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Bitcoin The Almighty Buck

Bitcoin Surges 25% In One Week. Warren Buffett Still Won't Buy It (forbes.com) 217

Posted by EditorDavid from the no-sale dept.
Last Sunday we reported Bitcoin's price had surged 50% in the previous month.

In the week since it's surged another 24.8%.

As Bitcoin celebrates its 12th anniversary, a Forbes columnist writes that Bitcoin "soared to $34,000 yesterday — but here's why Warren Buffett will never own Bitcoin." Buffett has called Bitcoin, among other names, "rat poison squared" and has said he won't ever buy the cryptocurrency. "I don't have any cryptocurrency and I never will," Buffett told CNBC in February, when Bitcoin was trading at about $10,000. Here are 3 reasons why Buffett will never own Bitcoin, no matter how high the price of Bitcoin soars:

Buffett believes that Bitcoin has no underlying value. As a value investor, Buffett invests in companies that are undervalued, produce stable and recurring cash flow and have the ability to increase in book value. To Buffett, Bitcoin doesn't produce earnings or dividends. Rather, the value of Bitcoin is simply what one person is willing to pay for it. In this regard, Bitcoin is no different than the tulip craze of 1637. Therefore, Buffett believes that Bitcoin has no inherent value...

While all investing involves some degree of speculation, Buffett's background is in insurance and risk mitigation. Buffett doesn't invest in "high fliers" — that's not his game. His game is "buy and hold" — forever. He invests in companies that grow over time, steadily and consistently.
And the third reason? Warren Buffett "only invests in things he understands."

"He prefers to invest in stable consumer goods companies like Coca-Cola and financial services companies like American Express."
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Bitcoin Surges 25% In One Week. Warren Buffett Still Won't Buy It More

Bitcoin Surges 25% In One Week. Warren Buffett Still Won't Buy It

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  • He's refreshingly clear-eyed on this (Score:3, Interesting)

    by DeplorableCodeMonkey ( 4828467 ) on Sunday January 03, 2021 @02:53PM (#60891372)

    Buffett believes that Bitcoin has no underlying value.

    He's correct. Bitcoin is like a fiat currency, but without the ability to settle tax debts. In the US, you're free to conduct all of your transactions in Zimbabwean dollars, but your transactions will be audited by the IRS using US Dollar valuations, and you'd better pay up in our currency. Same deal with Bitcoin.

    • Re:He's refreshingly clear-eyed on this (Score:4, Insightful)

      by phantomfive ( 622387 ) on Sunday January 03, 2021 @03:12PM (#60891442) Journal

      Not to mention, if you're Warren Buffet, you have plenty of very good investment opportunities. You don't need to invest in everything, just things you understand. He's done well following that strategy.

      • To be clear, *EVERYONE* should follow that strategy. It's mind-blowingly stupid to invest in things you don't understand. How can you make an informed decision on the risk vs reward of an investment when you don't understand how something works?

    • Re:He's refreshingly clear-eyed on this (Score:4, Insightful)

      by shanen ( 462549 ) on Sunday January 03, 2021 @03:22PM (#60891478) Homepage Journal

      It's the fake scarcity that convinces me there's nothing there in BitCoin. It was kind of a clever marketing ploy to "mine" for coins by wasting electricity, but there is nothing preventing the creation of an infinite number of other kinds of funny cyber money. The value of BitCoin is a matter of opinion, but without any commitment from governments to prop up the illusion (the way they are propping up stock prices).

      I won't gamble on it. I won't even gamble on how it will implode, but I'm sure the question is "when" not "if". And yet I have to admire the way the Chinese have played the BitCoin game. Not actually forbidding it, but not really sanctioning it, either. Looks to me like China wants to be in a position from which they can crush BitCoin at any time, but without being in a position to get hurt if anyone else tries to pick a time.

      I finally forced myself to read a number of books about BitCoin and blockchain last year. Blockchain is an interesting solution in search of a problem, but BitCoin is just a shoe waiting to drop. But does anyone have any books or authors to recommend for the new year?

      • It's the fake scarcity that convinces me there's nothing there in BitCoin.

        Really curious as to what makes you think the scarcity of BitCoin is fake...

        • Re: (Score:2)

          by iNaya ( 1049686 )
          Because one can clone the system infinite times, making infinite different currencies that are pretty much exactly the same.

