Warren Buffett: Bitcoin Is Pure FOMO(secure.marketwatch.com)
secure.marketwatch.com
Warren Buffett: Bitcoin Is Pure FOMO
https://secure.marketwatch.com/story/heed-warren-buffetts-warning-bitcoin-is-pure-fomo-2017-12-26
195 comments
This article talks in more detail about that: http://www.bzarg.com/p/what-bitcoin-shows-us-about-how-money...
Bitcoin is a bad currency because it doesn't count value consistently. And it never could, because there is no central bank to regulate supply to balance an inevitably fluctuating demand.
Bitcoin is a bad currency because it doesn't count value consistently. And it never could, because there is no central bank to regulate supply to balance an inevitably fluctuating demand.
you don't think an open market could create that equilibrium? Particularly when the coin is out of the adoption phase?
No. How would it?
The author sort of covers that in this line:
>I counter that just about nobody thinks of American cash as an investment, except for perhaps currency speculators.
Of course that sort of ignores the fact that bitcoin investors are currency speculators...
>I counter that just about nobody thinks of American cash as an investment, except for perhaps currency speculators.
Of course that sort of ignores the fact that bitcoin investors are currency speculators...
Before the interest rates crashed, many people put most of their money into saving accounts that paid more interest than inflation. They probably thought of this more as saving than investing, but what many people are looking for is a store of value that wont go down and pays a bit of interest. Historically getting 3% on very secure, gold denominated debt was the norm.
Savers don't necessarily want to be investors. Most people don't have the combination of time, interest, temperament, and intelligence to invest well. You used to be able to just buy US bonds or longer term CDs and do OK, but this is no longer the case. Now the savers are encouraged to buy broad market index funds using a time averaged purchase method and never sell the dips (or buy extra during the booms). This just does not sit well for moderately risk adverse people (and this risk aversion is also a trait that makes them want to have savings).
I think the smart money knows that a combination of factors has put the dollar in a less sound footing than in the past (rise of China, $20 trillion US debt, US baby boomer pension, social security, and medicaid obligations, decline in the dollar denominated global oil market, etc) and no long want to hold US dollar based assets (US bonds, US cash, US corp debt, etc). In fact you see a lot of the rich piling up US dollar debt against their assets.
Regular people are now also feeling the fiat currencies are no longer a good store of value, still want to save, but don't want to be investors. So what to save? Copper ingots? Bushels of wheat? Barrels of oil? Bitcoin or some other cryptocurrency could be it. Maybe a few of them could be, but for now they look like a crazy frenzy of Ponzi schemes. The regular public is getting sucked in with many stories of 10x in a year returns and are not familiar with previous 80% crashes. If a a single cryptocurrency does become the default store of value for the masses of conservative savers then another 100x from current price levels is not unreasonable. Bitcoin seems the most likely candidate at the moment.
Savers don't necessarily want to be investors. Most people don't have the combination of time, interest, temperament, and intelligence to invest well. You used to be able to just buy US bonds or longer term CDs and do OK, but this is no longer the case. Now the savers are encouraged to buy broad market index funds using a time averaged purchase method and never sell the dips (or buy extra during the booms). This just does not sit well for moderately risk adverse people (and this risk aversion is also a trait that makes them want to have savings).
I think the smart money knows that a combination of factors has put the dollar in a less sound footing than in the past (rise of China, $20 trillion US debt, US baby boomer pension, social security, and medicaid obligations, decline in the dollar denominated global oil market, etc) and no long want to hold US dollar based assets (US bonds, US cash, US corp debt, etc). In fact you see a lot of the rich piling up US dollar debt against their assets.
Regular people are now also feeling the fiat currencies are no longer a good store of value, still want to save, but don't want to be investors. So what to save? Copper ingots? Bushels of wheat? Barrels of oil? Bitcoin or some other cryptocurrency could be it. Maybe a few of them could be, but for now they look like a crazy frenzy of Ponzi schemes. The regular public is getting sucked in with many stories of 10x in a year returns and are not familiar with previous 80% crashes. If a a single cryptocurrency does become the default store of value for the masses of conservative savers then another 100x from current price levels is not unreasonable. Bitcoin seems the most likely candidate at the moment.
"Nobody thinks of American cash as an investment, except for perhaps those who invest in it."
> Nobody thinks of American cash as an investment, except for perhaps those who invest in it
Most buyers of U.S. dollars buy it for non-speculative purposes. Out of those who speculate on it, most do so in tandem with buying bonds and borrowing. Most FX is a cousin of rates trading more than hoping your currency goes up.
Most buyers of U.S. dollars buy it for non-speculative purposes. Out of those who speculate on it, most do so in tandem with buying bonds and borrowing. Most FX is a cousin of rates trading more than hoping your currency goes up.
> Most buyers of U.S. dollars buy it for non-speculative purposes.
Sure! I didn't say, "except for perhaps those who buy it," I said, "for those who invest in it."
> Out of those who speculate on it, most do so in tandem with buying bonds and borrowing. Most FX is a cousin of rates trading more than hoping your currency goes up.
I agree, but don't feel like we would split these kinds of hairs when talking about other kinds of investment. Like, do we consider shorts and arbitrage and other more sophisticated forms of dabbling in financial markets to be "not investment" because they aren't "buy a stock; hope it goes up"? Perhaps when in technical discussion, but in common parlance, I feel like this is a distinction driven by emotion.
Sure! I didn't say, "except for perhaps those who buy it," I said, "for those who invest in it."
> Out of those who speculate on it, most do so in tandem with buying bonds and borrowing. Most FX is a cousin of rates trading more than hoping your currency goes up.
I agree, but don't feel like we would split these kinds of hairs when talking about other kinds of investment. Like, do we consider shorts and arbitrage and other more sophisticated forms of dabbling in financial markets to be "not investment" because they aren't "buy a stock; hope it goes up"? Perhaps when in technical discussion, but in common parlance, I feel like this is a distinction driven by emotion.
>Sure! I didn't say, "except for perhaps those who buy it," I said, "for those who invest in it."
Well, if those are statistically insignificant outliers, then "nobody" still stands, as it's a colloquialism for "very few people" or "only stupid ones" -- it doesn't really mean "absolutely no one in the history of the world".
Except if you mean people like Soros and co, speculating on national currencies (but those are few and far between too)
Well, if those are statistically insignificant outliers, then "nobody" still stands, as it's a colloquialism for "very few people" or "only stupid ones" -- it doesn't really mean "absolutely no one in the history of the world".
Except if you mean people like Soros and co, speculating on national currencies (but those are few and far between too)
Those few and far between opportunities is what the consistently great investors shoot for. I think I might agree with Warren Buffet and his view of investing. If you are a professional investor, patience and rare (every few years) big bets when things look very good. Otherwise, full market index funds.
[deleted]
> its a bad _currency_
The problems that I see are:
1. There is a finite number of bitcoins, which means you can never have inflation, or in other words the bitcoin price is only going up tomorrow. So it doesn't make sense for people to spend it.
2. Mining. It costs a lot to mine a bitcoin. Imagine if the US government had to spend 1 billion worth of energy to print 1 billion dollars.
I think Bitcoin was designed to be analogous to gold. We stopped using gold as currency many years ago.
But then again, I know little about economics and finance, so don't take my word for it.
The problems that I see are:
1. There is a finite number of bitcoins, which means you can never have inflation, or in other words the bitcoin price is only going up tomorrow. So it doesn't make sense for people to spend it.
2. Mining. It costs a lot to mine a bitcoin. Imagine if the US government had to spend 1 billion worth of energy to print 1 billion dollars.
I think Bitcoin was designed to be analogous to gold. We stopped using gold as currency many years ago.
But then again, I know little about economics and finance, so don't take my word for it.
> or in other words the bitcoin price is only going up tomorrow. So it doesn't make sense for people to spend it.
Yes. That's why I've never bought a computer - next year there will be a faster and cheaper one on the market. And that's why people regularly starved before fiat currencies were introduced. They were just hoping they can buy more food tomorrow for the same money.
People don't need encouragement to spend. They need encouragement to save. Whoever thinks otherwise, should talk a bit about it with an average American.
Noone is going to stop spending because their currency will have 2% more purchasing power in a year. And the economy would run much better if we weren't wasting so many resources on shit that we don't need and never-ending boom and bust cycles.
Yes. That's why I've never bought a computer - next year there will be a faster and cheaper one on the market. And that's why people regularly starved before fiat currencies were introduced. They were just hoping they can buy more food tomorrow for the same money.
People don't need encouragement to spend. They need encouragement to save. Whoever thinks otherwise, should talk a bit about it with an average American.
Noone is going to stop spending because their currency will have 2% more purchasing power in a year. And the economy would run much better if we weren't wasting so many resources on shit that we don't need and never-ending boom and bust cycles.
> Yes. That's why I've never bought a computer - next year there will be a faster and cheaper one on the market. And that's why people regularly starved before fiat currencies were introduced. They were just hoping they can buy more food tomorrow for the same money.
> People don't need encouragement to spend. They need encouragement to save. Whoever thinks otherwise, should talk a bit about it with an average American.
> Noone is going to stop spending because their currency will have 2% more purchasing power in a year. And the economy would run much better if we weren't wasting so many resources on shit that we don't need and never-ending boom and bust cycles.
This of it like this: You have a currency that is giving a return of 3% per year. Why would someone risk their money investing in existing or new businesses/ventures?
> People don't need encouragement to spend. They need encouragement to save. Whoever thinks otherwise, should talk a bit about it with an average American.
> Noone is going to stop spending because their currency will have 2% more purchasing power in a year. And the economy would run much better if we weren't wasting so many resources on shit that we don't need and never-ending boom and bust cycles.
This of it like this: You have a currency that is giving a return of 3% per year. Why would someone risk their money investing in existing or new businesses/ventures?
