Chamath Palihapitiya, who is a former Facebook executive and currently the CEO of Social Capital, was interviewed on CNBC’s Squawk Box this morning. During the middle part of the discussion, Palihapitiya was asked for an update on his views regarding Bitcoin, which he has been talking about publicly for at least seven years.
Palihapitiya ended up sharing his thoughts on how the U.S. presidential election will (or won’t) affect monetary policy, how bitcoin is a hedge despite its recent correlation to traditional assets, and the Winklevoss twins’ theory regarding Elon Musk eventually crashing the price of gold by mining the precious metal on asteroids in space.
The first question that was posed to Palihapitiya on Squawk Box was about U.S. President Donald Trump’s bout with COVID-19. During the end of his response, the former Facebook executive noted that the market has seemed to go up no matter what the news has been around Trump, COVID-19, or anything else lately.
“I think what it really means is that, for the next four or five years, the most dominant factor that I see is a combination of [the U.S. Treasury Department] and the Federal Reserve,” said Palihapitiya. “The reality is that they have printed so much money that the likelihood is that we’re going to continue to see asset price inflation independent of who’s in the White House.”
Another billionaire investor, Bridgewater Associates founder Ray Dalio, recently shared a similar sentiment with Bloomberg regarding the problem of too many new U.S. dollars being created, going as far as to say the U.S. dollar’s global reserve currency status is under threat.
Later in Palihapitiya’s interview with Squawk Box, co-host Andrew Ross Sorkin asked the Social Capital CEO about bitcoin’s supposed use as an uncorrelated asset because it has recently been moving in tandem with traditional stock markets.
Palihapitiya responded by maintaining his long-held position that bitcoin is a hedge against the current financial system controlled by central banks and large financial institutions around the world, and he does not view the crypto asset as something that should be traded on a short-term basis.
“The reality is it’s fundamentally not [correlated with traditional markets] because it is underpinned by a set of beliefs that are completely orthogonal to the orthodoxy that runs the world today, and it is completely the inverse of how the financial infrastructure of the world operates,” said Palihapitiya. “So, from my perspective, I still think that what I talked about sort of eight or nine years ago still holds, which is as a one-percent hedge in our portfolio. I think of this as the insurance policy I use to sleep soundly at night, just in case the central banks and governments of the world step on a land mine.”
Palihapitiya added that people who treat bitcoin like it’s a traditional stock will become more frustrated over time.
“You buy it, you hold it, you put it away, and honestly, I think you hope that you never need it because the amount of actual chaos that will drive bitcoin appreciation is not something we actually really want to see,” Palihapitiya later added. “Now, that being said, if it does happen, I think it will create an enormous power redistribution, and it will push power, it will push financial accessibility to the edges, to billions and billions of people. And in that, I think there’s something to be really proud and excited about.”
Palihapitiya was also asked for his opinion on the meme that Elon Musk will eventually crash the price of gold by flying rockets into space and bringing back large amounts of the precious metal after mining them from asteroids. This idea gained popularity after it was touted by the Winklevoss Twins during a public conversation they had with Barstool Sports founder Dave Portnoy about Bitcoin.
“I have no idea what they’re talking about,” said Palihapitiya when asked about this theory. “I really wish I could give you a smart answer, but I have no idea what they’re talking about.”
When pushed further for a response, Palihapitiya pointed to a variety of issues with this hypothesis.
“There’s a couple of problems,” said Palihapitiya. “One is called the rocket equation. You know, there’s a small problem of getting onto the asteroid, mining [the gold], generating enough energy to come back, [and] bringing back all of these wonderful riches that you find there. I mean, I hope it happens.”