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It's always good to see the same hot takes rehashed over and over on HN. I'm sure Bloomberg appreciates the ad revenue. Buffett (with all due respect, and I ha

It's always good to see the same hot takes rehashed over and over on HN. I'm sure Bloomberg appreciates the ad revenue. Buffett (with all due respect, and I have a lot of respect for him) doesn't understand Bitcoin, and doesn't add anything of value to the discussion. He's never been much of a technology investor, so this should surprise no one.

samfisher83 9y ago
Crypto currency is an asset. He has bought and sold a lot of assets over time and has done pretty well. Google Tulip mania. The whole point of bitcoin was a form a digital currency. However due to the high transaction fees and volatility you can't really use it for that. I have no idea where it is going, but to dismiss a guy who has experience buying and selling things for a long time seems foolish.
- vasilipupkin 9y ago
  Buffet has a lot of expertise investing in businesses where cashflows can be analyzed. Not every investment is like that. Where it's not like that, his expertise is less valuable
  - TheAdamAndChe 9y ago
    Yet at the end of the day, Bitcoin is simply a store of value, just like any currency. And Buffet has plenty of experience with handling stores of value. Bitcoin's recent exponential growth screams "bubble" for anyone who knows what to watch for.
    - vasilipupkin 9y ago
      I don't get this whole store of value concept. Nothing is a store of value, all there is is investments with varying levels of risk.
      - TheAdamAndChe 9y ago
        Bitcoin is just a store of value because ownership itself does not produce any profits or dividends, profits require higher demand in the future. No wealth is generated, merely transferred. This is similar to gold, and very different from, say, ownership in a farm, where goods can be consistently generated and sold every year.
        vasilipupkin 9y ago
        gold is an investment, not a store of value. Between 1979 and 2001, it lost 70% of its value. What kind of store of value does that?
        TheAdamAndChe 9y ago
        Lots do. The dollar has greatly depreciated due to inflation. A dollar in 1950 would be the equivilant of $10.16 today[1]. [1] http://www.in2013dollars.com/1950-dollars-in-2017?amount=1 http://www.in2013dollars.com/1950-dollars-in-2017?amount=1
        vasilipupkin 9y ago
        that's my point. "Store of value" implies storing value, not losing value. Which is why I am saying there is no such thing - all you have is various types of investments which can make or lose money over time
        adventured 9y ago
        Gold did not lose value. It locked you in at the price you paid in that time's dollar. If you then try to swap that locked in value for a dollar at a later date that has a higher value, you will suffer the imbalance. It stored your value. It's the dollar that gained (or lost) value. You're attempting to move back into the dollar afterward, when the dollar's value has shifted. What you're describing is that, as an example, a mistake was made by locking in your value by buying gold at a weak 1980 dollar price, then the dollar gained significant value in subsequent years, and then you're again trying to move back out of gold and into the dollar later (ie exchanging gold for dollars) after the dollar has climbed (while your value in the gold was set at that weak 1980 dollar). Your loss is the difference between the two different values of the dollar at two points in time separated by decades.
  - bradleyjg 9y ago
    Yes, every investment is like that. The sine qua non of an investment is purchasing a productive asset. If you purchase a non-productive asset--that could be hedging, or speculation, or just consumption, but it isn't investing.
    - vasilipupkin 9y ago
      well, what I mean is, imagine a company that will have no cashflows for 100 years and then with probability 0.01% will have cashflows of 100 trillion gazillion. Buffet doesn't invest in those types of companies normally, that's not his edge.
- jonathanjaeger 9y ago
  What about a crypto with no transactions fees (e.g. Raiblocks)? Obviously volatility is still an issue.
  - davidcbc 9y ago
    Do you think that once bitcoin collapses under its own weight and investors lose a ton of money the general public is going to trust another cryptocurrency?
    - rndmwlk 9y ago
      Just like all internet based companies went out of business after the dot com bubble crashed. I agree that crypto is in a bubble right now, but that doesn't mean it has zero value as a technology.
    - realusername 9y ago
      It worked for the Internet bubble, just give it 10 more years . The bubble crash will slow down everything for a while but the technology is here to stay.
- DennisP 9y ago
  Tech stocks are assets, but Buffett has always said he purposely avoids most of them because he doesn't understand them well enough. Taking him at his own word, we shouldn't put all that much weight on his cryptocurrency opinions.