Because, after factoring-in the business risk, the expected return is 5%, and 5 is bigger than 3.
Or 10%, or 20%. Eventually, some business opportunities are better than sitting on a pile of cash.
Or 10%, or 20%. Eventually, some business opportunities are better than sitting on a pile of cash.
You're adopting the micro perspective to a macro problem of a finite supply of coins.
Finite supply means that on average, net coin-profit of a business is zero coins. With such poor odds, why should someone go into business? Inflation incentivizes investment since you know that on average, a business opportunity has better ROI than saving.
Finite supply means that on average, net coin-profit of a business is zero coins. With such poor odds, why should someone go into business? Inflation incentivizes investment since you know that on average, a business opportunity has better ROI than saving.
If you can produce 3BTC worth of goods using 2BTC, then people will pay you 3BTC.
Your doubts are based on the assumption, that somehow "there would be not enough money", which is simply not true. During the process of producing and trading goods money are not destroyed. They are just changing hands. There is always enough money in the economy.
Your doubts are based on the assumption, that somehow "there would be not enough money", which is simply not true. During the process of producing and trading goods money are not destroyed. They are just changing hands. There is always enough money in the economy.
> That's why I've never bought a computer - next year there will be a faster and cheaper one on the market.
Computers are practically useful. If you buy a computer now instead of waiting, it's because the the cost of not buying it later is outweighed by the utility of having it now.
The spending of Bitcoins has no inherent practical value. So long as you believe the value of Bitcoins will go up more than your local fiat currency, the rational thing is to keep the Bitcoins and spend your fiat, unless your Bitcoins are the only money you have.
Computers are practically useful. If you buy a computer now instead of waiting, it's because the the cost of not buying it later is outweighed by the utility of having it now.
The spending of Bitcoins has no inherent practical value. So long as you believe the value of Bitcoins will go up more than your local fiat currency, the rational thing is to keep the Bitcoins and spend your fiat, unless your Bitcoins are the only money you have.
One of the main reasons we got off the gold standard is in fact the scarcity of it was a shackle. Imagine if, say China decided to hoard gold, how much of an influence that artificial scarcity would have on all the other economies that could only value things in gold?
The US has 75% of all the world's reserves.
http://www.usfunds.com/investor-library/frank-talk/top-10-co...
Also, there is finite value in the total amount of gold available, so at a point, there is no room for growth. If there is say 1 billion worth of gold on Earth, the value per weight of gold would go through the roof. buying everyday items would be valued in specs of gold (or 18ths of specs). It's probably really easy to lose a spec of gold.
Finally, without inflation, it doesn't make financial sense to buy anything. Why buy a truck for 1oz of gold today when I could buy two for the same amount next year?
The US has 75% of all the world's reserves.
http://www.usfunds.com/investor-library/frank-talk/top-10-co...
Also, there is finite value in the total amount of gold available, so at a point, there is no room for growth. If there is say 1 billion worth of gold on Earth, the value per weight of gold would go through the roof. buying everyday items would be valued in specs of gold (or 18ths of specs). It's probably really easy to lose a spec of gold.
Finally, without inflation, it doesn't make financial sense to buy anything. Why buy a truck for 1oz of gold today when I could buy two for the same amount next year?
> Why buy a truck for 1oz of gold today when I could buy two for the same amount next year?
Because someone needs a truck now. Deflation makes people more fiscally responsible, not less.
Because someone needs a truck now. Deflation makes people more fiscally responsible, not less.
Right, but in economies, that's a bad thing. (less spending, less demand, fewer jobs, repeat, downward spiral, economic collapse).
You are both saying the same thing. You only buy a truck today if you absolutely need it.
Bitcoin was a "first iteration" of digital currency. It has shown some problems. It started by allowing you to send money fast and cheap to other parties. That advantage is gone for Bitcoin. Transaction costs are huge now, and it can take hours for a transaction to get confirmations.
But there are many other digital currencies that try to solve those and other problems. Even currencies that implement the Distributed Ledger without the Blockchain, where no "Mining" is required for the network to function, and therefore no large energy requirements and no cost for transactions.
We are still at the beginning of the technology.
But there are many other digital currencies that try to solve those and other problems. Even currencies that implement the Distributed Ledger without the Blockchain, where no "Mining" is required for the network to function, and therefore no large energy requirements and no cost for transactions.
We are still at the beginning of the technology.
>>But there are many other digital currencies that try to solve those and other problems. Even currencies that implement the Distributed Ledger without the Blockchain, where no "Mining" is required for the network to function, and therefore no large energy requirements and no cost for transactions.
Most of these get rid of Proof of Work and blockchain-based distributed consensus without replacing them with any other automated and distributed method of establishing consensus.
For example, Ripple, Stellar, NEO, IOTA and EOS rely on trusted third parties to run all consensus nodes, which makes them effectively centralized, and destines them to becoming permissioned ledgers that must heed the censorship laws of any number of powerful nation-states (e.g. capital controls imposed by the Chinese government).
That makes them more similar to Venmo and PayPal than cryptocurrency.
The concept of a neutral global platform for censorship proof financial coordination is revolutionary. While Bitcoin has been effectively sabotaged with its hyper-conservative anti-adoption development roadmap, successor chains like Bitcoin Cash or most likely Ethereum could pick up the mantle and fulfil its original promise.
Most of these get rid of Proof of Work and blockchain-based distributed consensus without replacing them with any other automated and distributed method of establishing consensus.
For example, Ripple, Stellar, NEO, IOTA and EOS rely on trusted third parties to run all consensus nodes, which makes them effectively centralized, and destines them to becoming permissioned ledgers that must heed the censorship laws of any number of powerful nation-states (e.g. capital controls imposed by the Chinese government).
That makes them more similar to Venmo and PayPal than cryptocurrency.
The concept of a neutral global platform for censorship proof financial coordination is revolutionary. While Bitcoin has been effectively sabotaged with its hyper-conservative anti-adoption development roadmap, successor chains like Bitcoin Cash or most likely Ethereum could pick up the mantle and fulfil its original promise.
> 1. There is a finite number of bitcoins, which means you can never have inflation, or in other words the bitcoin price is only going up tomorrow.
It takes both supply and demand to create a price.
If demand evaporates then the price can crater even though the supply remains constant.
It takes both supply and demand to create a price.
If demand evaporates then the price can crater even though the supply remains constant.
The political/economic climate around the time bitcoin caught on was also the Ron Paul/Austrian economics fad. They were calling the end of the USD and fiat currencies because central banks were risking hyperinflation. Lots of people were calling for a return to gold. BTC seemed even better. I think it's safe to say they were completely wrong about everything and orthodoxy won the day.
Weird, is Austrian economics a fad? I always thought it was a legitimate, alternative model of economics that was just as valid (if not more) as Keynesian.
Both the Keynesian and the Austrian models have been shown to be flawed and incomplete understandings (from what I understand of it). They can explain some things, but they break down, and in those breakdowns we had crises - keynesian thinking was abandoned after the 70s crisis, and now monetarism is being (slowly and reluctantly) abandoned after 2008.
I find that the assumptions on both models, that humans can measure and act according to their own preferences, might be one of the core issues with economics today. In fact if you keep to that idea economics is more of a religion than fact. There's very little evidence that humans act rationally in economic situations. There's accumulating evidence they don't. Economics makes more sense if you come at it from psychology from my view: humans are irrational and so are markets. Rational thinking is the exception, not the norm (might be an odd idea for the HN audience, but think about everyone else...)
I find that the assumptions on both models, that humans can measure and act according to their own preferences, might be one of the core issues with economics today. In fact if you keep to that idea economics is more of a religion than fact. There's very little evidence that humans act rationally in economic situations. There's accumulating evidence they don't. Economics makes more sense if you come at it from psychology from my view: humans are irrational and so are markets. Rational thinking is the exception, not the norm (might be an odd idea for the HN audience, but think about everyone else...)
No. Austrian economics has virtually zero support in mainstream academia or industry. You won't more than a handful of people who manage money for a living who think Austrian school is sensible. Keynesianism as Keynes wrote it is full of holes, but is the biggest contributor to modern economic thought. Good writeup on reddit a few years ago:
https://www.reddit.com/r/Economics/comments/ip2nb/know_your_...
https://www.reddit.com/r/Economics/comments/ip2nb/know_your_...
This is a pretty shortsighted view of things. The various economic theories all have their insights and shortfalls… and there's no one theory to rule them all.
Recommended: Marginal Revolution's "Game of Theories" https://www.youtube.com/watch?v=cYNVB5iqydk&list=PL-uRhZ_p-B...
To call Austrian economics as something with zero support in mainstream academia or industry is really just revealing your own biases more than anything.
Recommended: Marginal Revolution's "Game of Theories" https://www.youtube.com/watch?v=cYNVB5iqydk&list=PL-uRhZ_p-B...
To call Austrian economics as something with zero support in mainstream academia or industry is really just revealing your own biases more than anything.
"a handful of people who manage money for a living "
Half of those people don't even perform better than an index fund, so let's not put them in some sort of pedestal...
Half of those people don't even perform better than an index fund, so let's not put them in some sort of pedestal...
The Austrian school most certainly does not align with modern mainstream economics.
> or in other words the bitcoin price is only going up tomorrow
That depends on both it remaining valuable technologically and in terms of adoption, neither of which will sustain over time. Bitcoin will die due to replacement if nothing else, the market will innovate until Bitcoin is worthless. It's AltaVista.
It makes sense for people to spend it if: 1) there is actually a bubble and the average value for Bitcoin over the coming years is lower; or 2) if Bitcoin is going to get replaced in the next 3 to 5 years and this general time frame is the highest Bitcoin will ever be.
In the best case scenario it may take a decade to reclaim whatever high Bitcoin puts in during this mania phase. That's typical of bubble pricing, even the things that have legitimate value often take many years to again reach their former high valuations. That's if it doesn't get supplanted in the meantime.
