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Warren Buffett Predicts 'Bad Ending' for Cryptocurrencies (cnbc.com)
"97% of all bitcoins are held by 4% of addresses," reports Credit Suisse (in an article cited by Slashdot reader CaptainDork). And elsewhere this week, Warren Buffett told CNBC that speculation in bitcoin and other cryptocurrencies "will have a bad ending," adding that looking out five years he'd gladly bet against all of the cryptocurrencies.
Meanwhile, CNBC senior analyst Ron Insana has his own skepticism: I am predisposed to view them as just speculative tokens in a cryptocurrency bubble that has inflated more quickly than any other in financial market history. Admittedly I'm green with envy for failing to foresee the explosive rally in the price of bitcoin when it was first brought to my attention several years ago. Having said that, there are many things I find quite ironic about how bitcoin and other "cryptos" are described. First, they are largely denominated, or discussed, in U.S. dollar terms... If the dollar is archaic, as the crypto-enthusiasts believe, why not speak only in crypto-terms...?
It's much easier to buy and sell dollars, stocks or commodities than it is to trade bitcoin and its brethren. The conversion of one crypto to another is relatively easy on these embryonic exchanges. But getting your digital wealth converted into cold hard cash is more problematic... And while the growth has been impressive, it remains very difficult to walk into any establishment and exchange a digital token for goods or services.
The article notes that the U.S. dollar still accounts for 65% of all global economic transactions, due to its status as the world's reserve currency, and concludes that "The adoption of cryptocurrencies as a global source of funds has a long way to go before staking a claim to the world's economy."
Meanwhile, CNBC senior analyst Ron Insana has his own skepticism: I am predisposed to view them as just speculative tokens in a cryptocurrency bubble that has inflated more quickly than any other in financial market history. Admittedly I'm green with envy for failing to foresee the explosive rally in the price of bitcoin when it was first brought to my attention several years ago. Having said that, there are many things I find quite ironic about how bitcoin and other "cryptos" are described. First, they are largely denominated, or discussed, in U.S. dollar terms... If the dollar is archaic, as the crypto-enthusiasts believe, why not speak only in crypto-terms...?
It's much easier to buy and sell dollars, stocks or commodities than it is to trade bitcoin and its brethren. The conversion of one crypto to another is relatively easy on these embryonic exchanges. But getting your digital wealth converted into cold hard cash is more problematic... And while the growth has been impressive, it remains very difficult to walk into any establishment and exchange a digital token for goods or services.
The article notes that the U.S. dollar still accounts for 65% of all global economic transactions, due to its status as the world's reserve currency, and concludes that "The adoption of cryptocurrencies as a global source of funds has a long way to go before staking a claim to the world's economy."
He's right in the fact that this is likely a bubble. It will likely correct. I highly doubt bitcoin will ever return to zero (unless there is a nuclear war and then so will the dollar). Every market corrects, even the stock market.
He's wrong in the fact that he thinks of bitcoin as a fiat currency. Its not and never will be. Bitcoin will be like diamonds in the regard that it will carry a constantly changing value. Bitcoin although called a crypto-"currency" should be considered a crypto-"stock".
Mike @ The Geek Pub. Let's Make Stuff!
Hmm. Whose investment advice should I take, Warren Buffet's or Anonymous Coward's?
Post may contain irony: discontinue use if experiencing mood swings, nausea or elevated blood pressure.
Don't know about that, but I sure wish I had ignored the nay-sayers on Slashdot a few years back when you could still mine bitcoin on the CPU. It would have been easy, it would have been fun, but I listened to too many negative people and lost out. Oh well.
"First they came for the slanderers and i said nothing."
Crypto currencies are fantastic investments, with their value pegged to the price of Dutch Tulip Bulbs...
Ken
Buffet is notoriously conservative. He refused to invest in data and software for decades. Conservative investors have better long term returns. Doesn't mean that an alternative approach would not have worked though.
Bitcoin was predicted by Neal Stephenson in Cryptonomicon around 2000, but he assumed it would need to be backed by gold. He as wrong, and in fact, too conservative.
http://michaelsmith.id.au
Bitcoin is another tulips. Some cryptocurrency will always have value, just as tulips still sell for as much as $10. But they once sold for literally 10x the annual income of a skilled craftsmen.
My personal favorite is the wikipedia's page list of what was exchanged once for a single tulip bulb, which included (among other things) four tun of beer and two hogshead of wine AND a silver cup to drink it (1 hogshead = 79 gallons, 4 hogshead = 1 tun, so clearly a beer lover).
A mania is basically when non-professionals enter the market for speculative purposes, rather than because they want/need the core item.
This is clearly happening with the cryptocurrencies. The only question is, what will their real value end up after the mania has ended.
excitingthingstodo.blogspot.com
I mean, if he's so smart, why ain't he rich?
You are welcome on my lawn.
