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Shares give you a stake in a productive(hopefully) enterprise, cryptocurrency does not give you anything but a token. This is the problem that Buffett has with
by sireat 8y ago
Shares give you a stake in a productive(hopefully) enterprise, cryptocurrency does not give you anything but a token.
This is the problem that Buffett has with cryptocurrencies.
When you buy shares in a company you are buying claims to its future earnings at least in theory.
Theory being that should the company not serve shareholder needs you can force the company to distribute the earnings/dissolve/merge etc etc.
(Not going into the whole modern abomination to strip lesser shareholders of their rights to vote as Google, Facebook, Snap have done with their tiered stocks).
When you are buying Bitcoin or any other cryptocurrency and yes that means ICOs too you are buying digital tokens with no claims to anything besides being a proof of having that token. It is solely 'castles in the air' which Keynes so long ago stated regarding stock market but in the stock market it is not the sole factor.
In some ways cryptocurrency is closer to regular currency but not backed by the government's mandate to receive taxes in said currency.
In other ways cryptocurrency is closer to tulips,gold,MagicTheGathering cards in that the value is based on something that some number of people agree on(ie the market).
Except cryptocurrency has no utility besides being a token, wherein tulips, gold and MagicTheGathering cards possess some utility outside being a token of exchange.
- SimbaOnSteroids 8y agoOne: Thank you for helping rationalize that my Magic The Gathering habit isn't a problem. Two: I know you said >Not going into the whole modern abomination to strip lesser shareholders of their rights to vote as Google, Facebook, Snap have done with their tiered stocks However if you want to argue you're problems with crypto (there are many) we need to make arguments using the way things are in the real world. Given I'm a retail investor. In one universe I place a bet on Snap for 50k. In another I took that same 50k and put it into bitcoin. In both universes my bet goes bad, both asset's price per unit goes to 0. Snap goes through the process of being liquidated. Remember I'm a retail investor, I own common stock. Now am I better off in one universe over another? I'd argue that I'm not. However if I were Warren Buffet, I'd have been much better off bought Snap as I would have preferred shares.
- sireat 8y agoYou might not be better off in either universe but my reply was regarding difference between buying cryptocurrencies and buying shares. Buying shares is like investing 50k in your Uncle Eddies seashell harvesting venture. In return you receive 50% share in his venture that is you get half of all future seashells harvested by Eddie. Buying cryptocurrencies is like giving 50k USD to your Uncle Eddie and getting some seashells back but that is it! There is an active market for these seashells and price goes up and down. However you do not get to claim any more seashells produced by Uncle Eddie. Buying common shares implies certain rights to some enterprise while buying cryptocurrencies implies nothing.