That depends on both it remaining valuable technologically and in terms of adoption, neither of which will sustain over time. Bitcoin will die due to replacement if nothing else, the market will innovate until Bitcoin is worthless. It's AltaVista.
It makes sense for people to spend it if: 1) there is actually a bubble and the average value for Bitcoin over the coming years is lower; or 2) if Bitcoin is going to get replaced in the next 3 to 5 years and this general time frame is the highest Bitcoin will ever be.
In the best case scenario it may take a decade to reclaim whatever high Bitcoin puts in during this mania phase. That's typical of bubble pricing, even the things that have legitimate value often take many years to again reach their former high valuations. That's if it doesn't get supplanted in the meantime.
[deleted]
Buffett has described investing as ability to find the right pitch to swing at. He invests in companies which are within his "circle of competence":
https://www.cnbc.com/2017/02/02/warren-buffett-simplifies-in...
This lesson is apparently lost on many people.
https://www.cnbc.com/2017/02/02/warren-buffett-simplifies-in...
This lesson is apparently lost on many people.
Buffett's whole approach to valuing companies to invest in doesn't really work for tech cos, especially software.
It works on some fronts. He particularly likes to invest into businesses with moats. It's a theme he has spoken about constantly for decades. His personal problem is he doesn't understand technology businesses well enough to identify what those are or when they exist. It's equivalent to the specialized knowledge required to understand which biotech companies have competitive advantages or not, Buffett would also fail on that knowledge front (that is, he'd fail at it, not due to the lack of moats existing, but due to his own inability to understand the businesses).
Microsoft, Intel, Cisco, Facebook, eBay, Amazon, Google - all tech companies with massive moats around them (now or in the recent past) that have helped to protect their core monopolies (or quasi-monopolies). Microsoft had a ~13 PE ratio five years ago (while paying a dividend), Apple was down to something like an 11 PE (pre the recent market bubble run); those are the kind of valuations Buffett likes in quality companies. So why'd he wait to invest into Apple until after it had already gone up so much (why didn't he buy it early into the iPhone ramp)? For the same reason he made a bad investment mistake with IBM, he doesn't understand the technology business at all (he thought Watson was some kind of special competitive advantage, that it'd be a dynamite business etc; he had no idea what he was talking about, it was out of his expertise to pick the winners in that area).
Microsoft had an epic moat circa 1995. Buffett was friends with Gates at the time. Why didn't he invest? Microsoft was an adjusted $5 / share in 1995, it's $85 now (and has paid out a lot in dividends etc). In that time it has generated several hundred billion dollars in profit. Buffett has publicly stated it was because he had no particular ability to understand their business, to identify its competitive advantages; that doesn't mean those things didn't exist. Others with specialized knowledge of tech could identify those advantages. Google as another example has had an extraordinarily obvious monopoly moat in search for 13 or so years at this point.
Microsoft, Intel, Cisco, Facebook, eBay, Amazon, Google - all tech companies with massive moats around them (now or in the recent past) that have helped to protect their core monopolies (or quasi-monopolies). Microsoft had a ~13 PE ratio five years ago (while paying a dividend), Apple was down to something like an 11 PE (pre the recent market bubble run); those are the kind of valuations Buffett likes in quality companies. So why'd he wait to invest into Apple until after it had already gone up so much (why didn't he buy it early into the iPhone ramp)? For the same reason he made a bad investment mistake with IBM, he doesn't understand the technology business at all (he thought Watson was some kind of special competitive advantage, that it'd be a dynamite business etc; he had no idea what he was talking about, it was out of his expertise to pick the winners in that area).
Microsoft had an epic moat circa 1995. Buffett was friends with Gates at the time. Why didn't he invest? Microsoft was an adjusted $5 / share in 1995, it's $85 now (and has paid out a lot in dividends etc). In that time it has generated several hundred billion dollars in profit. Buffett has publicly stated it was because he had no particular ability to understand their business, to identify its competitive advantages; that doesn't mean those things didn't exist. Others with specialized knowledge of tech could identify those advantages. Google as another example has had an extraordinarily obvious monopoly moat in search for 13 or so years at this point.
Why doesn't' it work for software?
He's stated it's because he doesn't understand it, but unpacking that...
Buffett's investment strategy is to run a discounted cash-flow analysis on the stock's fundamentals to figure out its "true" value, and then only invest in it if this is significantly above its market price.
Most consumer software companies have cash-flow graphs where they spend 5-10 years with zero revenue just gaining users and building a monopoly, then they turn on the monetization strategy and instantly start making $10B/quarter or so, and then they continue to make massive profits until some younger, cooler software company comes along and takes all their users, and then they either buy that company for a good fraction of outstanding shares or they die. In other words, their cash flows are unpredictable and back-loaded, and depend upon a number of factors that are unknowable early in the company's life, like 1) is there a viable monetization strategy? 2) when will the founder/CEO turn it on? 3) will they run out of capital first? 4) how big will the userbase be at the time? 5) will they be replaced by further developments in technology?
For an investor who wants predictability and rationality in investing, these are anathema; it's like going to a casino where the house holds the information advantage and hoping you can play enough rounds that you win.
Buffett's investment strategy is to run a discounted cash-flow analysis on the stock's fundamentals to figure out its "true" value, and then only invest in it if this is significantly above its market price.
Most consumer software companies have cash-flow graphs where they spend 5-10 years with zero revenue just gaining users and building a monopoly, then they turn on the monetization strategy and instantly start making $10B/quarter or so, and then they continue to make massive profits until some younger, cooler software company comes along and takes all their users, and then they either buy that company for a good fraction of outstanding shares or they die. In other words, their cash flows are unpredictable and back-loaded, and depend upon a number of factors that are unknowable early in the company's life, like 1) is there a viable monetization strategy? 2) when will the founder/CEO turn it on? 3) will they run out of capital first? 4) how big will the userbase be at the time? 5) will they be replaced by further developments in technology?
For an investor who wants predictability and rationality in investing, these are anathema; it's like going to a casino where the house holds the information advantage and hoping you can play enough rounds that you win.
The main argument for why value investing doesn't work in the tech sector is its basis on revenue trends over time.
The whole approach is based on figuring out when a good time to buy a stock is based on when it's cheap / undervalued. However, many techs cos are growth stage investments, and it's hard to predict which ones will (eventually) win / succeed in creating moats.
Determining the value of pre-revenue companies, for example recent tech IPOs, is just hard. You don't have the revenue history that you do for a company like Coca Cola. There's much more projection and extrapolation required.
https://www.quora.com/Is-there-such-thing-as-a-strategy-like...
https://www.mckinsey.com/business-functions/strategy-and-cor...
The whole approach is based on figuring out when a good time to buy a stock is based on when it's cheap / undervalued. However, many techs cos are growth stage investments, and it's hard to predict which ones will (eventually) win / succeed in creating moats.
Determining the value of pre-revenue companies, for example recent tech IPOs, is just hard. You don't have the revenue history that you do for a company like Coca Cola. There's much more projection and extrapolation required.
https://www.quora.com/Is-there-such-thing-as-a-strategy-like...
https://www.mckinsey.com/business-functions/strategy-and-cor...
Prudence?
More specifically, his approach of value investing / choosing to invest in companies per an intrinsic value based on fundamentals.
https://www.investopedia.com/articles/01/071801.asp
https://www.investopedia.com/articles/01/071801.asp
He didn't say that. That's what the author of the article said.
Of course Warren buffett doesn't like it. He has made his name on being able to tell if a stock's price is above or below it's fundamentals. Bitcoin doesn't have fundamentals and it doesn't pay dividends.
Of course Warren buffett doesn't like it. He has made his name on being able to tell if a stock's price is above or below it's fundamentals. Bitcoin doesn't have fundamentals and it doesn't pay dividends.
I would like to argue Bitcoin has a fundamental.
The number of people using it and making up its value.
`Metcalfe's law states that the value of a telecommunications network is proportional to the square of the number of connected users of the system (n2)` https://en.wikipedia.org/wiki/Metcalfe%27s_law
`Metcalfe's law states that the value of a telecommunications network is proportional to the square of the number of connected users of the system (n2)` https://en.wikipedia.org/wiki/Metcalfe%27s_law
The air can be thought of as a telecommunications network that everyone is connected to. Sure signal loss is a problem, but that can be fixed by amplification.
That doesn't mean that you should invest in air.
When I said fundamentals I meant something more on the lines of:
Taken from https://www.investopedia.com/articles/fundamental/03/022603....
I am long on bitcoin, but not because it has any of the properties of a stock.
That doesn't mean that you should invest in air.
When I said fundamentals I meant something more on the lines of:
cash flow
return on assets
conservative gearing
history of profit retention for funding future growth
soundness of capital management for the maximization of shareholder earnings and returns
Taken from https://www.investopedia.com/articles/fundamental/03/022603....
I am long on bitcoin, but not because it has any of the properties of a stock.
If people start to run for the exits, then that number goes down and there's no floor under that number. The system can unwind in a panic until nobody is using the system and the value of the system becomes zero. Which means that isn't any kind of fundamental value, you're just measuring popularity. Fundamentals are supposed to provide support to value when a security becomes unpopular and untrendy.
sure but that's the same as like banks and traditional money, right?