I don't know, that Cheeseburger in Paradise song kind of sucks.
You are welcome on my lawn.
That fact that it isn't backed by gold makes bitcoin the worst combination of the gold standard (inflexible and prone to volatility) and a fiat currency (essentially worthless, you're buying on faith alone and that's all you have if it goes south) with the added bonuses of design flaws and easy theft and permanent loss.
"Be particularly skeptical when presented with evidence confirming what you already believe." -
Cryptocurrencies have purpose and the technology will be useful in multiple fields. Bitcoin no longer has purpose or use and is worthless.
"Be particularly skeptical when presented with evidence confirming what you already believe." -
But if you were sane, you'd have cashed out by now. Or if it took nothing to get, you'd ride it until after it crashes. Basically, there's no alternate universe that proves you made X dollars by doing the other thing, so why bother? The only people I've known who've held alt coins told me how much they've made while they were still holding. I've yet to meet a single person who can show me the tens of thousands they made sitting in their bank accounts right now. (Not to say they don't exist, but people also win lotteries, doesn't mean I feel bad for not playing.)
"Old man yells at systemd"
I mean, he has inso far as he isn't participating. But between you and an insanely rich dude, I pick the insanely rich dude for smarts. I the like "oligarchy dollar rich" euphemism for "actually rich".
"Old man yells at systemd"
OK... where to start. A lot of what you said about Bitcoin, is alrightish. Everything you said about the stock market is pretty much dead wrong.
Warren Buffet isn't a regular trader. He is a hybrid between a lender and trader. His funding doesn't come from purchasing the same shares as you or I would. He gets special control, walkout clauses, and schedules. He also has restrictions like not being able to do shareholder control, or having to hold the shares for X time (similar to CEOs). So he might give a company $9 million in funds, but he won't be able to sell them for 5 years or he can if the price goes below $X (many times even above $Y). He might give it based on the the company focusing in a specific market sector or putting it into R&D, etc. He might guarantee that he will provide the funding over the next 10 years on a $1 million per year basis but that the price can't fluctuate outside a certain window. Etc.
Mr Buffet doesn't do trading like we do. A elephant can't move like the mice in a glassware shop.
The vast majority of the institutions that act in the stock market are government/company pensions, retirement accounts, insurance accounts, escrows, and rich entities (ie: trusts, rich people/companies, estates, etc). If they played on buy low, sell high, they would just be stealing funds from each other. They aren't stupid, nor foolish to believe one will beat the others. If that's all the stock market is, they can stick to far more fun games (ie: commodities trading, futures, & currencies). These entities are also well regulated (so is Buffet), they aren't allowed to do pump & dump, nor invest widely in unregulated entities like Bitcoin (thou they can still plan regulated exposure).
This is why private unregulated hedge funds were and still are so popular. The majority are them are very successful but some get too big. Of course its a winner-loser game for them so losses are spectacular (ie: Madoff, Cohen, Rajaratnam, ...).
You can use companys that trade fractions of gold like goldmoney.com and then yes you can buy a stick of gum with gold and a .05% transaction charge.
Like Kim Kardashian is worth $175 Million but her value to society...
What is it about Bitcoin that makes people throw logic completely out the window? It's a really obvious bubble, and in many ways worse than most bubbles because there is literally nothing of value underneath it all. For example the housing bubble(s) (plural because it's pretty cyclical, seems like we're on the up-rise of another one now) -- at least when it pops, you have land & structures to show for it. Did you pay too much for that at the top of the bubble? Yes, but you can still turn those into income to help cut your losses. Stock bubbles -- same thing, history has shown that if you play the long game, the bubbles and their popping aren't really as devastating as they seem.
I'm not sure -- did people behave like this when the beanie baby craze was going on in the 90s? Did they react with insults and call you stupid if you tried to point out that it's a bubble? I knew lots of people who were in that bubble, and none of them are rich now -- do YOU know any beanie baby millionaires? Possibly the CEO of Ty...
So Bitcoin is obviously a pure speculation market and has no intrinsic value -- what scares me more is how defensive people get when you say that. Look at the above comments for examples, there are plenty!
My advice to BTC prospectors: Get out now. If you got into BTC early, great -- you should be able to turn that into a ton of spendable/investable cash! "But won't it cause a crash if everyone gets out now?" you ask -- possibly, but first of all it's better to be the cause of the crash by protecting yourself than the victim of the crash by waiting too long. Also, since 97% of BTC are held by a few people, the crash isn't likely unless those 4% start selling off, too...
So that's his father?
You are welcome on my lawn.
Walk in to Gold Dealer near the Los Angeles Airport, give them an ounce of gold (at $1337.40 at the time of this writing) and they hand you $1337.40 in USD - zero cost conversion. No paperwork. No trail. They pay spot price, no fee. Then you can do whatever you want with the easily exchanged currency.
Browsing at +1 - no ACs, I ignore their posts. So refreshing!