Recently, I read a 2010 article describing what Warren Buffett thinks about gold. It’s an illuminating piece which really helps further explain why “The Oracle Of Omaha” is so against BitCoin.
Anyway, here’s the standout quote:
You could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what it’s worth at current gold prices, you could buy — not some — all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils (XOM), plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?
Buffett’s main BitCoin grievance is pretty similar. He claims that crypto currencies (like gold) are a speculation. And, he’s advocates buying something which is guaranteed to rise in value (farmland, blue-chip stocks) instead.
It’s a good argument and solid advice, but there is one catch.
Gold, and many other “worthless speculations” are still highly sought after and continuously rise in price.
Sure, these assets don’t have the same practical utility as a bean field in Nebraska or stock holdings in a gravel company (Peter Lynch’s favorite investment). But, nonetheless, many intangibles and speculations still gain value. People want them, and prices stay high.
Here’s an example.
Gold, BitCoin, And Warren Buffett
As any dorm room philosopher will tell you, money has no real world value. “It’s just a piece of paper, man.” They’re technically correct, yet good luck arguing this when you need a bank loan.
The same goes for many other “nonessential items.”
Paintings and sculptures can’t grow crops or smelt iron ingots, yet certain artwork often sells for millions at auction.
Why?
Because value is in the eye of the beholder.
If someone’s willing to pay $10 million dollars for a Picasso, that painting is now worth $10 million bucks.
Additionally, items like gold, art, and BitCoin, rise in price due to their finite supply. When crypto was easy to mine, it’s value was virtually nonexistent. I remember my brother mining LiteCoin when they were less than $1 each. Then, once supplies dried up, demand rose.
As something becomes more and more rare, prices skyrocket. It’s why old baseball cards, comic books, and houses in “the nice part of town” all become highly sought after.
The same thing (in my opinion) is partially true with BitCoin.
As coins get harder to get, prices continually tick upwards.
Lastly, and not to hate on the guy because I generally like his investing advice, but Warren Buffett sucks at picking winning tech companies. He dismissed the idea of computers, thought Amazon was a dumb investment, and is somewhat out of the loop with what younger generations do.
(Here’s A Whole List Of Investments Buffett Bungled)
He’s skipped Google, dumped Disney stock, and balked that Wal-Mart was too expensive at $11.62 per share (it’s now worth over $85).
In other words, he’s been wrong before.
So taking Buffett’s advice as 100% accurate can lead to missing out on some big gains.
Final Thoughts
I understand why people are skeptic about BitCoin. Unlike a stock, or land, there’s no utilitarian purpose. There aren’t physical assets to sell off and crypto currency doesn’t produce consumer staples or resources (like oil or a share of Procter & Gamble would).
That said, there’s still value in it.
People want finite items (like gold, crypto coins, vintage comic books, and high-quality art). And personal tastes don’t have to follow some form of utilitarian logic.
BitCoin, in my opinion, will hold its value and continually increase. We might not get a massive jump like 2017 again, but I do see the market continually growing and expanding in value. BitCoin is still a worthwhile investment, whether Warren Buffet likes it or not
P.S. Looking to dip your toes into the crypto marketplace? Why not invest with CoinBase? They’re an excellent exchange, and by using this link to invest, you’ll get $10 in free BitCoin.