With stable national currencies like US dollar, there are debts, expenses, taxes, etc. that are denominated in the currency. And there is a national economy producing products and services for which people can pay with US Dollar. And financial infrastructure and laws to support the economy and currency.
lots of examples of currencies getting inflated pretty badly. agreed the US $ has been stable for the last 30 years, and seems like a fairly safe bet. but it also doesn't seem outside the bounds of possibility that something will flip and we enter another period of bad inflation. (to me, gut feeling, zero expertise in any of this -- just some guy on the internet, thinking about it for fun.)
are contracts being written in bitcoin yet? if so, that'd be some momentum to help keep the bottom from falling out.
and i don't think taxes are really denominated in USD: they are paid in USD, but they are denominated in % of «taxable event», converted to USD, at whatever the conversion rate happens to be. right?
i guess a national currency is a little more "real" than something like bitcoin because you have one more-or-less guaranteed believer in it, the nation issuer. but it still doesn't seem that different to me than something like bitcoin. it basically just has value because it's useful for it to have value, and it's made scarce enough that it can serve for that purpose.
are contracts being written in bitcoin yet? if so, that'd be some momentum to help keep the bottom from falling out.
and i don't think taxes are really denominated in USD: they are paid in USD, but they are denominated in % of «taxable event», converted to USD, at whatever the conversion rate happens to be. right?
i guess a national currency is a little more "real" than something like bitcoin because you have one more-or-less guaranteed believer in it, the nation issuer. but it still doesn't seem that different to me than something like bitcoin. it basically just has value because it's useful for it to have value, and it's made scarce enough that it can serve for that purpose.
I see the difference as there being a national economy and government closely tied to USD.
Usually, central bank tries to manipulate supply and velocity of USD so it doesn't become too scarce. Because short supply of money leads to deflation and stagnation of the economy.
Usually, central bank tries to manipulate supply and velocity of USD so it doesn't become too scarce. Because short supply of money leads to deflation and stagnation of the economy.
Sending small to large quantities of wealth worldwide quasi instantly and with small fees does have a tremendous value. Ask families of immigrants.
Buffet hasn’t even invested in digital tech stocks. IMO, even after all the huge respect he deserves, he doesn’t get this technology. Other than that, I don’t doubt that many current “investors” are only FOMO movers
Buffet hasn’t even invested in digital tech stocks. IMO, even after all the huge respect he deserves, he doesn’t get this technology. Other than that, I don’t doubt that many current “investors” are only FOMO movers
> he doesn’t get this technology
I'm sure he'd agree with you, but even people who 'get it', might think the tech may find a home someday, while steering well clear of Bitcoin itself.
I'm sure he'd agree with you, but even people who 'get it', might think the tech may find a home someday, while steering well clear of Bitcoin itself.
I agree and it makes me wonder how much the current price is drive by these FOMO investors versus actual believers. If we removed the first group does the price settle somewhere lower like $10k? I don’t really know but the surge is interesting.
You have a third group: hungry sharks who saw the feeding frenzy and are tantalizing at ripping the shirts off of the backs of the first two groups.
Heres a good thought experiment. How much would people pay for 1 bitcoin if they could never ever sell it(just exchange it for goods)?
another one is: how much would people pay if you did not know the true “market value”? ie you dont know what people are selling a bitcoin for.
another one is: how much would people pay if you did not know the true “market value”? ie you dont know what people are selling a bitcoin for.
What makes it so that Bitcoin will be the medium to send that wealth and not another coin if Bitcoin’s value is too volatile?
Given you can have an infinite number of crypto currencies, should one necessarily dominate indefinitely?
Given you can have an infinite number of crypto currencies, should one necessarily dominate indefinitely?
Doesn’t have to be Bitcoin, and, I assume, Buffet doesn’t mean it either explicitly. Often Bitcoin in many contexts in understood as a synonym of this new digital money.
Power law/positive feedback/winner take all dynamics make it likely there will be one or a few dominant ones and a lot of would-be's. Bitcoin has maintained the first mover advantage as well as the strongest engineering community thus far, so it will likely be one of those.
The whole transaction can happen in a matter of hours tho. Bitcoin isn't that volatile. And you have to realize that is a means where there was previously none. Like it's not like the people doing this might have that many options.
That being said, I've also heard of western companies using Bitcoin to transfer money cause it's cheaper than via bank.
That being said, I've also heard of western companies using Bitcoin to transfer money cause it's cheaper than via bank.
> Buffet hasn’t even invested in digital tech stocks
Apple is not a tech stock?
Apple is not a tech stock?
He only invested in it this year, and because, by his own comments, he doesn’t see Apple purely as a tech company any more, but a services one.
> he doesn’t see Apple purely as a tech company
That doesn't mean Apple isn't a tech company (one of the biggest there is), and consequently that this particular complain isn't nonsense.
That doesn't mean Apple isn't a tech company (one of the biggest there is), and consequently that this particular complain isn't nonsense.
>Sending small to large quantities of wealth worldwide quasi instantly and with small fees
Bitcoin Core cannot do that, Bitcoin Cash can.
https://np.reddit.com/r/BitcoinMarkets/comments/6rxw7k/infor... https://www.reddit.com/r/CryptoCurrency/comments/7cwfm5/some... https://twitter.com/gavinandresen/status/929377620000681984 https://twitter.com/VitalikButerin/status/930276246671450112
Bitcoin Core cannot do that, Bitcoin Cash can.
https://np.reddit.com/r/BitcoinMarkets/comments/6rxw7k/infor... https://www.reddit.com/r/CryptoCurrency/comments/7cwfm5/some... https://twitter.com/gavinandresen/status/929377620000681984 https://twitter.com/VitalikButerin/status/930276246671450112
As can Litecoin, Ethereum, Monero, and so on: https://coinmarketcap.com/
BTC and Bcash are subject to ASIC centralization. Litecoin and other scrypt based algos have had ASIC hardware attacks developed recently as well.
BTC and Bcash are subject to ASIC centralization. Litecoin and other scrypt based algos have had ASIC hardware attacks developed recently as well.
> Sending small to large quantities of wealth worldwide quasi instantly and with small fees does have a tremendous value.
Last I checked Bitcoin transactions are frequently prohibitively expensive for microtransactions if the transaction clears at all. OTOH I can send someone in my own country money from my bank account and expect it to arrive within a business day (or less).
Right now it doesn't look like BTC is a good medium for transferring money. It's immutable and publicly verifiable and maybe that's good for some kinds of transactions but I guess most people would raise privacy concerns over that (yes, you can get around that but you basically have to apply money laundering techniques).
Last I checked Bitcoin transactions are frequently prohibitively expensive for microtransactions if the transaction clears at all. OTOH I can send someone in my own country money from my bank account and expect it to arrive within a business day (or less).
Right now it doesn't look like BTC is a good medium for transferring money. It's immutable and publicly verifiable and maybe that's good for some kinds of transactions but I guess most people would raise privacy concerns over that (yes, you can get around that but you basically have to apply money laundering techniques).
It's only very recently that he's started investing in tech stocks at all. And he's never on the leading edge. He's always been very clear about this. He doesn't want to invest in things that are bleeding edge and that he doesn't understand, and he's proud to say it.
Buffet is well-known for this and I often hear tech people dismiss his views as a result, but I think some people misunderstand what he is saying.
Buffet is concerned with companies that will have a long term competitive advantage and thereby generate stable and growing cash returns over long periods. He doesn't generally invest in technology stocks because he says it is hard to determine which companies have a competitive advantage that will be durable enough to produce long-term returns.
Look at Netscape, MySpace, or Yahoo! for companies that looked valuable but ended up not having a competitive advantage. It doesn't have anything to do with "understanding" technology---the question is the ability to pick the winners in advance.
Buffet is concerned with companies that will have a long term competitive advantage and thereby generate stable and growing cash returns over long periods. He doesn't generally invest in technology stocks because he says it is hard to determine which companies have a competitive advantage that will be durable enough to produce long-term returns.
Look at Netscape, MySpace, or Yahoo! for companies that looked valuable but ended up not having a competitive advantage. It doesn't have anything to do with "understanding" technology---the question is the ability to pick the winners in advance.
Absolutely, and that’s always the good strategy. Invest only in that what you understand. He doesn’t have to understand tech nor invest in it; his numbers show it. I for one, and I assume many more here, often suffer from the bias that and consider that everything is tech. Wrong.
I think the biggest roadblock to developing the next steps of bitcoin that could more easily demobstrate this value is the influx of FOMO money bogging down the system and making it less reliable as a stable, fast, inexpensive system. Maybe this is even a necessary stage, but I'd like it to be over: it's the least interestinhnpart of the social and technologic advances offered by crypto.
> Sending small to large quantities of wealth worldwide quasi instantly and with small fees does have a tremendous value. Ask families of immigrants.
I live in a foreign country, and I do pretty easily & regularly with TransferWise, with less fees than Bitcoin (another thread today mentioned $30 fee for $100 tx). Don’t see the value of bitcoin here.
> Buffet hasn’t even invested in digital tech stocks. IMO, even after all the huge respect he deserves, he doesn’t get this technology. Other than that, I don’t doubt that many current “investors” are only FOMO movers
Stop changing the goal posts. Bitcoin is not a tech stock. Originally, proponents called BTC a currency, and now they call it a store of value. That’s what Buffet was commenting on with his analogy.
I live in a foreign country, and I do pretty easily & regularly with TransferWise, with less fees than Bitcoin (another thread today mentioned $30 fee for $100 tx). Don’t see the value of bitcoin here.
> Buffet hasn’t even invested in digital tech stocks. IMO, even after all the huge respect he deserves, he doesn’t get this technology. Other than that, I don’t doubt that many current “investors” are only FOMO movers
Stop changing the goal posts. Bitcoin is not a tech stock. Originally, proponents called BTC a currency, and now they call it a store of value. That’s what Buffet was commenting on with his analogy.
Answering you here but answering many too. I don’t mean BTC in particular, I mean cryptocurrencies in general. Yes, BTC and ETH currently are suffering slow downs. These both assets and many more will overcome those challenges. The tech is relatively in its infancy.
This literally didn’t address any of my replies.