      • Re: (Score:2)

        by rtb61 ( 674572 )

        The value of bitcoin is the value of the advertising that makes it appear to be worth something. This is of course reinforced by greed driven stupidity, right now they are buying it up, to pump up a bitcoin handling IPO for a real major pump and dump. Don't take the warning fine, don't cry when the dump happens, it will post IPO along with the dumping of those shares.

        I think they will crash and burn though, they are connected to internet connect sheep, many of whom will scatter and sell and the first scare

        • Re: (Score:2)

          by shanen ( 462549 )

          Yes, but each sucker always believes in his luck and timing and his skill in picking the lucky timing and therefore that he won't be the one left holding the empty bag. In reality, there will be plenty of empty bags so each of the suckers can have one. The actual money has usually been scammed away long before that.

          First time I saw this kind of thing up close was actually in the early 80s when I was working for some commercial realtors. Basically the same scams and same suckers, but with different wrapping

    • Venezuelans pay their taxes with the Venezuelan bolívar, but it doesn't make good currency. People expect currency to have stable value, or they flock to other means to make transactions.
      • Fiat currencies are backed by GDP and what matters most is the goods/services you can buy based on the nominal value of said currency. That is where Bitcoin falls over. It’s like claiming MIPS processors are the bees knees but if they can’t run the things you need, they’re going to be very useless for you.

        If I can’t be paid in Bitcoin, pay for everyday goods and services using Bitcoin or easily bank it with FSCS guarantees - it is useless to me and a lot of other people.

        • Fiat currencies are backed by GDP and what matters most is the goods/services you can buy based on the nominal value of said currency.

          Fiat currency is backed by the faith of the people that use it. [npr.org] Nothing else. If enough people believe it has value, then it does.

          Bitcoin has a faith issue. Some people think it will take over the world, some think it's garbage, and a lot of rampant speculation that doesn't care as long as they make some US greenbacks.

          • Not quite the same.

            I can choose to have faith in the USD or I can choose not to, but no matter what I need USD to pay my taxes and exist in society. I can't just decide to switch to having faith in another currency and use that.

            With Bitcoin I can have faith in it or not, and if not I can choose to have faith in LiteCoin or JunkCoin or DogeCoin or ThelaskoCoin which you create tomorrow. There is endless alternatives that are equally as good, as long as sufficient number of people have faith in them to ma

    • US currency: 'Fake' money printed as pretty lithiographs on fancy paper.
      Bitcoin: 'Fake' money sitting as bits on a hard drive.

      So this begs the question: Is Bitcoin faker than US dollars?

      • The metal value of the present-day U.S. penny is 0.72 cents, the dime is 1.92 cents. The material value of bitcoin is zero.

        • The metal value of the present-day U.S. penny is 0.72 cents, the dime is 1.92 cents.

          0.00025% of US dollars are in coinage.

    • Bitcoin is like a fiat currency, but without the ability to settle tax debts.

      Also without powerful governments interested in deflating its value to monetize their debts.

    • Re: (Score:2)

      by Kisai ( 213879 )

      Bitcoin is hardly a fiat currency, it's more like trading rat tails in WoW. Nobody actually trades in rat-tails except the rat-tail quest giver, and unless you are doing that quest, nobody else in the world will take your rat tails.

  • All pumped up. (Score:5, Insightful)

    by Gravis Zero ( 934156 ) on Sunday January 03, 2021 @02:55PM (#60891380)

    Now to see who gets left holding the bag after the dump.

    • Re:All pumped up. (Score:4, Insightful)

      by war4peace ( 1628283 ) on Sunday January 03, 2021 @03:05PM (#60891422)

      Now, I have not invested in cryptocurrency, I mined a bit for fun back in 2017 and ended up owning something like 500 dollars worth of cryptocurrency. Hell, I don't even know what I've done with my wallets.
      With that being said, hadn't this "dump" occurred quite a few times already? BTC history shows that, and every time people from your social bubble rejoiced, only to be proven wrong, time and again.

      Ref. what Mr. Buffett is about ("buy and hold" — forever), that's what one of my former co-workers did. He bought BTC when it was $4000, held them when they were $20K, still held them when BTC appeared to crash, still holds them right now. He jokingly said he will hold on to his BTC amount until he would be able to buy a mansion with it.

      Is BTC a gamble? Sure it is. For some, it pays off, for others it doesn't. However, very few tradeable elements had, so far, the potential of making 5 times the money you invested, within 6 months.

      • If you mined $500 worth of BTC in 2017, then you probably want to work out what you did with your wallet. Depending on when you mined it, 1 BTC was worth somewhere between $900 and $20k.
        If you mined it when it was worth $900, then your $500 wallet would be worth around $18,000 today.
        Even if you mined $500 worth when it was $20k, that'll be worth over $800 today.