  - diab0lic 9y ago
    Cryptocurrency is comparable to a tech stock because computers? That's about the extent of what they have in common.
    - deleted 9y ago
      [deleted]
    - sodafountan 9y ago
      If you don't understand technology you're not going to understand crypto-currency, that's the point.
      - TheAdamAndChe 9y ago
        This is wrong. You don't need to understand hashing and network algorithms to understand supply and demand. There's a fixed supply of bitcoins and a rising demand due to speculation. Anyone can see that that this is what is driving the growth, but blind speculation is how bubbles form, and bubbles always pop. Here[1] are the signs of asset bubbles. I've posted the signs I feel are most relevant to Bitcoin below. > Rationalizing borrowing, lending and purchase decisions based on expected future price increases rather than the ability of the borrower to repay. > Rationalizing asset prices by increasingly weaker arguments, such as "this time it's different" or "housing prices only go up." > A high presence of marketing or media coverage related to the asset. [1] https://en.wikipedia.org/wiki/Economic_bubble#Identifying_asset_bubbles https://en.wikipedia.org/wiki/Economic_bubble#Identifying_as...
    - rytill 9y ago
      Compare it to something else then.
- nerdponx 9y ago
  Bitcoin does not represent all digital currency. Bitcoin will die, crypto currency will survive.
  - WalterSear 9y ago
    The mature and stable crypto-currency market will doubtlessly shrug off the demise of its founding coin. All the newbies who've never even opened a savings account before won't rush for the exits, and the market movers, given their decades of experience along with their secured and diversified assets, will doubtlessly take losses rather than slosh the deck. At least the terrible transaction speeds will mitigate a substantial amount of damage.
    - nerdponx 9y ago
      None of that has anything to do with the failure of cryptocurrency in general.
  - PeterisP 9y ago
    "Bitcoin will die, crypto currency will survive." is the exact scenario where investing in cryptocurrencies is stupid - if cryptocurrencies as a concept win, but the particular cryptocurrencies you bought fail, then you lose. Just as in the dotcom boom - the concept of dotcom businesses won (and absurdly so), but pretty much everyone who invested in dotcom businesses lost.
    - nerdponx 9y ago
      Who said to invest in them? Cryptocurrency is currency. Investing in forex is for nerds, quants, and banks. Cryptocurrency ought to be treated the same.
- wyager 9y ago
  > Google Tulip mania. People involved in cryptocurrencies hear this idiotic comparison all the time. By the way, the tulip mania was a myth. https://www.smithsonianmag.com/history/there-never-was-real-tulip-fever-180964915/ https://www.smithsonianmag.com/history/there-never-was-real-...
  - sodafountan 9y ago
    I don't know why this is getting down-voted. Tulips die, Blockchains don't.
    - sp527 9y ago
      It’s getting downvotes because crypto enthusiasts have strawman’ed their way out of the argument. The tulip bubble was above all a cautionary tale about the behavioral dynamics of speculative assets.
      - sodafountan 9y ago
        Except bitcoin isn't speculative, bitcoin has real value. It makes a great hedge against inflation and the global demand for it is a testimony to that. While it's true that we could be seeing over-inflated prices now or in the future, I FULLY believe that the value of bitcoin will always increase over the long term. It's a principal of the technology it's deflationary. That's not a bubble my friend.
        imtringued 9y ago
        The problem is it's increasing faster than inflation right now. That also means at some point it has to go down again to match the inflation rate.
        lurr 9y ago
        > Except bitcoin isn't speculative, bitcoin has real value because zealots say so.
- sodafountan 9y ago
  You realize things can change and adapt right? Just because bitcoin was conceptualized as a currency doesn't mean that it always has to be one. Bitcoin may prove to be a better store of value and a hedge against inflation, like a next generation savings account. Don't be so narrow minded. Look at how the web has evolved, I highly doubt Tim Berners Lee could conceptualize Facebook, Youtube or Google when he put together the fist world wide web page.
  - slivym 9y ago
    You can say that it can change to be something other than a currency, but unless you actually have something interesting to say about how it actually will become something else then you're really not saying much. It could become a hedge against inflation. Do you have any evidence that it acts as a hedge against inflation at all? Do you have any logic why it could? You may as well say that stones act as a good hedge against inflation. You need reasons to actually argue it.
    - sodafountan 9y ago
