Bitcoin’s plunge turns Winklevoss twins into ex-billionaires as focus turns to gold

PUBLISHED : Thursday, 18 January, 2018, 3:15am
UPDATED : Thursday, 18 January, 2018, 5:35pm

Cameron and Tyler Winklevoss, the twin brothers who became billionaires after the run-up in the price of bitcoin and other digital assets toward the end of last year, have seen their fortunes drop 37 per cent in the past month as the cryptocurrency plunged.

They are just two of thousands who have seen their net worth fall as the cryptocurrency plummeted on Wednesday to 50 per cent of the value of its mid-December peak. And while they are hopeful about the future for the digital coins, many other investors are now turning to solid gold instead.

As bitcoin dipped below US$10,000 on Wednesday, it extended a rout that has sliced US$443 million from the net worth of each of the Winklevoss Twins, leaving them with US$739 million apiece – at least on paper – according to the Bloomberg Billionaire Index.

Bitcoin dropped 10 per cent to US$9,544.09 in New York, the first time it traded below the US$10,000 threshold since December 1, according to consolidated pricing data. It peaked at US$19,511 on December 18. 

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Still, the twins may not be too concerned. They intend to hold their bitcoin for the long-term and expect it to “appreciate by 10 to 20 times its current value,” Cameron Winklevoss said in a December 8 interview with Bloomberg.

That attitude stands in sharp contrast to many sellers, who have responded to bitcoin’s wipeout by swapping digital gold for the real thing.

Bullion dealer Sharps Pixley, a subsidiary of Europe’s largest precious metal coin and bar outlet, regularly sees trades north of a million pounds, while sales of gold coins at Frankfurt-based CoinInvest jumped fivefold as the largest digital asset collapsed after surging 1,400 per cent last year, according to Director Daniel Marburger.

Emails and phones did not stand still with customers asking how they could turn their crypto into gold
Daniel Marburger of CoinInvest

“Yesterday was a hell of a crazy day,” he said from Frankfurt. “Emails and phones did not stand still with customers asking how they could turn their crypto into gold.”

The current price swings across seemingly every cryptocurrency are bringing to the fore a question that has loomed over the industry since its inception: to what extent can a virtual asset be a store of value?

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By swapping out of digital gold and into the real thing, some investors may be providing an answer.

Ross Norman, a gold dealer with a store tucked in a corner of London frequented by the upper classes, started exchanging gold for bitcoin via an intermediary three months ago.

He describes his customers as almost embarrassed by their new-found fortunes.

They often store it in safety deposit boxes in his underground vault, following extensive due-diligence to prevent money laundering.

Bitcoin is a bit of a lobster pot – it’s easy to get in, but hard to get out … [gold is] looking quite appealing right now
Ross Norman, gold dealer

“We’re seeing trades north of a million pounds [sterling] every couple of weeks,” said Norman from his shop in St James’s St. “It’s been a welcome addition to our business in a period when physical demand from more traditional sources has been subdued.”

Customers as young as 25 come in carrying laptops holding bitcoin they accumulated when it traded at US$1 or below. One, Norman said, had 1,000 bitcoin he intends to turn into physical metal. The company, owned by Degussa Goldhandel GmbH, does not take possession of bitcoin. Customers buy via an intermediary.

“Bitcoin is a bit of a lobster pot – it’s easy to get in, but hard to get out,” Norman said. “Gold also offers investors 4,000 years of history as a store of value, and that’s looking quite appealing right now.”

Lack of demand has not proved much of a headwind to gold prices in recent weeks. The yellow metal, supported by a falling dollar, rallied 7.5 per cent in the past month to a four-month high before tempering gains.

Marburger said CoinInvest sold almost 30 kilograms of gold, worth US$1.2 million in the spot market, as bitcoin dropped 23 per cent on Tuesday. One bitcoin buys about eight one-ounce Britannia gold coins, he said.

It was a similar story at GoldCore Ltd, where clients have been diversifying away from cryptocurrencies and into physical gold in both bars and coins, according to Director Mark O’Byrne.

“They told us they were concerned that the massive price appreciation was unsustainable and they got nervous about it,” he said in an emailed note.

“We think increasingly people are realising that these digital assets have much higher risk levels than the traditional safe haven asset.”

But Marburger at CoinInvest said physical gold bullion also holds attraction for bitcoin investors because the assets have much in common.

“Both are limited in quantity, easy to trade and you can store them decentralised,” he said. Gold has advantages because there are “no passwords you can lose, the volatility is much lower, sustainable growth and in the end you can hold your investment in your hands,” he said.