When will this false narrative finally die? Bitcoin is practically useless for remittance; I know this from first-hand experience. Bitcoin has to be converted into useable money by the recipient and that process is very inconvenient, slow, expensive and possibly dangerous if you follow the advice of bitcoin enthusiasts and meet up with random sellers in the street. All of this also presumes the recipient is technically literate enough to use and secure bitcoin without the sender being around to hand-hold them through the process and we must assume that they have reliable access to a phone/computer and internet. I'm sure there is some legitimate remittance activity through bitcoin but it is very uncommon.
From the article at the bottom:
About a third of the customers queuing at La Maison du Bitcoin’s teller windows in Paris aren’t speculating on the value of the cryptocurrency. They’re sending digital money home to Africa.
“In many countries in Africa, there are far more cellphones than bank accounts,” said Manuel Valente, co-founder of La Maison. “For bitcoin, all you need is a phone.”
https://www.bloomberg.com/news/articles/2017-11-17/bitcoin-e...
About a third of the customers queuing at La Maison du Bitcoin’s teller windows in Paris aren’t speculating on the value of the cryptocurrency. They’re sending digital money home to Africa.
“In many countries in Africa, there are far more cellphones than bank accounts,” said Manuel Valente, co-founder of La Maison. “For bitcoin, all you need is a phone.”
https://www.bloomberg.com/news/articles/2017-11-17/bitcoin-e...
Is it true though? Or journalistic exaggeration of some insignificant (in quantity) activity?
It is true, check for example http://mgafrica.com/article/2015-03-03-mobile-come-first-in-... . Paying by phone is popular and has much lower bandwidth/storage requirements than bitcoin will ever have: http://edition.cnn.com/2017/02/21/africa/mpesa-10th-annivers...
Western Union takes up to 10%! Of people's wages, often cash wages of low income people. You're assuming I think incorrectly that the value add won't cause people to find another way to circumvent. Either learn how to transfer BTC yourself, use a system someone else wrote that your friend told you about, or even use a different crypotocurrency.
Secure isn't a problem if you don't assume every exchange is a Mt Gox waiting to happen.
Secure isn't a problem if you don't assume every exchange is a Mt Gox waiting to happen.
This! When a company comes along that can pull off a 1/1 mapping of an electronic token to a given currency and build out the trust less blockchain like infrastructure that allows for transactions at little to no cost that company will have value.
I'm really intrigued by things like Ripple but to me the value there isn't XRP but is Ripple Labs. But AFAIK I can't buy stock in Ripple Labs.
I'm really intrigued by things like Ripple but to me the value there isn't XRP but is Ripple Labs. But AFAIK I can't buy stock in Ripple Labs.
Why the US government is not the "company" that has done this already is a real shame and a bit baffling (except for the standard, "It's the government. What do you expect." argument). Fee free online transactions would be great for US competitiveness and give the dollar a leg up in staying the world currency. If not the US, some other country with a convertible currency should do this. They could have the defacto online currency very quickly, I think. How about it Iceland?
> Sending small to large quantities of wealth worldwide quasi instantly and with small fees does have a tremendous value.
Yes, that is one of the primary purposes of the interbank settlement/wiring systems. They've been around in one form or another for around 100 years...
Yes, that is one of the primary purposes of the interbank settlement/wiring systems. They've been around in one form or another for around 100 years...
What do you consider a digital tech stock? He's the largest single shareholder of Apple:
https://www.cnbc.com/2017/08/30/warren-buffett-ive-never-sol...
https://www.cnbc.com/2017/08/30/warren-buffett-ive-never-sol...
Buffett describes Apple as a consumer products company, not a "tech" or pure software company. Clearly, Apple is the outlier in the tech ecosystem.
Scrolling through these threads, I am surprised at how many people are suggesting that Buffet just doesn't get it. That's possibly not wrong. Buffet's desire to not get into stuff he doesn't understand is well-documented. He traditionally has stayed away from tech investments for primarily that reason, and definitely doesn't do bleeding edge tech when he finally does do tech. As the OP alludes to, Buffet actually commented similar stuff about Bitcoin already. His logic hasn't changed much from then till now in terms of seeing what the endgame is. http://www.businessinsider.com/why-buffett-doesnt-invest-in-...
If people think Buffet doesn't get it, everyone's entitled to their opinion. But if you want to say he's wrong, you should explain what's wrong with his logic. The OP summarizes his logic really well, and I see nobody in these threads taking apart his logic. Quoting the OP:
Intrinsic value is this continuous waterfall of cash. It’s not the stock price of Coke but the actual cash flow of the business, after costs.
Buffett made his billions by divining when the gap is greatest between intrinsic value and a stock’s share price, then buying loads of shares, tickets to real cash flow other investors would want.
Given that bitcoin is supposed to replace cash, what is the ultimate source of cash flow from digital coins created on the internet? It’s dollars flowing from the pockets of buyers who want to own those coins.
Cut off the supply of new investors and the bitcoin craze ends.
The fact is, bitcoin has no intrinsic value at all. While many digital coin “investors” would argue that neither does a dollar, I counter that just about nobody thinks of American cash as an investment, except for perhaps currency speculators.
Yes, I've seen a comment somewhere in here that says, "hey, aren't people who buy American dollars currency speculators too?" Yeah, of course. But I don't see anyone attacking the part about whether or not Buffet's fundamental thinking of intrinsic value is applicable here.
I will point to another interesting article that summarizes similar thinking in another way. This article is perhaps interesting because I've seen many people here describe Bitcoin as digital gold.
http://www.nasdaq.com/article/why-warren-buffett-hates-gold-...
He considers gold a nonproductiveasset because it doesn't produce anything of value. To illustrate this point, Buffett proposed this thought experiment in his 2011 letter to Berkshire shareholders:
"Today the world's gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce -- gold's price as I write this -- its value would be $9.6 trillion. Call this cube pile A.
"Let's now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world's most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-aroundmoney (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?
"A century from now the 400 million acres of farmlandwill have produced staggering amounts of corn, wheat, cotton, and other crops -- and will continue to produce that valuable bounty, whatever thecurrency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will beunchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond."
So, instead of nonproductive assets such as gold, Buffett prefers productive assets like farmland or companies that generate enormouswealth for shareholders -- companies like Exxon Mobil ( XOM ) , Coca-Cola or See's Candy.
And he clearly explains why:
"Our country's businesses will continue to efficiently deliver goods and services wanted by our citizens. Metaphorically, these commercial "cows" will live for centuries and give ever greater quantities of "milk" to boot. Their value will be determined not by the medium of exchange but rather by their capacity to deliver milk. Proceeds from thesale of the milk willcompound for the owners of the cows, just as they did during the 20th century when the Dow increased from 66 to 11,497 (and paid loads of dividends as well).
"I believe that over any extended period of time this category ofinvesting will prove to be the runaway winner… More important, it will be by far the safest."
This last sentence is important. Investing in productive assets carries less risk.
That's because, in the past,irrational exuberance has caused all sorts of nonproductive assets to suddenly skyrocket beyond any sane measure ofintrinsic value . The run-up on the prices of tulips in the 17th century is one colorful example.
If Buffet is wrong, take apart his logic. Otherwise, we can only wait and see. Me, I wish I'd gotten in on Bitcoin when it was $1, who doesn't wish that? But... I have yet to figure out how the heck it's reaching these prices. I see it, and it doesn't make sense to me. And I think I understand tech better than the average layperson. In fact, the fact that it's so expensive and volatile makes it difficult to use even as a currency. That makes it even more of a "nonproductive asset".
If people think Buffet doesn't get it, everyone's entitled to their opinion. But if you want to say he's wrong, you should explain what's wrong with his logic. The OP summarizes his logic really well, and I see nobody in these threads taking apart his logic. Quoting the OP:
Intrinsic value is this continuous waterfall of cash. It’s not the stock price of Coke but the actual cash flow of the business, after costs.
Buffett made his billions by divining when the gap is greatest between intrinsic value and a stock’s share price, then buying loads of shares, tickets to real cash flow other investors would want.
Given that bitcoin is supposed to replace cash, what is the ultimate source of cash flow from digital coins created on the internet? It’s dollars flowing from the pockets of buyers who want to own those coins.
Cut off the supply of new investors and the bitcoin craze ends.
The fact is, bitcoin has no intrinsic value at all. While many digital coin “investors” would argue that neither does a dollar, I counter that just about nobody thinks of American cash as an investment, except for perhaps currency speculators.
Yes, I've seen a comment somewhere in here that says, "hey, aren't people who buy American dollars currency speculators too?" Yeah, of course. But I don't see anyone attacking the part about whether or not Buffet's fundamental thinking of intrinsic value is applicable here.
I will point to another interesting article that summarizes similar thinking in another way. This article is perhaps interesting because I've seen many people here describe Bitcoin as digital gold.
http://www.nasdaq.com/article/why-warren-buffett-hates-gold-...
He considers gold a nonproductiveasset because it doesn't produce anything of value. To illustrate this point, Buffett proposed this thought experiment in his 2011 letter to Berkshire shareholders:
"Today the world's gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce -- gold's price as I write this -- its value would be $9.6 trillion. Call this cube pile A.
"Let's now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world's most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-aroundmoney (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?
"A century from now the 400 million acres of farmlandwill have produced staggering amounts of corn, wheat, cotton, and other crops -- and will continue to produce that valuable bounty, whatever thecurrency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will beunchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond."
So, instead of nonproductive assets such as gold, Buffett prefers productive assets like farmland or companies that generate enormouswealth for shareholders -- companies like Exxon Mobil ( XOM ) , Coca-Cola or See's Candy.
And he clearly explains why:
"Our country's businesses will continue to efficiently deliver goods and services wanted by our citizens. Metaphorically, these commercial "cows" will live for centuries and give ever greater quantities of "milk" to boot. Their value will be determined not by the medium of exchange but rather by their capacity to deliver milk. Proceeds from thesale of the milk willcompound for the owners of the cows, just as they did during the 20th century when the Dow increased from 66 to 11,497 (and paid loads of dividends as well).
