Barry Silbert: Head of the New World Order of Crypto
Anyone new to crypto will, as they embark on the hallowed process of doing their own research, come across the same names over and over again. In a field not exactly packed with extroverts, a handful of characters keep popping up.
Many perceive crypto to be a shadowy realm, operating in the darker, dustier corners of the internet. Flying below the radar of most, bar a cabal of geeks and weirdos. This view is reinforced by the mystery of the most famous name in the space: Satoshi Nakamoto, the enigmatic founder of bitcoin. Who is he? Where is he? Is he a he? Is he several people? And how many bitcoins does he still have?
But crypto is becoming ever more mainstream and a few of its most influential figures are edging further into the limelight. They are not yet household names. They don’t bask in the same glare as the Mark Zuckerbergs or Elon Musks of this world. But they may need stronger sunscreen soon enough.
Figures like Ethereum creator Vitalik Buterin, Ripple CEO Brad Garlinghouse and billionaire investor Mike Novogratz are familiar to anyone with more than a passing interest in crypto. Their opinions are sought (or eagerly proffered) on any big story. People listen to them and we see their names cited constantly in crypto news pieces.
Then there are the founders of the Gemini exchange, the infamous Winklevii, Cameron and Tyler Winklevoss. They may be best-known for their unhappy acquaintance with the Zuck and Facebook, but these two have brought their star-power to crypto and are now two of its most fervent champions.
Together, these guys form crypto’s unofficial PR department. They’re among its most visible and vocal figures and they’ve all made a ton of money from it. But they’re not alone. There are others who have quietly also become crypto bigshots, but whose names may not be so familiar. And one of the most interesting and influential of them all is one Barry E Silbert.
Who the Heck is Barry Silbert?
If you haven’t heard of Barry Silbert, then you’re not alone. Although he’s an active presence on Twitter with over 220,000 followers, his name doesn’t crop up with the same regularity as those mentioned above. This is strange because he’s behind some of the most influential entities in the crypto space and has invested in some of its best-known projects. It’s time we got to know him better.
Silbert is the founder and CEO of the venture capital firm Digital Currency Group (DCG), which describes itself as ‘the epicenter of the bitcoin and blockchain industry.’ The company has invested in numerous crypto and blockchain projects, many of which are among the most familiar and famous names in the industry. At a glance, these include Brave Software, Coinbase, Ledger, Ripple, Zcash and many, many more. It’s fair to say that Silbert has an eye for a winner.
DCG also has a number of subsidiaries that are themselves big industry players. These include asset management company Grayscale, as well as the blockchain news and info platform CoinDesk. We’ll look at both of these entities - and some others - in more detail later on. Before we do, let’s look at the origins of Silbert’s rise to the top of the crypto tree.
Born in 1976, Barry Silbert grew up in Gaithersburg, Maryland, where his first business venture was selling baseball cards. While still in high school, he sat and passed the General Securities Representative Exam, thereby qualifying as a stockbroker. He then passed the Series 7 stockbroker exam and became, at a mere 17 years old, the youngest person ever to do so.
After graduating from high school he moved to Atlanta to study at Emory University’s Goizueta Business School, from where he received his Bachelor’s degree in Finance in 1998. After graduating he joined Houlihan Lokey as an investment banker, staying with the firm until 2004.
After leaving Houlihan Lokey, Silbert founded Restricted Stock Partners, a firm which allowed private companies and investment funds to better raise capital by trading illiquid assets such as bankruptcy claims, start-up stocks and restricted stocks. In 2008 the company changed its name to SecondMarket, ‘to better reflect the direction of its business.’
SecondMarket duly went from strength to strength and was named a Technology Pioneer by the World Economic Forum at its 2010 convention in Davos. The following year, Fortune magazine named Silbert as one of its 40 under 40, while he was also an Ernst & Young Entrepreneur of the Year in 2009 and featured on Treasury & Risk’s list of the 100 Most Influential People in Finance.
Amidst all these accolades, in 2012 Silbert first heard about a new technology called bitcoin. He began buying it himself, while also recognising its potential as an asset class. In 2013 he stepped down as the CEO of SecondMarket in order to focus on bitcoin and the emerging cryptocurrency industry that was appearing in its wake. He eventually sold SecondMarket in 2015 to NASDAQ, who still operate the company as NASDAQ Private Market.
The BIT Between His Teeth
Silbert’s focus on bitcoin manifested itself as Grayscale Investments, which he founded in 2013 after stepping down from running SecondMarket. Grayscale’s flagship was - and remains - the Bitcoin Investment Trust (BIT), a private, open-ended trust which was one of the first investment vehicles of its type anywhere in the world. The trust (with its ticker GBTC) allows investors to get exposure to bitcoin as an asset, without having to buy and store it themselves.
A $2 million investment from SecondMarket helped to get the trust up and running, while it currently has around $4.7 billion assets under management (AUM). This means that the BIT holds around 450,000 bitcoins, representing a little over 2% of the 21 million total supply.
Consolidating his Position
Less than three years after hearing about bitcoin for the first time, Silbert was one of its biggest champions and a key figure in its emergence from the shadows into the public consciousness. The BIT was attracting investors who might not otherwise have gone near a crypto exchange or digital wallet. And yet he was just getting started.
The sale of SecondMarket to NASDAQ for an undisclosed sum enabled Silbert to set up DCG in 2015. The company name reflects Silbert’s belief in the power and potential of blockchain and digital currencies as a whole and not solely bitcoin.