      The evidence is in the market, I don't see many people buying and selling rocks. What I do see is people buying and holding an asset that has gained hundreds of thousands of percentage points since its inception and could very well continue that trend. The real revelation came when someone decided to purchase bitcoin from someone else, from that point on bitcoin had value and it always will. But you go ahead and try to sell some rocks you picked up off of the ground to someone and then report back here and let me know you did.
      - PeterisP 9y ago
        "people buying and holding an asset that has gained hundreds of thousands of percentage points since its inception and could very well continue that trend" applied to all kinds of stuff like the beanie baby craze as well. Seeing this behavior is not an evidence of something being long term value store. If the bitcoin doesn't gain a widespread practical use, it may well be that the long term value it has is, say, $100 / BTC, wiping out 99% of the value, and failing in any purpose as an inflation hedge or censorship-resistant store of value. Saying that it has value because it's being bought for ever increasing price is the "greater fool" value foundation, i.e. saying that it has value because someone else will value it even more later, which actually works really well (and can earn you a lot of money) until suddenly it doesn't. Other than that, any long-term valuation will have to be based on actual, practical, specific uses of Bitcoin (for example, but not limited to, as a transactional currency). It's easy to imagine realistic uses of Bitcoin that will justify some value, e.g. $10 or maybe $100 per BTC. However, the scenarios where the use is so massively valuable to justify a long-term market cap that matches a price of $10k or $100k per BTC require BTC to have a massive, very very widespread use - so either it will gain this massive use as a transactional currency (or something else), or the price won't be sustained nearly as high.
- panarky 9y ago
  Why does every discussion about cryptocurrency instantly devolve into a boring repetition of the same old stale arguments? Do you really think this community has never heard of the Dutch tulip mania? Everybody already knows cryptocurrencies are volatile and risky, what does this add to the conversation? Yes, let's talk again about how it's a Ponzi scheme, has no intrinsic value, can't buy coffee with it, it's only good for drugs and crime. Then supporters will say you can't trust banks, fiat is going to zero, and spew conspiracy theories about the Federal Reserve. Then someone will hype a random token, then a banker will call it all a fraud. Every. Single. Person. on this thread knows all of this already. Is there nothing new to talk about?
  - thesumofall 9y ago
    > Do you really think this community has never heard of the Dutch tulip mania? Likely. Also likely that most believe it was something that it wasn’t (a wide-spread market bubble): https://en.wikipedia.org/wiki/Tulip_mania#Modern_views https://en.wikipedia.org/wiki/Tulip_mania#Modern_views
  - JumpCrisscross 9y ago
    > Then supporters will say you can't trust banks, fiat is going to zero, and spew conspiracy theories about the Federal Reserve. Then someone will hype a random token, then a banker will call it all a fraud. :D
deleted 9y ago
[deleted]
rpedela 9y ago
Investing in Bitcoin, the currency, is just that: currency investing/speculation. Buffett knows and understands that. Investing in the blockchain technology is no different than investing in any other technology: invest in companies you think will use the technology effectively to create profitable businesses. It is actually the technology people that conflate the two and are getting confused by it.
sacheendra 9y ago
The post is remarkably devoid of any content and just a series of assertions. So, as you said, its the same take rehashed. But apart from that, bitcoin and the concept of cryptocurrency are conceptually not that difficult. And even if they were, their value is not due to their technical novelty but due to their fundamental nature as financial instruments. If Warren Buffet is warning against them, we do need to look at them and try to understand what is the problem he sees. As he knows more than most here about financial instruments. The risks need not be technical in nature at all. For example, governments could fail to recognize cryptocurrencies as valid contracts thus voiding the benfit of legal systems. So, you own tokens of a house? Good luck enforcing that.
- bradleyjg 9y ago
  > For example, governments could fail to recognize cryptocurrencies as valid contracts thus voiding the benefit of legal systems. Another one is that courts could treat coins as chattels rather than legal tender / negotiable instruments. In that case cryptocoins that were stolen would thereafter be tainted and subsequent holders would be a risk for liability for trading stolen goods (even if they are other otherwise innocent third parties).
nxsynonym 9y ago