"I believe that over any extended period of time this category ofinvesting will prove to be the runaway winner… More important, it will be by far the safest."
This last sentence is important. Investing in productive assets carries less risk.
That's because, in the past,irrational exuberance has caused all sorts of nonproductive assets to suddenly skyrocket beyond any sane measure ofintrinsic value . The run-up on the prices of tulips in the 17th century is one colorful example.
If Buffet is wrong, take apart his logic. Otherwise, we can only wait and see. Me, I wish I'd gotten in on Bitcoin when it was $1, who doesn't wish that? But... I have yet to figure out how the heck it's reaching these prices. I see it, and it doesn't make sense to me. And I think I understand tech better than the average layperson. In fact, the fact that it's so expensive and volatile makes it difficult to use even as a currency. That makes it even more of a "nonproductive asset".
His logic is very clear, and makes a lot of sense. The problem with it is that despite gold being a bad investment, its value is STILL $9.6 trillion. It has value because it is effectively deflationary, and can be used as a risk-management tool that works better than cash, allowing you to avoid inflation.
Buffet knows this, and I even recall that he bought a sizeable amount of silver a while back. I assume he also bought gold before too. He doesn't put the bulk of his assets in it. Most people don't. That's why Gold is only about 3% of the world's wealth.
Cryptocurrency's value is $600 billion, and by many arguments works better than gold for this purpose. This suggests to me that it would replace gold, making it potentially a good investment (even now). Once it replaces gold, it then only becomes a good hedge, and no longer a long-term investment.
Buffet knows this, and I even recall that he bought a sizeable amount of silver a while back. I assume he also bought gold before too. He doesn't put the bulk of his assets in it. Most people don't. That's why Gold is only about 3% of the world's wealth.
Cryptocurrency's value is $600 billion, and by many arguments works better than gold for this purpose. This suggests to me that it would replace gold, making it potentially a good investment (even now). Once it replaces gold, it then only becomes a good hedge, and no longer a long-term investment.
Wow, well done. I haven't thought about that. That's interesting food for thought. I guess time will tell.
Here, let me try:
In my humble opinion, at today's PE ratio of 43.57, stock price of Coke is completely detached from "the actual cash flow of the business" and is also FOMO and good mostly for speculation. In fact, people are complaining that value is near impossible to find in the current market. Anyone who enters KO at 43.57 (let's say you're just got some money to invest) is risking a ton more than Buffet.
"investors pounced on fixer-uppers" is also not a very compelling example by the author, where i live (bay area) investors wiped out all fixer-uppers 6 years ago already and are now bidding in the millions for what looks like dog sheds.
Bitcoin is detached from fundamentals and should drop to 0? Maybe. Is Coke justified at 43 PE and not 14? Who knows? Of course, anyone who entered it years ago at <20 may not really care.
In my humble opinion, at today's PE ratio of 43.57, stock price of Coke is completely detached from "the actual cash flow of the business" and is also FOMO and good mostly for speculation. In fact, people are complaining that value is near impossible to find in the current market. Anyone who enters KO at 43.57 (let's say you're just got some money to invest) is risking a ton more than Buffet.
"investors pounced on fixer-uppers" is also not a very compelling example by the author, where i live (bay area) investors wiped out all fixer-uppers 6 years ago already and are now bidding in the millions for what looks like dog sheds.
Bitcoin is detached from fundamentals and should drop to 0? Maybe. Is Coke justified at 43 PE and not 14? Who knows? Of course, anyone who entered it years ago at <20 may not really care.
I'm not sure you addressed the core of his logic. The core of his logic has nothing to do with whether value detaches from fundamentals.
Buffett
Buffett has never liked commodities or speculative assets. His primary strategy is to invest in wealth-producing assets. For instance, he said he would much rather own farmland than gold. And that's a great strategy. But it's not the only viable strategy.
Well that much is obvious. This doesn't speak to whatever utility bitcoin might have, but the recent uptick in price clearly has nothing to do with bitcoin's technical properties.
I appreciate the reporters critique, but what I believe they're missing is that there's an inherent value in the network and its market share in the space.
Bitcoin is not the check, it's the store of value and the bank. Bitcoin is the investors, developers, the miners, the ledger, wallets(accounts), the speculators, the store of value. Bitcoin is the headline maker in the WSJ, NYT, etc. That multilayered coupling is what makes BTC valuable.
The reporter talks about intrinsic value of companies, cash flow etc. The underlying healthy and stable economy is not some axiomatic truth. With BTC, You have all of the components to have currency emerge into existence and stay from bitcoins incentive system.
How much is it worth? That depends on what the alternatives are worth, and that evaluation changes every day. I hope it's long term near worthless, but you can never be too sure.
Bitcoin is not the check, it's the store of value and the bank. Bitcoin is the investors, developers, the miners, the ledger, wallets(accounts), the speculators, the store of value. Bitcoin is the headline maker in the WSJ, NYT, etc. That multilayered coupling is what makes BTC valuable.
The reporter talks about intrinsic value of companies, cash flow etc. The underlying healthy and stable economy is not some axiomatic truth. With BTC, You have all of the components to have currency emerge into existence and stay from bitcoins incentive system.
How much is it worth? That depends on what the alternatives are worth, and that evaluation changes every day. I hope it's long term near worthless, but you can never be too sure.
I still don't undestand why HN instead of being at the forefront of innovation aligns up with old school money. I guess most here are dependent n the old system and VCs
He has none but he could be shorting it?
Bitcoin saves lives in Venezuela, you people need to get your head from your asses, first world is not the only world.
We've banned this account for repeatedly posting unsubstantive comments and ignoring our request to stop.
https://news.ycombinator.com/newsguidelines.html
https://news.ycombinator.com/newswelcome.html
https://news.ycombinator.com/newsguidelines.html
https://news.ycombinator.com/newswelcome.html
https://en.wikipedia.org/wiki/Appeal_to_emotion
Appeal to emotion or argumentum ad passiones is a logical fallacy characterized by the manipulation of the recipient's emotions in order to win an argument, especially in the absence of factual evidence.
Appeal to emotion or argumentum ad passiones is a logical fallacy characterized by the manipulation of the recipient's emotions in order to win an argument, especially in the absence of factual evidence.
And bitcoin also pays for murders, launders money, etc. I feel, just as cash, it is quite ethics agnostic. Not knocking cryptocoin, just don't pretend it is a singular force for good. It is representation of capitol, albeit in a unique way.
I highly doubt Bitcoin is much used for laundering money, transactions are all happening in clear and if you try to hide traces by creating multiple addresses you are going destroy your capital in transfer fees (which are very high right now). It's clearly not the best currency to hide untraceable money.
I'd argue it's easier to use BTC securely when you're already laundering money than when you want to use it legitimately. Just use throwaway wallets to receive BTC, pay for goods that can be converted to physical cash and proceed laundering that cash as usual.
It's no surprise all the cryptolocker viruses asked for bitcoin payments or cash equivalent cards.
It's no surprise all the cryptolocker viruses asked for bitcoin payments or cash equivalent cards.
Wouldn't it be possible to temporarily switch to an intermediary altcoin (eg. ethereum, btc) ? I'm not invested nor an expert in any crytocurrency, so please correct me if I'm wrong.
Monero I think can be used for this, other main coins have a public ledger.
>And bitcoin also pays for murders, launders money, etc.
From scientific perspective this is not true. Bitcoin is way more open and traceable than good old dollars.
From scientific perspective this is not true. Bitcoin is way more open and traceable than good old dollars.
And destroys lives by contributing heavily to CO2 emissions which, funny enough, have an outsized impact on the citizens of third world countries.
It is not fault of bitcoin you are burning oil/etc for mining it. Use renewable energy.
...which could have been used to replace productive fossil fuel expenditures. It doesn't matter how you fuel egregious waste; its still a pointless thing to do?
I'd love for that to happen! But as it stands, when you use electricity, you're using whatever the grid supplies. And for Bitcoin miners especially, this power largely comes from burning coal.
Look up energy consumption of other worldwide services, like gold mining. Then get back to me.
Look up whataboutism [1], then get back to me ;-)
[1] https://en.wikipedia.org/wiki/Whataboutism
[1] https://en.wikipedia.org/wiki/Whataboutism
lol, touche
Does Warren Buffett understand digital signatures?
The technology is not important to the value.
Understanding the technology isn't, necessarily. You just need to understand the value proposition, transaction fees, etc.
One can look at the balance sheets for TransferWise, and without understanding a single thing about HTTP, web services, SWIFT, or any other detail one can quickly get a sense that it is a viable business whose revenues exceed its costs, and whose prices are competitive.
Same is true here. Warren Buffet is famously skilled at precisely this sort of thing. Unfortunately for Bitcoin, he doesn't see the value.
One can look at the balance sheets for TransferWise, and without understanding a single thing about HTTP, web services, SWIFT, or any other detail one can quickly get a sense that it is a viable business whose revenues exceed its costs, and whose prices are competitive.
Same is true here. Warren Buffet is famously skilled at precisely this sort of thing. Unfortunately for Bitcoin, he doesn't see the value.
How would you explain to him how they make the distinction here?
...asking for a friend
...asking for a friend
Bitcoin is built off of two cryptographic primitives. They implement rights/powers in software.
