IS CRYPTOCURRENCY A FAD, OR HAS WARREN BUFFET LOST HIS MARBLES?
At the annual meeting of Berkshire Hathaway on Saturday, May 5th 2018, Warren Buffet stated that he believes cryptocurrencies will come to a “bad ending” after the “euphoria wears off”. Additionally, he claimed Bitcoin (BTC) is “probably rat poison squared”, stating that he does not believe that Bitcoin is a “productive asset, unlike land or corporate shares”. He called it “a handy tool for charlatans”.
Berkshire Hathaway vice president Charlie Monger echoed Buffet’s sentiment by adding harsh criticism including a statement that “someone else is trading turds and you decide I can’t be left out”. Munger previously called Bitcoin “totally asinine”, based on the belief that everyone involved just “wants easy money”.
Bitcoin and cryptocurrency is too risky for Warren Buffet, and he has no reason to buy in to the philosophy and future of the cryptocurrency market. It bears no significance on the future of crypto as a whole, considering the fact that Buffet does not own a smartphone and rarely uses a computer in his corporate office.
There are several reasons why I do not believe that their public statements will harm Bitcoin and its future.
The value of cryptocurrency and the trend towards decentralization is happening with or without them. It will more than likely surpass the size and strength of the stock market, world markets, and real estate market. The fact is, all of these markets will more than likely become integrated into the cryptocurrency market.
There is probably no chance that Warren Buffet or Charlie Monger will get involved in shorting Bitcoin, and that is significant. They are basically taking a “hands-off” approach to the entire cryptocurrency market, and at their age, they have no reason to secure themselves ahead of it.
The banking systems of the world view cryptocurrency as a threat, and there isn’t much they can do to stop the momentum. The more that cryptocurrency gains in total market capitalization, the less power the banking system will have in keeping control of the world’s currency.
There has been talk of the government of the United States creating a “crypto dollar”, and this is a real possibility. But will it bear any significance? I think not. It is only a move that could be created to keep the general population confused and using the US Dollar as a base of trade.
But a cryptocurrency version of the US Dollar has no real use. It goes against the reason that Bitcoin and other altcoins were created. The Dollar is a centralized currency, meaning the government and central bank has total control of its volume. If a “Dollar Coin” is created, it does not mean that the government and banks will turn over control to the general population.
The government will continue to work with the banking system in “printing” dollars for its own use. The government does not create any value as a producer of sorts. But the ability to print money allows it to stay in complete control of the population.
For example, if there is a war to be funded, the government can print all of the money necessary to cover the cost of manufacturing munitions and mobilizing an army. But this devalues the dollar, and leaves the general public holding the bag. We pay for it by holding a dollar that is weaker, with less buying power. The end result is that the people must work harder to keep the same level of living.
The government creating a cryptocurrency version of the US Dollar defeats the purpose of its use. The volume of a cryptocurrency is accounted for by the unmovable Blockchain network. If the US Dollar were to be moved to the blockchain, the government and central banks would lose their ability to control the volume.
The creation of a cryptocurrency “US Dollar coin” would be meaningless. The only way it would succeed would be by the ignorance of the public in believing that its use and accounting is regulated by the Blockchain’s permanent records. Without the Blockchain, a US Dollar coin would be no different than the paper version or the electronic money that comprises of 90% of its volume.
This is why I don’t believe the attitudes held by Warren Buffet and Charlie Monger have any impact on the future of cryptocurrency. They are the last of the generation that grew up with fiat currency, and they have no reason to participate in its adoption. As the richest men in the entire world, they don’t have a reason to pay any attention to it.
A significant point to consider is the fact that Warren Buffet and Charlie Monger have no interest in shorting Bitcoin. They are taking no position one way or the other. That alone is enough proof to me that their age and generational mindset is the primary reason for their negative view of the cryptocurrency market.
As time goes on, the central banks of the world will continue to realize that cryptocurrency is a real threat to their ability to remain in control of the world population and the monetary system. Without the ability to make decisions without the agreement of the public regarding the supply of money, they will become obsolete.
Time will tell. And it will be an exciting, tumultuous process that will be unfolding. Until then, I’ll be sitting back watching, and placing my bets on the future of cryptocurrency as the next evolutionary step for world trade and commerce.