- Jesse Powell is the chief executive officer of the world’s fourth-largest crypto exchange, Kraken.
- He told Insider how he went from selling virtual items online to building an exchange from scratch.
- He also explains why Bitcoin could easily reach $250k next year and two crypto trends he’s watching.
- See more stories on Insider’s business page.
Jesse Powell was living in the Metaverse before it was even a thing.
Back in 2001, Powell, now CEO of the crypto exchange Kraken, was then running a company that sold virtual items and currencies for about 20 online games including World of Warcraft and Diablo.
His business was booming, but it was also constantly running into problems with credit card payments such as chargebacks and high transaction fees. Given the nature of the business, many of his clients were kids who did not have access to credit cards or PayPal.
“They would send cash in the mail or they’d have to use Western Union which was super expensive,” he said in an interview. “So that was a really terrible experience.”
On top of that, Powell also had many suppliers in China, which created a whole other set of problems. His company was spending over $100,000 a week buying virtual goods from Chinese suppliers, but Chinese citizens by law can only convert or purchase up to $50,000 of foreign currency per year.
“We needed to get Chinese yuan to pay these guys,” he said. “So every week we had to find at least two new people to do this trade for us. Over the course of a year, it gets to be more than 100 people.”
Powell had the good fortune of stumbling across Bitcoin while he was trying to solve all these complicated problems that were building up frictions and risks in his virtual goods business.
But Bitcoin ended up becoming an entirely new opportunity for Powell. This peer-to-peer, trustless, and decentralized money not only helped him bypass some of these problems in the traditional financial system but also previewed a career that would propel him to build one of the world’s largest crypto exchanges.
From Mt. Gox to Kraken
In 2011, Powell flew to Tokyo and joined his friend Roger Ver, another early Bitcoin investor, to help rescue what was then the world’s largest Bitcoin exchange Mt. Gox, which was suffering from its first major security breach.
After spending weeks trying to salvage the exchange, Powell came away with the impression that Mt. Gox was unlikely to be the professional service that can make regulators and banks feel comfortable about engaging with the Bitcoin ecosystem.
“Mt. Gox was what pushed me into becoming more professionally involved in the space,” he said. “I felt like to bring crypto to the mainstream, there had to be a really legitimate player in the exchange space, and there had to be more than one exchange.”
Shortly after that, Powell and his co-founder from the virtual goods business started working on Kraken, which in the early days was partly funded by the Bitcoin he had acquired at around $1 to $2 a coin on Mt. Gox.
Bitcoin is ‘going to the moon’
Today, Kraken, which has more than seven million users and lists over 50 different tokens, is the world’s fourth-largest crypto exchange by trading volume.
Bitcoin, which hit an all-time high of over $64,000 in mid-April, had dropped just below $50,000 as of midday Friday due to regulation fears and reports of a capital gains tax hike proposed by the Biden administration.
As a long-term Bitcoin investor, Powell says he tends to look past the near-term price moves, but he thinks there is “significant growth potential” between now and the next Bitcoin halving in 2024.
A Bitcoin halving event refers to the process of cutting the number of coins that miners receive for adding new transactions to the blockchain in half. Historically, Bitcoin has had a big surge in price within six months of a halving event. The last Bitcoin halving event took place on May 11, 2020.
“It’s really hard to know where Bitcoin is going near-term, it could be up or down 10% on any given day,” he said. “I don’t really see any reason to sell especially for dollars, which are basically guaranteed to lose value over time.”
Powell said he could “easily” see Bitcoin hit $250,000 a coin in the next year, but in the longer term, it becomes “irrational” to price the cryptocurrency against the dollar mainly due to the rampant money printing by the central bank and what might be the resultant “unchecked inflation.”
“We should price Bitcoin in some other asset that has more of a constant value rather than dollars which are being inflated like crazy,” he said. “I’m super bullish on Bitcoin and I think it’s going to the moon and become the world’s reserve currency in 10 to 20 years.”
The rise of DeFi and NFTs
Powell is constantly looking at interesting projects in the crypto space, but the rise of decentralized finance and non-fungible tokens this year has especially caught his eyes.
DeFi, which refers broadly to blockchain-based trading, lending, exchange, and other financial platforms that are automated by software instead of being executed by human employees, is likely to completely replace the insurance and lending industries, he said.
But investors should still keep a rational attitude when it comes to the new projects that are sprouting up every day.
“It’s a super quickly evolving space and somewhat dangerous space,” he said. “Because I think people are playing it pretty fast and loose with launching these new smart contracts that haven’t really been audited, they could end up having security problems with them or bugs in the contracts.”
As the founder of an art gallery in Sacramento, California, Powell can appreciate how NFTs have helped connect wealthy crypto patrons with artists seeking funding, but he also sees other use cases of NFTs in tokenized tickets, concert memorabilia, or even things that non-profits can give to their donors.
“I think it’s really going to change the game for merch, nonprofit fundraising, and obviously the art and collectibles world,” he said. “I think that’s super exciting and I’m watching that too.”
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