Understanding how Bitcoin and cryptocurrencies work in general doesn't make them suddenly have more value. I really wish supporters would stop parroting the "if you only understood you would see how good of an investment this is" argument. Just because you read the white paper and spend 20 hours a day refreshing news alerts for bitcoin doesn't make your investment a good one. I agree this article doesn't add anything to the discussion. If anything, Bloomberg is making out by selling the proverbial shovels around here by fueling the hype machine.
- samsonradu 9y ago
  This 100 times. Crypto currencies can be both successful (read widely-adopted) and have a sane, stable valuation. It is harder and harder to argue around bitcoin since a lot of people have taken sides already and have “skin-in-the-game”. Every time one says crypto is overvalued the reply looks like: “you don’t understand”, many times coming from somebody who barely understands what distributed and consensus mean. No pun intended.
- teekert 9y ago
  There is a difference between people understanding why Bitcoin is like gold and people that say it can't have value because it's "made out of thin air." Not saying Buffet is one of those but such people pop up every now and then.
  - ameister14 9y ago
    I honestly don't think people understand why Bitcoin is like gold because Bitcoin shares almost no characteristics with gold.
    - teekert 9y ago
      It's more like gold than money because Gold is finite and it takes effort to mine it but anyone can do it, both things are not true for money.
      - 9y ago
ckastner 9y ago
But he does seem to have an uncanny ability to think rationally, to recognize when the broad market doesn't, and to capitalize on this difference.
- madeuptempacct 9y ago
  To deny this is simply delusional.
nolok 9y ago
Buffett said he didn't want to invest in IT because he didn't understand it enough, but it also lead him to never say it was going to fail. Here it's different, he specifically points out that he thinks it will fail. You may disagree with his point of view, but to dismiss his input as absolutely irrelevant is out of touch, so is claiming he "doesn't add anything of value to the discussion": his opinion, by value of who he is and his experience, is value to the discussion in a field that is still about speculation and high risk investment. I find it interesting how many people on here like to eat up the words of most mogul and take it as semi gospel, then balks when one of them goes against one of their pet love thing. This is not specific of cryptocurrencies, although due to their "get rich quick" attributes these tend to make it even stronger. Just goes to show how people are the same everywhere, even (hell, especially) the "more informed". I don't personally believe in his point of view, I think while all current cryptocurrencies are going to fail or at least become a small sideshow especially the big names ones, the next wave will be smarter in what they try to be. Still, I value his input as much if not more as those of "self proclaimed cryptocurrency experts" who merely happened to have made one good bet. He made a ton more of those.
Zak 9y ago
> Buffett doesn't understand Bitcoin And Buffett has repeatedly said that it's a bad idea to invest in things you don't understand. He's also known for preferring longer-term investing to short-term speculation. As for cryptocurrency values, of course they're all quite volatile. Anybody who reads HN is probably aware of this by now. Using them as a long-term store of value without actively managing a portfolio right now would be unwise. Long-term, however, I expect distributed cryptocurrency will replace centralized fiat currency for most purposes. All it would take is an existing cryptocurrency that actually works well as a currency (not Bitcoin) combined with a financial crisis.
madeuptempacct 9y ago
And McAffee is a good subject-matter-expert according to you, right? Obviously he has done way better than Buffet? Is more reliable? Though Thiel's de factor endorsement goes a long way...assuming his fund hasn't sold yet.
htormey 9y ago
I’d also add that buffet hates the concept of gold. Aside from a socially acceptable form of modern middle class gambling in my opinion the primary use case of crypto currency is a store of value. Aside from the amount of time it’s been in existence what is the difference between gold and something like bitcoin? Only ~4 of gold is used for industrial purposes the remainder is used for jewelery and stuff like bullion. Basically stores of value. It trades at a premium above its cost to extract, store and transport.
otachack 9y ago
My problem with it all is right now, there are numerous ICOs happening by new companies, old companies, and small groups of people. Instead of adapting ones created already, such as ethereum, they claim theirs takes it to the next step. When does it all stabilize and people actually use the currency instead of invest? Who knows.
mcguire 9y ago
On the other hand, I believe Buffett does understand currencies. And personally, I don't really see what the "technology" brings to the party other than a specific bag of features. Kind of like Uber.

