Peter Thiel Loves Bitcoin, But Will Palantir Buy It?
A Passionate Argument for Bitcoin
Peter Thiel recently took stage at the Bitcoin Magazine conference. During his presentation, he had some interesting choice of words.
For starters, he called Warren Buffet, an outspoken opponent of Bitcoin, a "sociopathic grandpa." If anyone knows how to get peoples' attention, it's Peter Thiel.
Thiel is the cofounder of Palantir, a company that has worked very closely with the government in developing products to protect western values and freedoms. Palantir is so closely aligned with the government that they have exclusively chosen to only work with countries who believe and embody democratic principals - meaning they do not work with China or Russia.
Paradoxically, Thiel's comments mainly stemmed around his disgust for the government and how they have allowed inflation and the US Dollar to become a joke. He argued that the monetary system has for too long been controlled by centralized entities that don't actually care about maximizing economic freedom or increasing prosperity, but rather maintaining their own forms of hegemonic control via specific currencies.
Bitcoin, and cryptocurrencies writ large to Peter, can help solve this problem.
Will Palantir Buy Bitcoin?
Palantir has no bitcoin or crypto assets on their balance sheet. IN fact, they bought $50M of gold back in August 2021 because they suspected there may be a "black swan" event. Gold shot up 9% from their purchase price because of the invasion of Ukraine by Russia - so they were correct on that assumption.
If the cofounder of Palantir is so passionate about Bitcoin and cryptocurrencies, it does bring into question why the company has not purchased any on their balance sheets. Palantir is a founder-led company, Peter Thiel has super voting shares, so theoretically he could pull for the company to buy bitcoin if he genuinely believes it is going to the moon.
The reason I think he will not advocate for the company to do this, and why the company has not already done this, is because Palantir knows they are in a very unique situation.
First, Palantir is a high-growth tech stock. The market is not being friendly to these stocks right now. Interest rates are going up, so present values of future cash flows (which is how all stocks are valued) are going down - especially growth stocks that must borrow money in order to grow since they care more about market share vs. profits.
If the cost of borrowing capital increases, the valuations for the companies borrowing the money will decrease. Second, Palantir is trying to prove to the market that they can sell a product. Most analysts understand Palantir has a fairly unique product that the rest of the market isn't competing with, but they feel that companies like Snowflake simply have done a better job penetrating industries and becoming a household name.
Palantir recently announced plans to hire around 200 more salespeople, and admitted to making costly mistakes 5 years ago by not engraining sales into their culture and DNA. The tradeoff was being solely product focused - which was amazing since it created a product that they have no competition for, but if you can't sell it, it's almost like it doesn't even exist.
Even though Palantir does not have any debt on their balance sheet, which means higher interest rates likely won't affect them as badly, the market still does not want to overvalue growth stocks.
Crypto is Volatile
As a result, it is my belief that management likely can't afford having anything extremely volatile on their balance sheets. If we enter into a recession, make no mistake about it: crypto will go down. Bitcoin is not immune to macro level trends, in fact, it performs quite similarly to growth stocks and the NASDAQ.
If the economy were to crash, many companies would not recover. The best companies with the most optimized balance sheets and ability to weather through the storm would make it out alive. For Palantir to be one of those companies, making sure there is no debt (check), an amazing product (check), and having no volatile assets that could lose 50% of their value in one day on their sheets (check) is important.
Additionally, Palantir may have to deal with "paper losses" from their SPAC investments for many more quarters. Most of the SPACs are high growth tech companies that the market is not being friendly for, so if crypto were to crash, it would just be another asset that would drag down their financials - specifically their earnings per share.
Although they don't own crypto - Palantir does have many plans for the industry. I personally believe they can be a prime candidate to power most crypto companies that need to secure their coins from fraud and money laundering. This article explains how Palantir and Foundry for Crypto could power the metaverse.