palihapitiya reiterated his argument that Bitcoin's lack of fungibility stops it from being adopted by central banks.
"So, it's capped from that perspective."
Addressing the risk posed by AI, he said a bad actor could take advantage of self-improving AI models to target Bitcoin’s SHA-256 security and even hack the Bitcoin developer Satoshi Nakamoto’s wallet.
SHA-256 is a mathematical function called a cryptographic hash function that turns any digital information into a fixed-length output of 256 bits, usually shown as a 64-character hexadecimal string. But Palihapitiya warned AI hacks could break the SHA-256 function and hack Bitcoin in the future.
Not only that, the hacker can then take a short position on Bitcoin before announcing the hack and make the money twice, he expressed his concern.
It is imperative that Bitcoin should transition to quantum-secure, quantum-resistant cryptographic mechanisms but it's impossible in a community that "can't even agree where to meet," he decried.
Diamandis: "Do you think Bitcoin is cooked?"
Palihapitiya: "I just think it's capped, and then I think eventually it gets hacked and then it goes to zero."
When the host asked the investor if he owns Bitcoin, he revealed that he transferred his Bitcoin holdings to a company called the Digital Currency Group in exchange for equity.
Palihapitiya said it was much better for him to get rid of the custody and security risks than have direct crypto exposure.
BTC/USD, Source: DecibelBitcoin was exchanging hands at $81,160 at the time of writing, as per Decibel.
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