Here's a good example to grasp the idea: instead of asking the government not to read your emails (petitioning for the right of privacy) implement symmetric cryptography. You achieve the right instead of asking for it. Each cryptographic primitive does so and they can be connected up in ways that achieve more rights (Proof-of-Work>>Mining>>Cryptocurrency)
Shameless: http://inbitbox.com
Here's a good example to grasp the idea: instead of asking the government not to read your emails (petitioning for the right of privacy) implement symmetric cryptography. You achieve the right instead of asking for it. Each cryptographic primitive does so and they can be connected up in ways that achieve more rights (Proof-of-Work>>Mining>>Cryptocurrency)
Shameless: http://inbitbox.com
He understands that the global banking cartel already has a plan in place to crash bitcoin one way or another. And there are several ways. LOL you guys downvote fast. I say this as a hodler, but a realistic one.
As someone completerly uninvested in this whole mania, I still see Bitcoin as something with an inherent value. The real problem right now is that nobody knows what that inherent value really is. Even if the price were to crash 100x tomorrow, Bitcoin would still have some value because of the energy expenditure involved with Proof of Work. Of course people that are "investing" in it now are simply gambling. But Bitcoin itself will pretty much always have some worth because it will be impossible to recreate the amount of effort that went into mining it.
So there is inherent value in burning piles of cash, because 'cash went into creating it'? I don't get the logic.
Yeah, that's like saying that a pound of shredded bills has value. Like, yeah, you can trade it, and yeah, value was spent to create it, but you can't get that back.
It's not like buying bitcoin gives you back electricity.
It's not like buying bitcoin gives you back electricity.
Interesting off-topic tidbit that is not meant to derail your point:
You could probably send the shredded bills to a US department that examines mutilated cash and get compensated.
https://www.npr.org/sections/money/2017/06/30/.../episode-78... https://www.moneytips.com/mutilated-currency-101
You could probably send the shredded bills to a US department that examines mutilated cash and get compensated.
https://www.npr.org/sections/money/2017/06/30/.../episode-78... https://www.moneytips.com/mutilated-currency-101
It is the scarcity that creates the 'value'. Unless everybody walks away from the idea that it is worth something (may happen), then its value is still driven by how difficult it is to create some.
Scarcity doesn't create value. A copy of my personal memoir is extremely scarce, yet the value is zero. Further, bitcoin only has the illusion of scarcity, and clearly that's enough, but as was demonstrated by BCH, the supply of coins can be trivially increased. Enthusiasts will argue "BCH is not BTC, they're two separate currencies", but this is missing the point that "crypo-tokens" are an unlimited resource that is artificially limited through a consensus that can change at any time.
The total volume of my excrement over the course of my lifetime is scarce. Yet it is worthless to investors. Scarcity alone does not make something valuable.
I understand that you consider bitcoin to be sht and do not want it. It seems enough people have confidence in its mechanisms though. So that would be scarcity+confidence that gives it its value. But the same thing happens with the next crypto currency (your neighbors' sht) so maybe it is worth nothing after all. Not taking a stance, just trying to understand.
The fact that energy was expended doing all the hashing does not mean that the "coins" have value. It is entirely possible to expend energy on useless activity, thereby converting valuable electricity into useless waste.
No, that's a fundamental misunderstanding of what value is. And a manifestation of a common one!
Things don't have value because of how much it cost to create them. They have value because of how much people are willing to buy them for.
If you and I both produce spoons, and the spoons that we produce are identical in every way, but I have a more efficient manufacturing process and it costs me less to produce those spoons, that does not make your spoons worth "more." And, importantly for people who are drawn to this idea, we should not attempt to legislate that your spoons are worth "more" for fairness reasons -- this fundamental approach to value is exactly what creates incentives for me to find efficiencies in manufacturing.
Things don't have value because of how much it cost to create them. They have value because of how much people are willing to buy them for.
If you and I both produce spoons, and the spoons that we produce are identical in every way, but I have a more efficient manufacturing process and it costs me less to produce those spoons, that does not make your spoons worth "more." And, importantly for people who are drawn to this idea, we should not attempt to legislate that your spoons are worth "more" for fairness reasons -- this fundamental approach to value is exactly what creates incentives for me to find efficiencies in manufacturing.
Energy expenditure alone cannot guarantee value. I can think of plenty of ways I could expend huge amounts of energy that wouldn't create value.
There is a known name for this, it is called "Sunk Cost". If it cost you a billion dollars to build a spaceship that doesn't fly, that spaceship is not worth a billion dollars - it is worth nothing. Capish?
He's said in the past about technology and software that "I just don't understand it" then he gives advice to people telling them not to invest. Classic Buffett and if you think about that it makes no sense. He also famously missed out on the appreciation of technology sector from about the mid 90's onward. I wonder what he thought of Netscape giving away their product freely while also being one of the greatest IPOs of all time.
1. He seems to be doing just fine.
2. Netscape, really? That was your best example of a thriving tech business? You're making his point for him :))
2. Netscape, really? That was your best example of a thriving tech business? You're making his point for him :))
It's all smoke and mirrors. Just as Dimon called bitcoin investors 'stupid' at the very time he was already trading bitcoin, Buffett's downplaying of bitcoin is also a sign that he wants to get in on the action.
It's interesting to note that most of the people who are pro-Bitcoin were born after 1980 or so. Could it be that Mr Buffett just doesn't get it?
Your argument is that one of the most successful investors in the history of mankind is physically incapable of understanding Bitcoin investment (or anything, for that matter) just because he's old?
He has a different worldview. He's made his money on old way of investing. Some of it applies, some doesn't. He would not be the first successful person to be wildly wrong about a new thing.
I would love hear one thing about investing before that doesn't apply now. Or one thing that Buffet doesn't understand about bitcoin that has any economic relevance.
Those who say he doesn't get it seem infinitely more naive and ignorant than Buffet on this.
Those who say he doesn't get it seem infinitely more naive and ignorant than Buffet on this.
One of the main differences is the fact that the value of a currency is fundamentally based on who accepts it. All economic theory prior to this is...i dont want to say outdated but needs to be reprioritized.
Are you seriously suggesting that "currency is fundamentally based on who accepts it" is a new idea?
No?
I don't think that he suggested that he was "physically" incapable of understanding Bitcoin investment.
But, I mean, sure. People get old and start to have difficulty comprehending things that get added to the world long, long after they built their mental model of the world. This happens even to smart people. Even to singularly smart people. I don't know if it's happened to Buffet or not, but if he lives long enough, it will.
But, I mean, sure. People get old and start to have difficulty comprehending things that get added to the world long, long after they built their mental model of the world. This happens even to smart people. Even to singularly smart people. I don't know if it's happened to Buffet or not, but if he lives long enough, it will.
How about maybe because he is extremely busy?
Couldn't it also be that he does "get it" and all the young and inexperienced investors/speculators don't?
I'm not going to try to refute your argument (even though I might disagree with it), I'm going to assume that what you say is right.
Ok, why does it matter if he does get it and the young investors don't if the young investors can participate in a new economy. Like what is there to get? If they establish a new economy, who cares if Warren gets it?
Ok, why does it matter if he does get it and the young investors don't if the young investors can participate in a new economy. Like what is there to get? If they establish a new economy, who cares if Warren gets it?
I don't think most of the young investors these days are participating in a new economy. They are just trading Bitcoin as commodity on exchanges. In which case if they don't get it and Warren does, that's a problem for them.
Exchange is the foundation of any new economy. By creating exchanges, they are creating a foundation of the next economy.
A new economy that supposedly runs on a payment method that doesn't scale so have to resort to various degrees of centralization and trusted third-parties that don't deliver on the original promises of Bitcoin?
I guess I don't see what makes this a new economy and not just the same old economy with new commodity-based payment system.
I guess I don't see what makes this a new economy and not just the same old economy with new commodity-based payment system.
It’s still very much under development. It’s not like the rest of the economic system was built over night.
> It's interesting to note that most of the people who are pro-Bitcoin were born after 1980 or so.
Citation?
Citation?
I hear this argument a lot, and don't understand it. It's entirely possible Warren doesn't understand the technical details about how Bitcoin functions. But I don't understand how that's relevant to how it functions as an investment. Mind elaborating about why the technical details are relevant to how it performs as an investment?
Sure. But it seems faaar more likely that Buffet has seen this before and those who are pro-Bitcoin and haven't watched similar commodity/equity rushes are not getting it.
What? Bitcoin has never existed before it was created, and it wasn't possible before the Internet, so I don't think Warren Buffett has seen it before unless he's a time traveler.
Ah yes, something that's never existed before. While true in the technological particulars, it's dead wrong economically. There are all sorts of "never seen before" tradable things that show up in the economy. That people think that cryptocurrencies are so different is evidence that Buffet is right, not the economic newbs.
See also the efforts to force "blockchain" into all sorts of round holes where it doesn't fit, such as energy.
See also the efforts to force "blockchain" into all sorts of round holes where it doesn't fit, such as energy.
There is nothing comparable to Bitcoin that previously existed. Gold is perhaps the closest thing.
Haha, gold! The only way that gold is comparable is that similar political commentators are running pump schemes! Otherwise, there are plenty of other commodities that bitcoin is as similar to as gold. Currencies of unstable nations are perhaps more similar to bitcoin than gold is.
And that's just it: nothing new economically about bitcoin. Nothing that hasn't been theorized to death by economists. Politically, it enables a currency for those with massively unstable governments. It enables some black markets. But the idea that this is something new that Buffet isn't getting, is just silly, and that's been borne out by the paucity of any sort of insight from the bitcoin pumpers. Buffet is right that the current soaring and unstable price is driven by FOMO. Nobody knows what the proper size of the bitcoin economy should be yet, and there's almost no way to value it rationally. The most rational pricing of bitcoin is still wild guesses, but the vast majority of purchasers are doing nothing even remotely like trying to establish a price. They are just buying and hoping it soars. Works great until it doesn't.
