CEO of $250 billion multinational holding conglomerate Berkshire Hathaway, Warren Buffet, leave no stone unturned to diss at bitcoin, a digital commodity which is often termed as the digital gold by its proponents. The leading cryptocurrency in terms of market capitalization, bitcoin, has garnered a lot of support from across the globe since its inception back in 2008. However, it has failed to convince one of the biggest names in the world of finance Warren Buffet, of its usefulness and viability to replace the centuries-old traditional banking system.
In a recent meeting with the shareholders of his company Berkshire Hathaway, ss per Buffet, investing in bitcoin is NOT an investment and said:
It doesn’t do anything. It just sits there. It’s like a seashell or something, and that is not an investment to me.
Warren Buffet is one of the most respected names in the business world and his opinions do percolate in the general public and build a sentiment. As of now, the major connotation that is attached with bitcoin in the media, among the institutions and the general public is somewhat negative. These remarks from Buffet will only fuel the fire that has been lit by the revolution that cryptocurrency proponents promise to deliver despite a plethora of problems attached to it.
In the meeting, Buffet also stated:
The remarks made by Buffet make some sense too as the 88 years old veteran has been involved in the business world for quite a significant time. His notion of perceiving bitcoin as just a gambling device makes sense due to the fact that most of the people that are in the crypto space are here to make a quick buck. People want to get involved in Initial Coin Offerings (ICO) of various tokens so that they can cash out when the tokens are worth much more in the future with usually no specific interest in the project lying underneath. As Buffet said:
I’ll tear off a button here. What I’ll have here is a little token…I’ll offer it to you for $1000, and I’ll see if I can get the price up to $2000 by the end of the day… But the button has one use and it’s a very limited use.
Secondly, the issue of volatility that is associated with bitcoin makes it more of a gamble than an investment. Back in 2017, the asset was seen rising from a few hundred thousand dollars to almost $20,000 in a mere matter of days. This resulted in a lot of fortunate people becoming “bitcoin millionaires”. Soon after the spike, the asset fell down drastically over the subsequent months and since then, a bear market has been witnessed which is now poised to be broken as per some bullish experts. Cryptos do provide an investment option but it is too dangerous and risky.
Thirdly, the initial wave that drove the adoption of bitcoin was due to its linkage with negative and illegal activities. Darknet, or Dark Web, is one of the prime examples of places where cryptocurrencies are used for carrying out fraudulent and illegal activities with the likes of drugs and ammunition deals and much more.
But despite all the criticism for bitcoin, Warren Buffet couldn’t hold himself back from praising the underlying technology of blockchain as he stated:
“Blockchain…is very big, but it didn’t need bitcoin. J.P. Morgan, of course, came out with their own cryptocurrency,
The innovation that blockchain brings in the form of a decentralized peer-to-peer system of operation cannot be questioned. It is the use-cases that it brings that require extensive research.
So, the thing that is here to understand is that conventional businessmen and financial institutions are not quite liking the idea of cryptocurrencies. Cryptos are considered to be rebellious be some as they challenge the well-established norm of the banking system. Previously, the General Manager of International Monetary Fund (IMF), Christine Lagarde, also expressed her concerns regarding this highly unregulated space stating:
I think the role of the disruptors and anything that is using distributed ledger technology, whether you call it crypto, assets, currencies, or whatever … that is clearly shaking the system.
READ ALSO: Yes, ‘Bitcoin is Clearly Shaking The System’ and Even IMF Can’t Control
The major reasons behind the negative image of bitcoin involved price manipulation, scams and volatility. In order to solve these issues, the need is to develop concrete legislation around it so that its role as a currency or an investment asset can be defined clearly. Is it going to become the future gold or the future dollar, things are still blurry. If big business fishes like Warren Buffet are to be convinced of the positive aspects that bitcoin offers such as faster transactions, freedom from central control, borderlessness etc., the need is to define its role in the market and provide regulatory clarity. Once people like Warren Buffet start adopting this space, things will move quickly for this space in the right direction in terms of public adoption. In retrospect, if bitcoin is to rival the centuries-old fiat system, it needs to address the issues that make brands like Buffet dislike it.