        • I own 0.02 BTC and a splash of some other cryptocurrencies (e.g. 100 Monacoin, etc.), I just checked and all my crypto stuff is worth around $1K right now. The power I used mining them has been long paid, and it kept my apartment warm during the winter at the time, I ended up not paying for heat, so the overall cost was the same.
          That cryptocurrency is now worth a bit over 1% of all my savings, so I am not really in a rush to do anything with it. It was an experiment, I'll hold onto it for now.

          There was neve

      • Re: (Score:2)

        by khchung ( 462899 )

        Ref. what Mr. Buffett is about ("buy and hold" — forever), that's what one of my former co-workers did. He bought BTC when it was $4000, held them when they were $20K, still held them when BTC appeared to crash, still holds them right now. He jokingly said he will hold on to his BTC amount until he would be able to buy a mansion with it.

        One big difference is that most stock, if the company was successful, give out dividends eventually. So if you buy and hold stocks forever, you will very likely get your money back and more until the company folded.

        Unless there is reason to expect BTC will start giving out interest one day, it is not an investment.

        Buying something that gives you an income stream is investment. Buying something in hope you can sell it for more later is speculation.

      • Is BTC a gamble? Sure it is.

        That's the correct word. BTC is a gamble. Not an investment.

    • Comment removed based on user account deletion

  • Why would he buy something near the peak of its bubble?

    Besides, it is only going up like it is because people expect the US dollar to crash as America begins its second civil war. They wouldn't be digital goldbugs if they didn't entertain fantasies of collapse.

    What these numbnuts are too dumb to understand is that they can't actually use their bitcoin without a functioning Internet, and not only does the president, legitimate or orangewise, have the "kill switch" at their disposal, and plenty of "national s

    • Why would he buy something near the peak of its bubble?

      There is no reason to believe it is peaking. There is no "anchor". No natural ceiling.

      The Slashdot consensus was that Bitcoin was peaking when it first crossed the penny threshold.

      Since then, it has gone up 340000000%.

  • Digital Tulipmania Forever? (Score:5, Insightful)

    by GameboyRMH ( 1153867 ) <`gameboyrmh' `at' `gmail.com'> on Sunday January 03, 2021 @03:10PM (#60891436) Journal

    Perhaps Bitcoin will live on through the ages, the price changing randomly in one direction or the other until the last one lost. I think that's the future of Bitcoin, the world's longest and most environmentally destructive online casino game.

  • Some cryptocurrencies ARE useful, and provide useful services. Eg cryptos that make it efficient and practical to pay people for using storage on their machines, or pay people for using their spare bandwidth to relay data across the internet. Bitcoin makes crypto look like a phase. I'll be happy when it's dead... it's going to be a long wait though. Bitcoin wont collapse overnight.

    • The advantage of crypto is that no government can prevent you from paying money to anyone you feel like over the internet. They tried to stop it with things like e-gold. Remember when they tried to stop donations to Wikileaks by preventing credit card payments to them?

      So that is the entire purpose: to make payments possible without a gatekeeper.

      • Re: (Score:2)

        by dryeo ( 100693 )

        All the government has to do is turn off the internet, or more likely, civil unrest or such leads to the internet becoming unstable and useless.

  • Buffet was also wary of tech during the late 90s dot-com boom, and we all know how that turned out. Buffet doesn't win every quarter. That's not his game. He wins out over *decades*. Some of it is value investing, which you can duplicate yourself. The rest is economy of scale: Buffet can evaluate a company better than you can, because of who he is. He can hire dozens of researchers for just one investment if he needs to learn about it. He can make CEOs salivate over offers, etc.

    So. You can at least

    • I was curious, so I looked at BRK’s return over the last 25 years. Buffet’s CAGR over that time is 9.6%. I have about 30 stocks on my little watchlist that have been around for that long, and only Waste Management, Viasat, and Ford have performed worse than BRK (I don’t have Ford’s historical dividend info though).

      Some of the surprising ones: Home Depot, Nike and Microsoft are all up about 16% CAGR. Less surprising: Apple is at 30%, and Amazon is at 35% CAGR.

      • If I remember right, 15 or so years ago, Warren Buffet himself recommended against buying Herkshire Hathaway stock. He said it was overvalued.

    • Buffet doesn't win every quarter.

