The value of all the bitcoins sitting in underground bunkers owned by wealth-management startup Xapo has been the subject of intense speculation ever since the company first allowed journalists into the catacombs where the family offices of the world's wealthiest people stash their digital gold.
Now, Bloomberg - after conversations with two purported clients - has produced a figure: Somewhere around $10 billion. Several sources said that number would be "a good approximation" - though the price can still be volatile.
Interestingly enough, with its reputation unmatched by other firms, Xapo has in effect created something more than just a bitcoin vault. It's essentially the first private bank for rich bitcoiners.
Because in addition to its security offerings, Xapo also provides customers with a bitcoin debit card and access to a bitcoin trading desk.
Already, the company's holdings - which constitute roughly 7% of the global bitcoin supply - are higher than 98% of the 5,670 banks in the US.
"Everyone who isn’t keeping keys themselves is keeping them with Xapo," said Ryan Radloff of CoinShares, which has more than $500 million of Bitcoin stored at Xapo. "You couldn’t pay me to keep it with a bank."
Founded by Argentine entrepreneur and PayPal board member Wences Casares, who is widely credited with turning the Valley's VC billionaires on to bitcoin, the company has amassed a network of underground vaults, including a decommissioned Swiss military bunker.
Thanks to Cesares' reputation, Xapo has managed to attract venture investments from some of the Valley's biggest names, including LinkedIn Corp. co-founder Reed Hoffman and former Wall Street trader Mike Novogratz, who is, of course, is in the process of setting up his own crypto "merchant bank" that might end up competing with Xapo.
It also has relationships with major crypto investment firms, such as Grayscale and CoinShares.
Xapo's clients aren't limited to wealthy individuals. First Block Capital, one of Canada's first registered crypto firms, chose Xapo to be its custodian - the first sign that the institutional market for crypto custody could some day dwarf Xapo's private business.
"Every part of their DNA is geared to security," said Sean Clark, First Block’s founder, who noted the vault’s fingerprint scanners were equipped with a pulse reader to prevent amputated hands from being used. "Whenever we make big transfers they FaceTime us, we have duress words, if it’s big enough they’ll fly out to see us."
To pursue institutional investors, Xapo President Ted Rogers hired Peter Najarian, a veteran of emerging-market trading at UBS Group and Royal Bank of Scotland Group, to oversee outreach to pension funds, private banks, assets managers, family offices and hedge funds.
The perceived lack of an institutional-grade custodial solution for Bitcoin has been one of the sticking points for many money managers looking to try the asset class. Xapo says its already offering precisely that solution. If it persuades them of its merits, the implications for Bitcoin would be profound.
"A fraction of that kind of institutional money flowing into the space would be a tidal wave," Najarian said.
However, there's one factor that could limit Xapo's growth, particularly as the crypto market outside of bitcoin grows (assuming the alt-coin universe hasn't already reached its zenith). The company only works with bitcoin because of Cesares' belief that it alone will succeed.
For everybody who's not wealthy enough (or too cheap) to pay a third party for an elaborate private-storage scheme, individuals can always store their private keys - the tool that gives them access to their bitcoin - on a hard drive that's air-gapped from the Internet.
Of course, no solution is 100% safe from hackers and thieves. And at the end of the day, that reality might be enough to indefinitely stave off the "mainstream adoption" that bitcoiners say is just around the corner.