And that's just it: nothing new economically about bitcoin. Nothing that hasn't been theorized to death by economists. Politically, it enables a currency for those with massively unstable governments. It enables some black markets. But the idea that this is something new that Buffet isn't getting, is just silly, and that's been borne out by the paucity of any sort of insight from the bitcoin pumpers. Buffet is right that the current soaring and unstable price is driven by FOMO. Nobody knows what the proper size of the bitcoin economy should be yet, and there's almost no way to value it rationally. The most rational pricing of bitcoin is still wild guesses, but the vast majority of purchasers are doing nothing even remotely like trying to establish a price. They are just buying and hoping it soars. Works great until it doesn't.
OP talking about other phenoms. [S]he says that. IE the dot com bubble and some of the insane stock prices.
Last I checked Bitcoin wasn't a stock.
I don't see the point to buying Bitcoin.
I was born before 1980 (< 1 year before, but still true statement) so maybe I really don't get it, but a "currency" that doesn't have transaction speed or throughput needed for widespread use doesn't seem appealing to me.
I like to read about the protocol and rummage through the code. Reading about hacks/scams and other interesting stories is fun. But my interest has not so far induced me to invest money or computing time into any cryptocurrency.
I was born before 1980 (< 1 year before, but still true statement) so maybe I really don't get it, but a "currency" that doesn't have transaction speed or throughput needed for widespread use doesn't seem appealing to me.
I like to read about the protocol and rummage through the code. Reading about hacks/scams and other interesting stories is fun. But my interest has not so far induced me to invest money or computing time into any cryptocurrency.
Not sure why everyone's go-to after someone talks negatively about Bitcoin is "he/she doesn't get it." Exactly what is there to get?
I'm curious about this too. Bitcoin is now essentially an investment venture, no? What is there to get about making money from bitcoin price going up?
Bitcoin's price only goes up as people buy it. "Making money" requires selling it. Selling it causes the price to go down. This is fundamentally the problem—unlike stocks, real estate, and other productive investments, one can only make money in Bitcoin by selling it for a higher price than it was purchased for.
There's a really cool ecosystem of decentralized systems starting to find real-world use cases on the other side of the bitcoin divide. Bitcoin is just the figurehead.
Is that a subtle version of ageism ?
Bitcoin is a financial instrument with currency aspiration. Mr Buffet is very much an expert talking about stuff he knows.
On the other side of the coin, recent history of bitcoin exchanges woes showed that "pro-bitcoin" people were not specifically enlightened, they were just inexperienced.
That does not make Mr Buffet right and pro-bitcoin wrong, but you should at least give him the benefit of the doubt and not simply dismiss his points as old people ramblings.
Bitcoin is a financial instrument with currency aspiration. Mr Buffet is very much an expert talking about stuff he knows.
On the other side of the coin, recent history of bitcoin exchanges woes showed that "pro-bitcoin" people were not specifically enlightened, they were just inexperienced.
That does not make Mr Buffet right and pro-bitcoin wrong, but you should at least give him the benefit of the doubt and not simply dismiss his points as old people ramblings.
Not subtle, but openly. I'm saying that people who didn't grow up in the internet age probably have a more difficult time understanding why it's so valuable.
> Could it be that Mr Buffett just doesn't get it?
People said the same thing in 1999 when he famously refused to invest in tech stocks and then you kno0w what happened.
People said the same thing in 1999 when he famously refused to invest in tech stocks and then you kno0w what happened.
Goldman Sachs hasn't yet setup their own Bitcoin trading desk, but they are building it. No doubt Buffet is trying to temper enthusiasm until their trading platform is built. Once it is, suddenly he will "Understand it".
Warren Buffet has previously vowed not to invest in tech b/c he said he doesn't understand it. I think it changed in the last ~5 years. But I still don't think that he "understands" tech.
The Beanie Babies comparison is straight up stupid. I can go to Africa right now and I can imagine that even some of the remoter parts will be aware of bitcoin.
The Beanie Babies comparison is straight up stupid. I can go to Africa right now and I can imagine that even some of the remoter parts will be aware of bitcoin.
> I can go to Africa right now and I can imagine that even some of the remoter parts will be aware of bitcoin.
The Bay Area, ladies and gentlemen.
In all seriousness, I doubt people in most of the world have heard of either.
The Bay Area, ladies and gentlemen.
In all seriousness, I doubt people in most of the world have heard of either.
I don't live in the bay area.
idk if you saw this but UN has previously used Ethereum to send aid to refugees.
https://www.coindesk.com/united-nations-sends-aid-to-10000-s...
You have to realize that in the US you have the luxury of stable (corrupt, but stable) government. A lot of other countries dont have that luxury. An international standard is a lot more enticing to someone from such a country than it is for you. Like stability is relative. What you can perceive as unstable, someone can perceive as unstable but stabler than the default.
idk if you saw this but UN has previously used Ethereum to send aid to refugees.
https://www.coindesk.com/united-nations-sends-aid-to-10000-s...
You have to realize that in the US you have the luxury of stable (corrupt, but stable) government. A lot of other countries dont have that luxury. An international standard is a lot more enticing to someone from such a country than it is for you. Like stability is relative. What you can perceive as unstable, someone can perceive as unstable but stabler than the default.
> A lot of other countries dont have that luxury
The intersection of (a) countries with reliable Internet access and broadly-available Internet-connected devices, (b) a useless national currency and (c) effective controls on the use of cash hard currency is small. The GDP of that intersection certainly doesn't support anything close to Bitcoin's price.
The intersection of (a) countries with reliable Internet access and broadly-available Internet-connected devices, (b) a useless national currency and (c) effective controls on the use of cash hard currency is small. The GDP of that intersection certainly doesn't support anything close to Bitcoin's price.
You don't need A. Re B, which countries have a useful currency really? Say Hungarian Forint. Do you consider that a useful currency?
Ok what do you think would be a justified price and why?
Ok what do you think would be a justified price and why?
A useful currency is a stable currency with predictable small inflation or deflaction. It doesn't really matter if this currency is implemented with people having "faith" in the currency, backing the currency with real assets or via a blockchain without a central bank.
A "currency" that can rise or fall by 30% on a single day is not useful as a currency.
A "currency" that can rise or fall by 30% on a single day is not useful as a currency.
We are very early on. Like' it's still very much in the beta stage.
I can't think of a national currency that is useful beyond faith.
Using a blockchain as a ledger device is far, far different from investing in a cryptocurrency.
> the project run by the United Nation's World Food Programme (WFP) was designed to direct resources to thousands of Syrian refugees by giving them cryptocurrency-based vouchers that could be redeemed in participating markets.
They're not really using the actual Etherium blockchain in any meaningful sense though. They just gave vouchers that could be spent at participating markets. It reeks of a marketing ploy by Parity Technologies for some press.
They're not really using the actual Etherium blockchain in any meaningful sense though. They just gave vouchers that could be spent at participating markets. It reeks of a marketing ploy by Parity Technologies for some press.
> The Bay Area, ladies and gentlemen.
Hear, hear. Meanwhile in remote areas of Africa, this is more like what functions as currency:
"If you're in South Sudan and something big happens in your life — you get married, you buy property or pay a penalty for a crime — cows are most likely involved. Cows are currency and credit card and bank account rolled into one. In South Sudan, banks can go bankrupt — cows are more reliable. At least that's how it used to be."
From Planet Money: https://www.npr.org/sections/money/2017/11/15/563788464/epis...
Hear, hear. Meanwhile in remote areas of Africa, this is more like what functions as currency:
"If you're in South Sudan and something big happens in your life — you get married, you buy property or pay a penalty for a crime — cows are most likely involved. Cows are currency and credit card and bank account rolled into one. In South Sudan, banks can go bankrupt — cows are more reliable. At least that's how it used to be."
From Planet Money: https://www.npr.org/sections/money/2017/11/15/563788464/epis...
South Sudan is hardly typical of Africa, though. In 2017, it had the single highest score on the Fragile States Index (formerly called the Failed States Index) of any country in the world.
As a person from (West) Africa, I can tell you they've not only heard of Bitcoin but they're mining it, even in villages.
Pakistani here, you really expect us to believe that in countries without reliable electricity in rural areas, nevermind reliable broadband internet access, and 40% literacy rates people who, looking at the average GDPs of countries in the region couldn't possibly afford the necessary computing power are mining Bitcoin?
How hard is it to imagine someone doing this:
http://www.cnn.com/2017/12/18/africa/inside-life-cryptocurre...
Could move to a rural location setup a 3g hotspot (remembering in these countries rural 3g is becoming common is actually fairly cheap) and run generators as backups?
Here's your country:
https://www.youtube.com/watch?v=ozBtOtDK4jY
Does anything shown really look that outlandish to do in a rural area with a little more than a backup generator?
Mining is taking off in 3rd world countries too.
http://www.cnn.com/2017/12/18/africa/inside-life-cryptocurre...
Could move to a rural location setup a 3g hotspot (remembering in these countries rural 3g is becoming common is actually fairly cheap) and run generators as backups?
Here's your country:
https://www.youtube.com/watch?v=ozBtOtDK4jY
Does anything shown really look that outlandish to do in a rural area with a little more than a backup generator?
Mining is taking off in 3rd world countries too.
I feel like some people really misunderstand developing countries. People living there are very much looking to participating in the world economy, because the local one isn't great.
Interesting. Could you please describe how such a mining operation is setup in one of these villages?
What country are you in?
I’m in the US, but I’m from Ghana, see above comment for details...
fivethree(3)
Comment written on software and hardware designed in the Bay Area.
I know cryptoppl active in Africa and ppl in remote parts of Africa who have heard of Bitcoin.
I don't think that's the point. Of course people on Hacker News are likely to know people in remote places or barely 3rd world places who know about things like crypto[currency]
I agree with the premise of the article, but isn't this quote a jump from that? Whats preventing bitcoin from being a temporary store of value to transmit from one person to another; Isn't there a second argument to be made on why its a bad _currency_ or not? I think something like this article: https://www.bloomberg.com/view/articles/2017-12-27/bitcoin-i...