      I would point out that you can win while avoiding tech. You don't get to participate in some huge growth stories, but if you don't know enough to separate pets.com from google.com, it's best to just stay in your lane. In the past five years, your money would have done just as well in Walmart as it would have in Google.

  • Warren Buffer old school but smart (Score:4)

    by hdyoung ( 5182939 ) on Sunday January 03, 2021 @03:34PM (#60891524)
    It's true that Warren Buffet is old fashioned, old school, and definitely NOT up with the times. It's also true that his investment strategy hasn't been doing as well over the last decade., compared to previous. His god-like reputation as an investor isn't quite as godly as it used to be.

    That being said, the man knows his stuff, is clearly a savvy businessman and investor and, over his career, has become a master at investing. When a random Slashdot poster craps on Bitcoin, feel free to ignore or laugh at it. When Warren Buffet says it's poisonous, you better at least consider his opinion, because the man is much, much, MUCH smarter than you (and me) at investing.

    More to the point. Investing in Bitcoin right now? Yeah, that would be like investing in gold in the year 1980. You're gonna get your clock cleaned by the people who know exactly WHEN to cash out. For the Bitcoin ecosystem, there's probably a dozen people on the planet who will time that one correctly, and they will take everybody else's money straight to their bank account. Yeah, I'll stick with investing in baskets of equities and annual rebalancing. How boring. Just a measly 7-8% annuallized growth. Decade after decade after decade after decade. Do the math. Once you're into decade 2 or 3, the growth becomes jaw-dropping. All it takes is... wait for it... self discipline and patience.

    Trying to triple your money in a few years time is for idiots, compulsive gamblers, and impatient people who are almost certainly gonna get screwed. I respect people's rights to do what they want with their money, but I'm taking a full, hard pass on crypto.

  • Why do I always get an image of a sleazy lounge singer with a bad toupee making table scraps hopping from gig to gig in Las Vegas? :}

  • Gold has got a density of 19.3g per ccm, or you could say it is ~19x heavy than water. It doesn't react with much anything and is a soft metal. This makes it fairly easy to verify its authenticity.

    Diamonds have a density of 3.5g per ccm and are crystals with a refraction index of 2.4. They're also one of the hardest materials known. The authenticity of diamonds is also fairly easy to verify.

    Bitcoin, when the power is out, or the storage device is damaged, or there is no network available, becomes unverifiab

    • Gold and diamonds aren't really great investments, either.

      • Gold and diamonds aren't really great investments, either.

        You cannot eat them, that's true. Nor can one speculate much with it or create bubbles and farm dumb people's money with it. I'll give you that.

        • Nor can one speculate much with it or create bubbles and farm dumb people's money with it.

          You haven't seen the price of gold this year, or many of the "buy gold!" advertisements.

    • Diamond value is 100% marketing built on the misogynistic idea that a woman cannot love a man who wont spend two months salary on a piece of carbon (DeBeers has been vomiting that bullshit for years). In addition to that, a diamond can be made artificially with far greater ease than gold ever will. Creating gold artificially involves manipulating literal electrons

      • In addition to that, a diamond can be made artificially with far greater ease than gold ever will. Creating gold artificially involves manipulating literal electrons

        So what? Nobody said you shouldn't make your own diamonds or shouldn't turn lead into gold. It still has value. It's a feature, not a bug.

        And about your misogyny problem will you only need to find a woman who will love you for your bitcoins and not for your diamonds. Not that I think it matters.

      • Creating gold artificially involves manipulating literal electrons

        ... the same is true of bitcoin...

  • Comment removed based on user account deletion

    • In theory, a lot of sites offer puts. Do you trust them to make good if bitcoin tanks?

      Besides, the real problem is the time-limited nature of puts. Remember, the market can stay stupid longer than you can stay solvent. This is especially true of a commodity with a limited trading throughput (crypto). Wouldn't be hard for a big player who sold a lot of puts to run out the clock by paying a massive premium to delay other people's transaction.

  • There isn't a person on the planet that can tell you what the actual value of BTC is, if they do they are lying. Nobody knows if BTC is high or low right now or any time. If you can't put an estimate of the value, then it's gambling.

    The government checks have probably contributed to the rise of BTC in the past few months

    • More important is whether you can predict if BTC will go up from here, or down. And that involves understanding why it's gone up recently.

  • Bitcoin has not intrinsic value, but there is some probability that it will become accepted as a medium for a large number of transactions. There is some probability it could replace credit cards for the majority of online transactions. If that were to happen, the value of bitcoins would rise dramatically because there would need to be a larger total value in circulation. Having that happen might require some governments to find a way to track bitcoin transactions - possibly going as far as to outlaw pr
  • Here's what I don't get about Buffet's statement that cryptocurrency has no intrinsic value.

