Warren Buffett is still an investment genius. He earned a literal fortune by being extremely conservative. His financial moves were based on being practical and finding investments with a high degree of certainty. Bitcoin has been compared as a new form of gold, but Warren Buffett is confused about any intrinsic value it holds. No longer young, it makes sense for him to not concern himself with unpredictable new technology. However, more research could have been done before advising on a topic that he misunderstands.
Friday, Warren Buffett spoke on CNBC and his advice could be summed up with the quote that is now circulating the Internet with varied weight being placed in it. “Stay away from it,” Buffett warned. His more in-depth thoughts were that it was a “mirage” and incorrectly labeled it as an anonymous “very fast money order.” His ideas were accepted and these thoughts were only covered briefly before CNBC continued on. His views were not challenged and had someone on the show been more informed, the conversation may have gone differently. He remains correct that investment is not a conservative move, but in covering the details Buffett made several more slip ups.
Defining it as “a method of transmitting money” he compared it to a check and pointed out that those pieces of paper have no worth; after all, the only things checks do is transfer money. The last half of what he says is completely true. However, unlike checks, Bitcoins have intrinsic value, currently at a conversion rate of one BTC converting to $636. In fact, what Warren Buffet is confusing with a paper check is more closely related to gold. He later said, “the idea that it has some huge intrinsic value is just a joke in my view.” A tweet from Marc Andreessen, a venture capitalist with a programming background, said, “Warren has gone out of his way for decades to avoid understanding new technology. Not a surprising result.”
The thought that Bitcoin is comparable to a check, money order, or only a money transmitting system is false, it is not another version of PayPal or Google Wallet. They posses very different functions and belong in different categories. It is more related to gold, as it is a currency with changing value, but it does have value, unlike a check. Forbes compared it to having U.S. Money when traveling to Montreal. They have value, can be traded for goods and services, or can be exchanged into which ever currency is needed. Asking a bank to trade any money for a blank paper check is not going to work.
The Bank of England just published an article covering digital currencies’ place in modern economy and the future of these new technologies. The conclusion they arrived at was, “digital currencies… have more conceptual similarities” to gold rather than money. Several reasons given were that they lack a fixed rate, are not currently a main medium of exchange, and they are more popular for serving as an asset class. The concept that Bitcoin is a technology based gold confused Warren Buffett, but he remains correct about it being a risky investment. The article continued, and Paypal and Google Wallet were compared to bank deposits, rightfully filed under a different term, with a different definition, than Bitcoin.
By Whitney Hudson