> “Whether it goes up or down in the next year, or five or 10 years, I don’t know. But the one thing I’m pretty sure of is that it doesn’t produce anything,” Buffett said. “It’s got a magic to it and people have attached magics to lots of things.”
Bitcoin has a lot of baggage, from energy consumption to the toxic community. But if you look at it on the protocol level, it is incredibly valuable. You can transfer and verify ownership of a finite amount of some numbers. It's a technology. How much is double entry book keeping worth? Now you can say the technology is already out, so obviously no one would pay to "buy" double entry book keeping because anyone could continue using it for free.
Similarly the Bitcoin technology can be repurposed and used in other tokens, and it has. But Bitcoin is unique in that it came along with a unique set of circumstances. For one, its original proceeds are fairly distributed (no pre-mine). It also helps that the creator is still miraculously anonymous. Other shitcoins, even Ethereum has a relatively concentrated ownership and centralized control. Bitcoin is also more battle tested and has a history the suggests the community would be immune to arbitrary changes (e.g. increasing number of tokens). Another coin could come along with a benevolent dictator, not hoard tokens for personal gain, take all Bitcoin's greatest ideas and add to them, create a community and trust over a decade or so, and overtake bitcoin as a de-facto leader in digital cash, but that's becoming increasingly less likely every year.
Of course! The technology which is not exclusive to bitcoin is what makes bitcoin so valuable. The ability to have a decentralized store of information that requires a hash of the previous information to verify because we may live in a world where no central authority with proper financial incentives to keep track of information doesn't exist, that makes a coin you get and can't spend without converting into cash/using a centralized system valuable!
Just think of all the times where we have to use transactions that are immutable (so they can't be reversed), trustless (so there's nobody to blame), and decentralized (meaning you need economic incentives to do expensive work to reach a consensus that's correct). I'm sure there are tons, the decade old technology is brand new, it's gonna find use eventually I swear, by the way do you want to buy my bitcoin for dollars I can actually pay my taxes with?
So, do you want to own the water or the power dam? Buffett's point is that people are buying water (i.e. bitcoin) at exhorbitant prices.
The distributed ledger technology is great, but it needs to be harnessed into a repeatable per-transaction money-maker to be useful. Anyone can over-pay for a bitcoin and hope they can sell it to someone fearing that they're missing out. The problem is that the FOMO crowd is thinning out.
> Just think of all the times where we have to use transactions that are immutable (so they can't be reversed), trustless (so there's nobody to blame), and decentralized (meaning you need economic incentives to do expensive work to reach a consensus that's correct).
But Buffett's point is that each unit of investment he pursues has the potential to produce incrementally more value. You're saying the aggregate technology underlying bitcoin has value - which it does. But you don't get twice the tech value by doubling your amount of coin owned. Conversely, if you double your farm holdings, you have double the ability to produce food.
Also, Buffett's quote here isn't some significantly new perspective. Hasn't this been the primary argument against bitcoin since the beginning?
I get it, its not an investment that Buffett typically makes. And he really shouldn't as it goes against his wise principal of not investing in things he doesn't fully understand. If you see his historical investments, they were generally boring high cashflow industries.
> But you don't get twice the tech value by doubling your amount of coin owned.
I think holding bitcoin is more of an investment in the underlying technology. If it is useful, presumably the demand will rise for it. It's like owning a stock that has most of its value in its intellectual property. For instance, Disney has a P/E (price earnings ratio) of 38, significantly higher than the typical firm. This is due to Disney's intellectual property. Disney will be able to produce and profit from Marvel movies for years along with their extensive catalog. When an investor buys Disney stock, a big chunk of what they're paying for is the technology (in this case intellectual property)
Gold and silver have a lot of industrial uses. But, like Bitcoin, their present-day prices are more a reflection of speculation than a their fundamental uses/technology.
It's just an alternative currency. It's the same as exchanging your USD for a foreign currency that has high volatility. Foreign exchange trading doesn't have the hype bitcoin does but it's the same thing. Eventually, bitcoin may prove to be a less inflationary currency so people may enjoy the small annual gains. Until then investing in bitcoin is essentially gambling. Believe it or not, the most successful investor in the world knows what he's talking about here.
Warren Buffet very likely doesn't understand the technology behind DeFi or decentralized governance. He's also heavily invested in the legacy financial system.
So he'd be the last person I'd trust with advice on cryptocurrencies lol.
He really discredits himself by saying he wouldn't take a liquid asset at less than its mark to market value. I've got a bridge to sell you if you believe Buffett wouldn't take Billions in guaranteed gains.