samfisher83 9y ago

Crypto currency is an asset. He has bought and sold a lot of assets over time and has done pretty well. Google Tulip mania. The whole point of bitcoin was a form a digital currency. However due to the high transaction fees and volatility you can't really use it for that. I have no idea where it is going, but to dismiss a guy who has experience buying and selling things for a long time seems foolish.

vasilipupkin 9y ago
Buffet has a lot of expertise investing in businesses where cashflows can be analyzed. Not every investment is like that. Where it's not like that, his expertise is less valuable
- TheAdamAndChe 9y ago
  Yet at the end of the day, Bitcoin is simply a store of value, just like any currency. And Buffet has plenty of experience with handling stores of value. Bitcoin's recent exponential growth screams "bubble" for anyone who knows what to watch for.
  - vasilipupkin 9y ago
    I don't get this whole store of value concept. Nothing is a store of value, all there is is investments with varying levels of risk.
    - TheAdamAndChe 9y ago
      Bitcoin is just a store of value because ownership itself does not produce any profits or dividends, profits require higher demand in the future. No wealth is generated, merely transferred. This is similar to gold, and very different from, say, ownership in a farm, where goods can be consistently generated and sold every year.
      - vasilipupkin 9y ago
        gold is an investment, not a store of value. Between 1979 and 2001, it lost 70% of its value. What kind of store of value does that?
        TheAdamAndChe 9y ago
        Lots do. The dollar has greatly depreciated due to inflation. A dollar in 1950 would be the equivilant of $10.16 today[1]. [1] http://www.in2013dollars.com/1950-dollars-in-2017?amount=1 http://www.in2013dollars.com/1950-dollars-in-2017?amount=1
        vasilipupkin 9y ago
        that's my point. "Store of value" implies storing value, not losing value. Which is why I am saying there is no such thing - all you have is various types of investments which can make or lose money over time
        adventured 9y ago
        Gold did not lose value. It locked you in at the price you paid in that time's dollar. If you then try to swap that locked in value for a dollar at a later date that has a higher value, you will suffer the imbalance. It stored your value. It's the dollar that gained (or lost) value. You're attempting to move back into the dollar afterward, when the dollar's value has shifted. What you're describing is that, as an example, a mistake was made by locking in your value by buying gold at a weak 1980 dollar price, then the dollar gained significant value in subsequent years, and then you're again trying to move back out of gold and into the dollar later (ie exchanging gold for dollars) after the dollar has climbed (while your value in the gold was set at that weak 1980 dollar). Your loss is the difference between the two different values of the dollar at two points in time separated by decades.
- bradleyjg 9y ago
  Yes, every investment is like that. The sine qua non of an investment is purchasing a productive asset. If you purchase a non-productive asset--that could be hedging, or speculation, or just consumption, but it isn't investing.
  - vasilipupkin 9y ago
    well, what I mean is, imagine a company that will have no cashflows for 100 years and then with probability 0.01% will have cashflows of 100 trillion gazillion. Buffet doesn't invest in those types of companies normally, that's not his edge.
jonathanjaeger 9y ago
What about a crypto with no transactions fees (e.g. Raiblocks)? Obviously volatility is still an issue.
- davidcbc 9y ago
  Do you think that once bitcoin collapses under its own weight and investors lose a ton of money the general public is going to trust another cryptocurrency?
  - rndmwlk 9y ago
    Just like all internet based companies went out of business after the dot com bubble crashed. I agree that crypto is in a bubble right now, but that doesn't mean it has zero value as a technology.
  - realusername 9y ago
    It worked for the Internet bubble, just give it 10 more years . The bubble crash will slow down everything for a while but the technology is here to stay.
DennisP 9y ago
Tech stocks are assets, but Buffett has always said he purposely avoids most of them because he doesn't understand them well enough. Taking him at his own word, we shouldn't put all that much weight on his cryptocurrency opinions.
- diab0lic 9y ago
  Cryptocurrency is comparable to a tech stock because computers? That's about the extent of what they have in common.
  - deleted 9y ago
    [deleted]
  - sodafountan 9y ago
    If you don't understand technology you're not going to understand crypto-currency, that's the point.
    - TheAdamAndChe 9y ago
      This is wrong. You don't need to understand hashing and network algorithms to understand supply and demand. There's a fixed supply of bitcoins and a rising demand due to speculation. Anyone can see that that this is what is driving the growth, but blind speculation is how bubbles form, and bubbles always pop. Here[1] are the signs of asset bubbles. I've posted the signs I feel are most relevant to Bitcoin below. > Rationalizing borrowing, lending and purchase decisions based on expected future price increases rather than the ability of the borrower to repay. > Rationalizing asset prices by increasingly weaker arguments, such as "this time it's different" or "housing prices only go up." > A high presence of marketing or media coverage related to the asset. [1] https://en.wikipedia.org/wiki/Economic_bubble#Identifying_asset_bubbles https://en.wikipedia.org/wiki/Economic_bubble#Identifying_as...
  - rytill 9y ago
    Compare it to something else then.
nerdponx 9y ago
Bitcoin does not represent all digital currency. Bitcoin will die, crypto currency will survive.
- WalterSear 9y ago
  The mature and stable crypto-currency market will doubtlessly shrug off the demise of its founding coin. All the newbies who've never even opened a savings account before won't rush for the exits, and the market movers, given their decades of experience along with their secured and diversified assets, will doubtlessly take losses rather than slosh the deck. At least the terrible transaction speeds will mitigate a substantial amount of damage.
