Venture capitalist and angel investor Tim Draper predicted on 12 April that the Bitcoin price would reach US$250,000 by 2022. He announced his prediction at a ‘block (chain) party’ organized at Draper University. He founded the institution, located in San Mateo, California, to train entrepreneurs.
Draper is a Silicon Valley investor who is one of the staunchest Bitcoin supporters among mainstream venture capitalists and angel investors. He has invested in cryptocurrencies, tokens and blockchain-related startups. Could his latest price prediction come true?
What makes Draper interesting to Bitcoin enthusiasts is his so far accurate predictions of the digital currency’s price moves.
His most notable prediction came in a 2015 interview with Fox News. The Bitcoin price then sat at around US$200 and looked like it could fall further. He announced that he believed it would hit US$10,000 by 2018. Most people, including many Bitcoin enthusiasts, didn’t believe it would happen. But Draper affirmed his conviction by betting US$400,000 on the price rebound.
The prediction came true in late 2017 when the price crossed US$10,000 and then approached US$20,000.
After witnessing such accuracy, many have since asked him to make a new prediction. Due to such requests, he organized the 12 April party at Draper University.
This time around, he picked an even more seemingly unattainable figure of US$250K by 2022. He also expressed the view that within the next five years, cryptocurrencies would go fully mainstream and the use of fiat would become an oddity.
His latest prediction comes at a time when Bitcoin has struggled to cross the US$10,000 threshold again after pulling back to about US$6,000 in March.
Forces driving the price
Several factors may work in Tim Draper’s favour and deliver his greatest Bitcoin prediction so far. Almost all involve either increasing demand or decreasing supply, creating the right economic conditions for an astronomical rise in price.
Driving the demand side is the growing awareness and adoption of Bitcoin. Growing numbers of individual developers, startups, mainstream companies and public institutions are investing time, skills and capital to discover and build blockchain and cryptocurrency-related solutions.
Their efforts will introduce more people to cryptocurrencies in general, and Bitcoin in particular, over the next five years. This growth will increase user base, which will translate to higher demand.
On the supply side, the number of new bitcoins coming into circulation is slated to halve sometime in the year 2020. At the moment, 12.5 new bitcoins are released into circulation in the form of mining rewards every ten minutes. This number will halve to 6.25 bitcoins per the protocol that guides the cryptocurrency.
A halving occurs every four years. The last halving that happened in 2016 is often given as one of the reasons that it jumped from below US$200 in 2015 to US$19,000 in late 2017.
The coming 2020 halving, coupled with an increase in demand, could drive the price towards the US$250,000 mark.
How invested is Tim Draper?
In a June 2014 public auction, Draper bought 30,000 bitcoins from a stash the US Marshals Service had seized from the Silk Road darknet marketplace a year earlier. He has disclosed that he also owns altcoins, including Ether.
With the proliferation of initial coin offerings (ICOs), Draper has been reported to have bought the tokens of several blockchain projects, including Tezos and Bancor. Blockchain startups that he has an investment stake in include the exchange service Coinbase, the hardware wallet manufacturer Ledger, and data storage platform Factom.
Tim Draper’s venture successes outside of blockchain include household brands such as Skype, Baidu, Tesla, Hotmail and Twitch. He invests in these companies primarily through his venture firms Draper Associates (founded in 1985) and Draper Fisher Jurvetson (DFJ).
Others besides Draper have predicted a soaring Bitcoin price. In January, Saxo Bank analyst Kay Van-Petersen has predicted Bitcoin will cross new all-time highs of between US$50,000 and US$100,000 before the end of 2018. Van-Petersen is also among those who previously predicted we would see US$10,000 before we reached 2018.
John McAfee has given an even more ambitious prediction. The founder of the company behind the McAfee antivirus software believes the price of Bitcoin will hit US$1 million by 2020. His previous prediction was US$5,000 by the end of 2017.
It is important to understand that Tim Draper’s forecast could be biased, considering that he has skin in the game, as does McAfee and others who have predicted high prices. If you choose to make personal investment decisions regarding buying Bitcoin, you may want to take into account factors other than their words alone.