I think his point is that the market value of Bitcoin is driven by speculation on its future value rather than by productive activity, and that that would make the gains much less guaranteed than gains in investments associated with something that provides value to people.
To be clear my own position is less extreme, though similar. I'm more in the "Some people may like it as a currency but if it's a currency, it's a lousy one (high volatility), and if it's an asset class it's pure unregulated speculation" camp.
I do have the persistent suspicion that there's something I'm missing, because how could so many people like something I think is pretty silly if there weren't some kind of substance to it, but it seems like the operative question is "what is the value of Bitcoin?" not "Would Buffet really turn it down?"
I remember having beers with a friend who now runs a capital management fund in early 2000. He was telling me how Warren Buffets ideas don't work anymore and how he missed out on dotcom. A couple years later, Warren was way ahead of the market, again.
I wouldn't be surprised if that happened again over the next year or so, although it is much harder for Buffet now at this scale.
Putin (and all of Russia) would be very happy now if he bought Bitcoins from the US dollar reserves a few months ago. He got an expensive lesson in ownership. Now if he had ownership of 10% of US apartments or 10% of US farmland, he would learn the same expensive lesson.
Warren Buffet is speaking from a privileged position. He has everyday access to the most powerful bankers of the world.
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Bitcoin has a lot of baggage, from energy consumption to the toxic community. But if you look at it on the protocol level, it is incredibly valuable. You can transfer and verify ownership of a finite amount of some numbers. It's a technology. How much is double entry book keeping worth? Now you can say the technology is already out, so obviously no one would pay to "buy" double entry book keeping because anyone could continue using it for free.
Similarly the Bitcoin technology can be repurposed and used in other tokens, and it has. But Bitcoin is unique in that it came along with a unique set of circumstances. For one, its original proceeds are fairly distributed (no pre-mine). It also helps that the creator is still miraculously anonymous. Other shitcoins, even Ethereum has a relatively concentrated ownership and centralized control. Bitcoin is also more battle tested and has a history the suggests the community would be immune to arbitrary changes (e.g. increasing number of tokens). Another coin could come along with a benevolent dictator, not hoard tokens for personal gain, take all Bitcoin's greatest ideas and add to them, create a community and trust over a decade or so, and overtake bitcoin as a de-facto leader in digital cash, but that's becoming increasingly less likely every year.
Just think of all the times where we have to use transactions that are immutable (so they can't be reversed), trustless (so there's nobody to blame), and decentralized (meaning you need economic incentives to do expensive work to reach a consensus that's correct). I'm sure there are tons, the decade old technology is brand new, it's gonna find use eventually I swear, by the way do you want to buy my bitcoin for dollars I can actually pay my taxes with?
The distributed ledger technology is great, but it needs to be harnessed into a repeatable per-transaction money-maker to be useful. Anyone can over-pay for a bitcoin and hope they can sell it to someone fearing that they're missing out. The problem is that the FOMO crowd is thinning out.
Can you name at least one?
Also, Buffett's quote here isn't some significantly new perspective. Hasn't this been the primary argument against bitcoin since the beginning?
> But you don't get twice the tech value by doubling your amount of coin owned.
I think holding bitcoin is more of an investment in the underlying technology. If it is useful, presumably the demand will rise for it. It's like owning a stock that has most of its value in its intellectual property. For instance, Disney has a P/E (price earnings ratio) of 38, significantly higher than the typical firm. This is due to Disney's intellectual property. Disney will be able to produce and profit from Marvel movies for years along with their extensive catalog. When an investor buys Disney stock, a big chunk of what they're paying for is the technology (in this case intellectual property)
So he'd be the last person I'd trust with advice on cryptocurrencies lol.
To be clear my own position is less extreme, though similar. I'm more in the "Some people may like it as a currency but if it's a currency, it's a lousy one (high volatility), and if it's an asset class it's pure unregulated speculation" camp.
I do have the persistent suspicion that there's something I'm missing, because how could so many people like something I think is pretty silly if there weren't some kind of substance to it, but it seems like the operative question is "what is the value of Bitcoin?" not "Would Buffet really turn it down?"
I'm not really defending or attacking Bitcoin at all in my statement. Just simply pointing out that he isn't being honest here.
lol, yeah right
I wouldn't be surprised if that happened again over the next year or so, although it is much harder for Buffet now at this scale.
Warren Buffet is speaking from a privileged position. He has everyday access to the most powerful bankers of the world.
this is a joke, right? He almost certainly did some of this.
Bitcoin: a great way for war criminals to avoid sanctions
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