  - nerdponx 9y ago
    None of that has anything to do with the failure of cryptocurrency in general.
- PeterisP 9y ago
  "Bitcoin will die, crypto currency will survive." is the exact scenario where investing in cryptocurrencies is stupid - if cryptocurrencies as a concept win, but the particular cryptocurrencies you bought fail, then you lose. Just as in the dotcom boom - the concept of dotcom businesses won (and absurdly so), but pretty much everyone who invested in dotcom businesses lost.
  - nerdponx 9y ago
    Who said to invest in them? Cryptocurrency is currency. Investing in forex is for nerds, quants, and banks. Cryptocurrency ought to be treated the same.
wyager 9y ago
> Google Tulip mania. People involved in cryptocurrencies hear this idiotic comparison all the time. By the way, the tulip mania was a myth. https://www.smithsonianmag.com/history/there-never-was-real-tulip-fever-180964915/ https://www.smithsonianmag.com/history/there-never-was-real-...
- sodafountan 9y ago
  I don't know why this is getting down-voted. Tulips die, Blockchains don't.
  - sp527 9y ago
    It’s getting downvotes because crypto enthusiasts have strawman’ed their way out of the argument. The tulip bubble was above all a cautionary tale about the behavioral dynamics of speculative assets.
    - sodafountan 9y ago
      Except bitcoin isn't speculative, bitcoin has real value. It makes a great hedge against inflation and the global demand for it is a testimony to that. While it's true that we could be seeing over-inflated prices now or in the future, I FULLY believe that the value of bitcoin will always increase over the long term. It's a principal of the technology it's deflationary. That's not a bubble my friend.
      - imtringued 9y ago
        The problem is it's increasing faster than inflation right now. That also means at some point it has to go down again to match the inflation rate.
      - lurr 9y ago
        > Except bitcoin isn't speculative, bitcoin has real value because zealots say so.
sodafountan 9y ago
You realize things can change and adapt right? Just because bitcoin was conceptualized as a currency doesn't mean that it always has to be one. Bitcoin may prove to be a better store of value and a hedge against inflation, like a next generation savings account. Don't be so narrow minded. Look at how the web has evolved, I highly doubt Tim Berners Lee could conceptualize Facebook, Youtube or Google when he put together the fist world wide web page.
- slivym 9y ago
  You can say that it can change to be something other than a currency, but unless you actually have something interesting to say about how it actually will become something else then you're really not saying much. It could become a hedge against inflation. Do you have any evidence that it acts as a hedge against inflation at all? Do you have any logic why it could? You may as well say that stones act as a good hedge against inflation. You need reasons to actually argue it.
  - sodafountan 9y ago
    The evidence is in the market, I don't see many people buying and selling rocks. What I do see is people buying and holding an asset that has gained hundreds of thousands of percentage points since its inception and could very well continue that trend. The real revelation came when someone decided to purchase bitcoin from someone else, from that point on bitcoin had value and it always will. But you go ahead and try to sell some rocks you picked up off of the ground to someone and then report back here and let me know you did.
    - PeterisP 9y ago
      "people buying and holding an asset that has gained hundreds of thousands of percentage points since its inception and could very well continue that trend" applied to all kinds of stuff like the beanie baby craze as well. Seeing this behavior is not an evidence of something being long term value store. If the bitcoin doesn't gain a widespread practical use, it may well be that the long term value it has is, say, $100 / BTC, wiping out 99% of the value, and failing in any purpose as an inflation hedge or censorship-resistant store of value. Saying that it has value because it's being bought for ever increasing price is the "greater fool" value foundation, i.e. saying that it has value because someone else will value it even more later, which actually works really well (and can earn you a lot of money) until suddenly it doesn't. Other than that, any long-term valuation will have to be based on actual, practical, specific uses of Bitcoin (for example, but not limited to, as a transactional currency). It's easy to imagine realistic uses of Bitcoin that will justify some value, e.g. $10 or maybe $100 per BTC. However, the scenarios where the use is so massively valuable to justify a long-term market cap that matches a price of $10k or $100k per BTC require BTC to have a massive, very very widespread use - so either it will gain this massive use as a transactional currency (or something else), or the price won't be sustained nearly as high.
panarky 9y ago
Why does every discussion about cryptocurrency instantly devolve into a boring repetition of the same old stale arguments? Do you really think this community has never heard of the Dutch tulip mania? Everybody already knows cryptocurrencies are volatile and risky, what does this add to the conversation? Yes, let's talk again about how it's a Ponzi scheme, has no intrinsic value, can't buy coffee with it, it's only good for drugs and crime. Then supporters will say you can't trust banks, fiat is going to zero, and spew conspiracy theories about the Federal Reserve. Then someone will hype a random token, then a banker will call it all a fraud. Every. Single. Person. on this thread knows all of this already. Is there nothing new to talk about?
- thesumofall 9y ago
  > Do you really think this community has never heard of the Dutch tulip mania? Likely. Also likely that most believe it was something that it wasn’t (a wide-spread market bubble): https://en.wikipedia.org/wiki/Tulip_mania#Modern_views https://en.wikipedia.org/wiki/Tulip_mania#Modern_views
- JumpCrisscross 9y ago
  > Then supporters will say you can't trust banks, fiat is going to zero, and spew conspiracy theories about the Federal Reserve. Then someone will hype a random token, then a banker will call it all a fraud. :D

