Venture capitalist and entrepreneur Tim Draper is rolling in bitcoins after winning a US government auction Monday.
He bought 29,656 bitcoins–a new form of digital currency–from a trove that the government seized in a raid of the illegal online drug market Silk Road last year.
Draper, co-founder of Silicon Valley investment firm Draper Fisher Jurvetson, beat out 44 other participants during the 12-hour auction Monday and identified himself as the winner Wednesday. Though the price he paid wasn’t released, the
stash is worth about $19 million at current market prices.
Draper says he’ll use the digital currency in a new business to bring bitcoins to the developing world.
Bitcoins are among the oddest but potentially most profound phenomena to hit world currency markets in modern times. They’re not physical coins but pieces of software code traded over the Internet. Their origins are mysterious: Legend has it they were created in 2009 by someone with the alias Satoshi Nakamoto.
Since then, bitcoin markets have developed and some online retailers–including Tiger Direct, New Egg and Overstock–are accepting bitcoins for payment. Bitcoin ATMs are popping up. California recently changed state law to allow use of bitcoins and similar alternative currencies.
Federal regulators are studying the currency closely. The IRS recently ruled bitcoin is a property, legitimizing its use. Bitcoin holders lost millions in the collapse of Tokyo bitcoin exchange Mt. Gox this year.
Still, demand for bitcoins continues to grow. Bitcoin prices dived during the Mt. Gox contretemps, but have headed upward since.
The price of bitcoins has grown nearly $100 since last week to about $650 as of Wednesday as established investors like Draper entered the auction, Wedbush Securities analyst Gil Luria said. The value of bitcoins will continue to fluctuate, but as liquidity grows the price swings will lessen, he predicted.
“It’s very hard to pin down what the exact value of bitcoins is,” Luria said. “But the more liquid the markets are, the less volatility there will be on a day-to-day basis.”