Buffett warns that cryptocurrencies will come to a bad end

Discussion in 'Alternative Investments' started by Brendan Burgess, Nov 25, 2017.

  1. Brendan Burgess

    Brendan Burgess Founder

    Last edited: Jan 11, 2018
    Warren Buffett on Bitcoin

    As reported by the Motley Fool

    Elaborating on his remarks, Buffett said bitcoin is "a very effective way of transmitting money, and you can do it anonymously and all that." He added: "A check is a way of transmitting money, too. Are checks worth a whole lot of money just because they can transmit money?"

    He capped his criticism by saying that "[t]he idea that [bitcoin] has some huge intrinsic value is just a joke, in my view."

    "You can't value bitcoin, because it's not a value-producing asset." Glancing at it through investor glasses, he added that it wasn't possible to determine how high it will trade for. According to him, there's "a real bubble in that sort of thing."
    Last edited: Jan 11, 2018
  2. Brendan Burgess

    Brendan Burgess Founder

    He updated his comments here yesterday:


    "I can say almost with certainty that cryptocurrencies will come come to a bad end. When or how, I don't know.

    If I could buy a 5 year put on every one of the crypto currencies, I would be glad to do it.

    But I would never short a dime's worth

    [ a bit garbled] When I went to Columbia, I did a course on econometrics - they figured out - but you have never been able to make money on the stock market or even make great decisions in business by listening to economists."

    "I get into enough trouble with things I think I know something about," he added. "Why in the world should I take a long or short position in something I don't know anything about."
  3. noproblem

    noproblem Frequent Poster

    To put it all in perspective as to value, and what anything's worth unless you enjoy the asset and spending some of it? Which will last longer, Buffet or Bitcoin?
  4. Dan Murray

    Dan Murray Guest

    This is all consistent with my views - the man is a legend
  5. Dan Murray

    Dan Murray Guest

    Many of these bitcoin threads remind me of the words of another great American:

    It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so
  6. SBarrett

    SBarrett Frequent Poster

    Listened to the Politico Money podcast on Bitcoin. An interesting point made is that just like the dotcom, some cryptocurrencies may go the way of amazon. Others will go the way of pets.com... :rolleyes:

    I just stick to the non value producing asset.

  7. TheBigShort

    TheBigShort Frequent Poster

    Doh!...you have me there! I was talking somewhat abstract - I simply don't have fluidity of writing that fpalb would have. So, accepting what you have highlighted...it should read "then €11,000 bitcoin could represent real value"

    I stick to my original position. I don't know what the 'true' value of bitcoin is €1 or €100,000, who knows? When I bought in at €2,350 I thought it was worth the punt then. Which differs to my previous view when bitcoin was €80 - I saw no value.

    Actually, I'm somewhat misleading once more. I have bought some more bitcoin at circa €11-12,000, so I guess I am saying I believe it has value at these prices.
    fpalb and Duke of Marmalade like this.
  8. jman0war

    jman0war Frequent Poster

    All of the FUD and price swings in Bitcoin seem to follow-on from government regulators (raids, imminent exchange shutdown orders, outright banning of trading etc), as well as statements from Central Banks and people in Banking leadership positions (Jamie Dimon).
    There isn't anything actually occuring within cryptos themselves or technology generally speaking, that is causing such market waves.

    It seems a little convenient that those that shout the loudest of the 'dangers of bitcoin' are also the ones attempting to yield coercive legislation against it.

    Jamie Dimon for example, is either being openly dishonest in order to effect price, or may be just simply unaware that the company he leads is investing in cryptos. I dont know.

    But I get the feeling that Warren Buffet and Jamie Dimon are talking their own book and Bitcoin and cryptos are threatening to that.
    So too government regulators.

    It's basically manipulation they are engaging in.

    But Bitcoin will be Bitcoin.
    The purpose and intent is to be censorship resistant, so bring it on.
    TheBigShort likes this.
  9. dub_nerd

    dub_nerd Frequent Poster

    I've talked to a number of people who have taken a punt on cryptocurrencies, some of them as miners. When I put it to them that crytptos have no intrinsic value, they pointed out all the stuff that's been pointed out on this thread -- inflation proofing, untraceable anonymous transactions etc. It seems to me that some of those things are of most value to drug dealers and other criminals but, willing to concede the point for the sake of argument, I asked then what is the value of any particular cryptocurrency. Here the conversation inevitably turns to how the value is 100 times more than it was a couple of years back, and if only one had invested back then ...

    This is what convinces me that cryptos are in a completely crazy bubble. These people don't care what the value is. They are gamblers, plain and simple, lured by the stories of massive gains. They don't have any idea what the present or future value of the currency is. You could argue the same about some stock market investments, such as the FANGs which have inflated valuations based on nebulous ideas about future earnings. It should come as cold comfort to know that those are probably in a bubble too.

    Bitcoin seems like a particularly silly and wasteful idea. Its production is highly entropic -- you can't get back all the electricity that it cost to mine it, which did have some intrinsic value. And you can't easily expand the money supply, which is held up as a virtue but is in fact a curse. In the real economy, the fiat creation of money is only a bad thing when no corresponding value is created. But when it is based on valuable resource extraction, or is used to bring forward the value of future productivity, it greases the wheels of the economy in a way that a more inflexible currency can't. A valuable currency is backed by the economy (usually in the form of a promise from a government, but that's just a formality). What economy is Bitcoin backed by?

    The other problem with Bitcoin is that it can be easily replicated, as we seen with the splurge of other cryptos. That on its own is evidence that Bitcoin can't even keep up with the appetite for gambling. Anybody can create their own cryptos, there are freely available platforms and mechanisms for doing it. Anybody can issue their own paper currency too, of course. You could start handing out Monopoly money tomorrow to anybody crazy enough to accept it. It all comes back to what value is being represented by the currency. Greenshield stamps and air miles are all viable currencies under the right conditions. What are the conditions that make Bitcoin valuable?

    Blockchain technology in general has fantastic prospects. One idea that has been floated is using it to track the electricity contributions and withdrawals from EV batteries when they are used in future as buffers and backup storage for the electric grid. In that case, the value will be in the electric power*, with the blockchain currency providing the medium of accounting and exchange. Again, the currency would be backed by a real economy.

    And finally, there is that thing about governments being suspicious of cryptos. Most people (other than drug dealers and criminals) will have noticed that governments are entitled to spy on your monetary transactions for the purpose of taxing you. And if they can't spy on your individual transactions but feel you've accumulated an unreasonable amount, they can just take it off you. The Limerick guy who was found recently drying out €1.5m in banknotes in a tumble dryer forfeited the lot, in spite of no transaction history being established. What's more, government can just make it illegal to hold certain things as currency. They've done it before for gold bullion. They recently demonetised €500 notes, and 500 and 1000 Indian rupee notes, precisely to curb black market trading. Bitcoin may not be a fiat currency, but it could disappear by fiat.

    * which is not to say that a unit of power will have a fixed value, for all sorts of reasons that would be tangential to the current discussion.
    Sarenco and MrEarl like this.