deleted 9y ago

[deleted]

rpedela 9y ago

Investing in Bitcoin, the currency, is just that: currency investing/speculation. Buffett knows and understands that. Investing in the blockchain technology is no different than investing in any other technology: invest in companies you think will use the technology effectively to create profitable businesses. It is actually the technology people that conflate the two and are getting confused by it.

sacheendra 9y ago

The post is remarkably devoid of any content and just a series of assertions. So, as you said, its the same take rehashed. But apart from that, bitcoin and the concept of cryptocurrency are conceptually not that difficult. And even if they were, their value is not due to their technical novelty but due to their fundamental nature as financial instruments. If Warren Buffet is warning against them, we do need to look at them and try to understand what is the problem he sees. As he knows more than most here about financial instruments. The risks need not be technical in nature at all. For example, governments could fail to recognize cryptocurrencies as valid contracts thus voiding the benfit of legal systems. So, you own tokens of a house? Good luck enforcing that.

bradleyjg 9y ago
> For example, governments could fail to recognize cryptocurrencies as valid contracts thus voiding the benefit of legal systems. Another one is that courts could treat coins as chattels rather than legal tender / negotiable instruments. In that case cryptocoins that were stolen would thereafter be tainted and subsequent holders would be a risk for liability for trading stolen goods (even if they are other otherwise innocent third parties).