    The same applies to all fiat currencies too. In each case it's a self-supporting consensus about value. That's it.

    Even gold or diamonds have relatively little value when rationally considered.
    - True, gold is shiny/pretty and malleable.
    - And diamonds are shiny/pretty and very hard.
    - Just like paper currency could be used as mediocre toilet paper in a pinch.

    In each case, it's just a social agreement that these things h

    • Re: (Score:2)

      by King_TJ ( 85913 )

      Bingo! You're absolutely right on this.

      When you think about it, the only reason we even have "currency" is because it was an artificially created construct that people agreed made life a bit easier. (Easier to carry around some bits of metal or paper than bartering physical goods you have to lug around with you.)

      The truth with crypto is, people just feel uncomfortable about it because it's not backed by a central government. Pretty sure most older people in Buffet's age group are among those who feel like

    • Re: (Score:2)

      by swilver ( 617741 )

      There are two big difference you forget about.

      1) If the dollar starts losing value, the fed will take action to stabilize it.
      2) If I offer a shop dollars for their wares, they are obligated to accept them.

      vs.

      1) If bitcoin starts losing value, nobody will do anything.
      2) If I offer a shop bitcoin, they can refuse me.

      • Incorrect, you are free to accept any method of payment in the US. I could trade coffee for bags full of trash picked up off the beach if I wanted to. A debt on the other hand is when refusing legal tender can be used against you in court, with the one owing you money saying "I gave him his $100 in ten $10 bills at his home and he refused to take it".

      • Re: (Score:2)

        by dryeo ( 100693 )

        2) If I offer a shop dollars for their wares, they are obligated to accept them.

        No they are not obliged to take them, many stores refuse to take hundred dollar bills for example.

    • Warren Buffet also recommends against buying gold and diamonds as investments, also. He prefers things that pay a dividend. That's what he means when he says it has value: it will pay money to you quarterly, and the amount it pays is the value.

    • US Currency has real value. If you barter in the US, or work for BitCoin, you need to buy US Dollars to pay the IRS and state taxes. You need it to pay your sales taxes (although the merchant may be kind and collect it in bitcoin from you and do the conversion themselves.) You need it to keep the government from reposessessing your real property and to pay taxes to be allowed to drive a car on public roads. In short, there is a very large group of related entities (the government) who insist on US Dolla

    • Re: (Score:2)

      by mvdwege ( 243851 )

      The same applies to all fiat currencies too.

      No it does not.

      The value of a fiat currency is backed by the economic activity of the issuing nation. It is more or less a promise to fraction of the economic output of that nation, expressed as the ability to buy products and services denoted in that currency.

      BitCoin has no underlying economy.

      • So if and when a stable and high-integrity and functional-with-performance crypto-currency starts to be widely accepted for payment for goods and services throughout the global economy, we could say exactly the same thing as your saying relative to a nation's economy, except potentially larger and stronger backing.

        Multi-fiat-currency-basket stablecoins already have some of the properties needed, and are demonstrably backed by the value of all the powerful nations in the backing-currencies basket. So while y
  • I've got well over 20 years of investing experience. I've been in an investment club that entire time. I remember us talking during the tech bubble of around 1999 or 2000 (don't remember the exact year and too lazy to look) and Buffet got beat up then. His old world companies weren't doing so well and IT stocks were soaring. We just figured he was old and was being passed by. Then stocks like Nokia and Cisco and others tanked (those 2 still are below their peak values during the bubble) and Buffet'

  • The original movie was shown on December 17th, 2017. We know how it ended.

    This sequel should be even better!

  • He prefers in investing in companies which have underlying value as he's interested in dividends. People often boast about how much money they've made on bitcoin, but until they've actually sold their bitcoin or used it to make purchases they haven't made a single cent. I bought shares which after 10 years are yielding 30% on the original cost of purchase, meaning every 3 and a third years I'm getting my initial capital back.

    Companies like American Express and Coca Cola are far more conservative / safer i

  • The humble Tulip [wikipedia.org] was once worth more than gold by weight when they were first introduced, driven by financial mania [wikipedia.org] they became so valuable that they cost more than highly skilled craftsmen could earn in a decade. Single bulb could be exchanged for entire properties.

    Bitcoin is the South sea bubble [wikipedia.org] of the modern age.

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