VC: Bitcoin is schmuck insurance

Chamath Palihapitiya, founder of The Social+Capital Partnership, and a former Facebook exec, sees Bitcoin as "schmuck insurance."

AccessTimeIconMay 31, 2013 at 5:40 a.m. UTC
Updated Sep 10, 2021 at 10:47 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

, founder of The Social+Capital Partnership, a co-owner of the Golden State Warriors NBA team and a former Facebook exec, sees Bitcoin as "schmuck insurance."

To Palihapitiya, schmucks are the Lehman Brothers, Bear Stearns, AIGs, London Whales and other scandal-ridden "masters" of the financial services universe that have -- since the near-meltdown of the global economy in 2008 -- had an almost alchemical ability to turn gold into dross.

Palihapitiya's embrace of a better alternative in his Bloomberg commentary "Why I Invested in Bitcoin" clearly echoes the frustrations of many Bitcoiners with the dysfunctions of today's financial system. It's hard not to become cynical when the HSBCs of the world openly welcome massive cash deposits from Mexican drug cartels for years ... and somehow manage to still stay in business.

Meanwhile, people who aren't financial masters of the universe don't enjoy such free passes. In fact, when the big money boys misbehave, it's the little guys who end up taking the brunt of the punishment (see Cyprus, Portugal, etc.)

Bitcoin, on the other hand, is a way to view financial transactions in a whole new light, Palihapitiya writes. He compares it to the "red pill" offered to the character Neo in the movie "The Matrix" ... a pill that basically makes the scales fall from your eyes about how things really work.

"I’ve told my friends that it is entirely rational to allocate one percent of your assets to Bitcoin -- as I have," Palihapitiya writes. "Call it schmuck insurance. As the 2008 crisis proved, schmucks can cause a world of damage."


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.

Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to to register and buy your pass now.

Read more about