nxsynonym 9y ago

Understanding how Bitcoin and cryptocurrencies work in general doesn't make them suddenly have more value. I really wish supporters would stop parroting the "if you only understood you would see how good of an investment this is" argument. Just because you read the white paper and spend 20 hours a day refreshing news alerts for bitcoin doesn't make your investment a good one. I agree this article doesn't add anything to the discussion. If anything, Bloomberg is making out by selling the proverbial shovels around here by fueling the hype machine.

samsonradu 9y ago
This 100 times. Crypto currencies can be both successful (read widely-adopted) and have a sane, stable valuation. It is harder and harder to argue around bitcoin since a lot of people have taken sides already and have “skin-in-the-game”. Every time one says crypto is overvalued the reply looks like: “you don’t understand”, many times coming from somebody who barely understands what distributed and consensus mean. No pun intended.
teekert 9y ago
There is a difference between people understanding why Bitcoin is like gold and people that say it can't have value because it's "made out of thin air." Not saying Buffet is one of those but such people pop up every now and then.
- ameister14 9y ago
  I honestly don't think people understand why Bitcoin is like gold because Bitcoin shares almost no characteristics with gold.
  - teekert 9y ago
    It's more like gold than money because Gold is finite and it takes effort to mine it but anyone can do it, both things are not true for money.
    - 9y ago

ckastner 9y ago

But he does seem to have an uncanny ability to think rationally, to recognize when the broad market doesn't, and to capitalize on this difference.

madeuptempacct 9y ago
To deny this is simply delusional.

nolok 9y ago

Buffett said he didn't want to invest in IT because he didn't understand it enough, but it also lead him to never say it was going to fail. Here it's different, he specifically points out that he thinks it will fail. You may disagree with his point of view, but to dismiss his input as absolutely irrelevant is out of touch, so is claiming he "doesn't add anything of value to the discussion": his opinion, by value of who he is and his experience, is value to the discussion in a field that is still about speculation and high risk investment. I find it interesting how many people on here like to eat up the words of most mogul and take it as semi gospel, then balks when one of them goes against one of their pet love thing. This is not specific of cryptocurrencies, although due to their "get rich quick" attributes these tend to make it even stronger. Just goes to show how people are the same everywhere, even (hell, especially) the "more informed". I don't personally believe in his point of view, I think while all current cryptocurrencies are going to fail or at least become a small sideshow especially the big names ones, the next wave will be smarter in what they try to be. Still, I value his input as much if not more as those of "self proclaimed cryptocurrency experts" who merely happened to have made one good bet. He made a ton more of those.

Zak 9y ago

> Buffett doesn't understand Bitcoin And Buffett has repeatedly said that it's a bad idea to invest in things you don't understand. He's also known for preferring longer-term investing to short-term speculation. As for cryptocurrency values, of course they're all quite volatile. Anybody who reads HN is probably aware of this by now. Using them as a long-term store of value without actively managing a portfolio right now would be unwise. Long-term, however, I expect distributed cryptocurrency will replace centralized fiat currency for most purposes. All it would take is an existing cryptocurrency that actually works well as a currency (not Bitcoin) combined with a financial crisis.

madeuptempacct 9y ago

And McAffee is a good subject-matter-expert according to you, right? Obviously he has done way better than Buffet? Is more reliable? Though Thiel's de factor endorsement goes a long way...assuming his fund hasn't sold yet.

htormey 9y ago

I’d also add that buffet hates the concept of gold. Aside from a socially acceptable form of modern middle class gambling in my opinion the primary use case of crypto currency is a store of value. Aside from the amount of time it’s been in existence what is the difference between gold and something like bitcoin? Only ~4 of gold is used for industrial purposes the remainder is used for jewelery and stuff like bullion. Basically stores of value. It trades at a premium above its cost to extract, store and transport.

otachack 9y ago

My problem with it all is right now, there are numerous ICOs happening by new companies, old companies, and small groups of people. Instead of adapting ones created already, such as ethereum, they claim theirs takes it to the next step. When does it all stabilize and people actually use the currency instead of invest? Who knows.

mcguire 9y ago

On the other hand, I believe Buffett does understand currencies. And personally, I don't really see what the "technology" brings to the party other than a specific bag of features. Kind of like Uber.