As we have seen, its portfolio of investments is enormous, with over 130 projects supported, including some of the most recognisable names in crypto. This makes DCG arguably the biggest crypto hedge fund around, even outdoing other giants like Pantera Capital, Andreesen Horowitz and Mike Novogratz’s Galaxy Digital.
It’s not just DCG’s size and scope which make it and Silbert such powerful figures in the crypto world. The impressive roster of subsidiary companies also helps to further strengthen DCG’s position as a market leader.
We’ve already touched on Grayscale, which continues to be at the forefront of institutional investment in bitcoin and other cryptos through its investment products. While the BIT remains far-and-away its flagship vehicle, the trust also offers investors exposure to other cryptos such as ethereum, litecoin, XRP and Zcash through similarly-structured products. These bring Grayscale’s total AUM to $5.9 billion as of the end of September 2020, with the New York-based trust enjoying record levels of investment during the first quarter of the year.
As my colleague Guy over at Coin Bureau’s YouTube channel has pointed out, financial institutions and hedge funds are starting to quietly accumulate huge stashes of BTC, fuelled in part by the fear, uncertainty and doubt currently hanging over the world. Many big players in finance are going long on bitcoin, seeing it as a hedge against post-Covid inflation, with Grayscale leading the way.
DCG’s other big-name subsidiary is news site CoinDesk, which was originally launched way back in May 2013 by Spotify advisor and angel investor Shakil Khan. Khan conceived and launched the site over the course of a month as a response to the ‘lack of transparent information’ surrounding bitcoin in those early days. The site states that its "mandate is to inform, educate, and connect the global investment community through news, data, events and education.’
Later that year CoinDesk conceived the bitcoin price index (BPI), the original price reference rate for the asset, which is still used by many media outlets to this day. The following year it published its influential State of Bitcoin report before launching, in September 2015, the first Consensus conference, a gathering of the great and good from across the blockchain sphere, which remains an important date in the crypto calendar.
This activity aroused the interest of Silbert and the rest of the board at DCG, resulting in a buyout of CoinDesk in early 2016. As with so many of Silbert’s investments, this quickly paid off as public interest in crypto duly exploded around that same time. CoinDesk has grown in popularity and scope ever since and now ‘employs the largest group of independent journalists dedicated to covering the blockchain ecosystem.’
Three other companies make up the list of DCG’s subsidiaries. Genesis is a digital currency-focussed trading desk, which
Provides institutional investors with an all-in-one solution to put substantial amounts of capital to work. Services include secure, discreet buying and selling, borrowing and lending in large sizes over fixed-terms, custody services to secure assets, and screening to ensure KYC and AML requirements are met.
The company has been around since 2013, as it was originally SecondMarket’s trading division. It is regulated by the SEC and FINRA and claims to have handled over $750 million in trading volume for institutions and high net worth individuals.
Foundry is one of DCG’s newer subsidiaries, having been launched without much fanfare last year. It is aimed at the bitcoin mining industry and ‘empowers miners with the tools they need to build tomorrow’s decentralized infrastructure.’ This involves the financing and acquisition of mining equipment, providing consultation and advice to miners and actual mining and staking: Foundry itself is one of North America’s largest bitcoin miners.
Having committed to investing over $100 million in Foundry over the next year, DCG clearly regards it as an important part of its future strategy. Silbert has affirmed this, saying that:
Digital asset mining and staking provide the backbone of the blockchain technology that will drive that advancement. Foundry is bringing critical resources and guidance to an essential corner of the industry
Crypto exchange Luno rounds off DCG’s list of subsidiaries. No self-respecting crypto concern is complete without a retail exchange to call its own and Luno marks DCG’s first major foray away from institutional investors.
Luno is both a retail exchange and a wallet, with over 5 million customers. It has so far processed over $14 billion while operating in over 40 countries, with a particular focus on Africa and South-East Asia. It’s been around since 2013 and is available as an app on Android and iOS, with a web version as well. Originally headquartered in Singapore, it is now based in London and initially received funding from DCG back in 2014.
The cost of the acquisition was not disclosed, but both parties have assured users that Luno will continue to operate independently, albeit as a wholly-owned subsidiary of DCG.
Conclusion: Fingers in Pies
The purchase of Luno in September 2020 ticked yet another box in DCG’s impressive roster of subsidiaries. The company now has a stake in all the major areas of the crypto space: institutional investment through Grayscale and Genesis, news, information and events through CoinDesk, mining through Foundry and now retail investors are catered for too.
All this is a remarkable achievement by Barry Silbert, who has positioned himself at the centre of a large web of crypto products and services, which will make him an influential player in the space for years to come. There is barely a big crypto project out there that hasn’t benefitted from his input and, as the sector continues to expand, it’s a good bet that he will be one of the main driving forces behind it.
Silbert’s wealth in 2018 was reckoned to be somewhere between $400 million and $500 million, putting him 16th on Forbes’s list of the wealthiest people in crypto. But DCG’s continued expansion, coupled with its founder’s keen eye for potential will surely see him climb those rankings soon enough. He may not yet have the same sort of profile as some of his peers, but you can expect that to change as well.
From a successful career in mainstream finance, Barry Silbert has managed in less than a decade to pivot effortlessly towards crypto domination. It all makes you wonder what he’ll manage to achieve over the next eight years.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.