Cryptocurrencies Set to Overtake Fiat Currency in Five Years: Tim Draper

Venture capital investor Tim Draper has planted himself firmly in the crypto camp with a series of bullish predictions about the future of digital currencies. Fiat currency, meanwhile, is set to become obsolete, according to Draper.

“In five years, if you try to use fiat currency they will laugh at you. Bitcoin and other cryptocurrencies will be so relevant ... there will be no reason to have the fiat currencies.”

Having led investments in Twitter, Skype and Tesla, Draper has now singled out Bitcoin and cryptocurrencies as the next big thing.

While Bitcoin might be the biggest cryptocurrency on the market, with a market cap of around $120 million, it is still dwarfed by fiat currency’s $2 trillion value. However, Bitcoin is on a rapid rise, having increased sevenfold in value since the start of 2017.

Draper is personally aware of the digital currency’s potential – in 2014, he bought 30,000 Bitcoins during a government auction of seized assets, at which time they were worth less than $20 million. Now, those Bitcoins are worth close to $214 million.

Expounding on the differences between fiat and digital currencies, Draper pointed out that the value of fiat currencies is bound by country borders; e.g. Nigeria’s Naira drops 30% in value outside the country’s border. The U.S. dollar and the Euro fare much better on a worldwide scale; however, there is always the problem of losing at least 1.4% in value when switching from any other currency to the U.S. dollar or the Euro.

Cryptocurrencies, however, do not pose any such problems, and are far more fixed and reliable stores of value.

“They’re all going to interrelate … and there will be exchange rates for all of them. My guess is that it will centralize around a wallet that you have, and when you pay for that Starbucks, your wallet will optimize to whichever currency has most value.”

While it seems unlikely to be this simple, Draper is a firm believer in technology and marketing’s ability to simplify the complex:

“If it doesn’t get simplified it won’t get adopted ... good marketing people will simplify all use of these things.”