I never knew what to think about Bitcoin when it
first came on my radar.
But unlike me, Warren Buffett was very clear on his
thoughts.
If you told me you owned all of the Bitcoin
in the world and you offered it to me for
$25, I wouldn't take it because what would I do
with it?
And his longtime partner Charlie Munger makes him look like
some kind of Bitcoin fanatic.
I have a slightly different way of looking at it.
In my life, I try to avoid things that are
stupid and evil and make me look bad in comparison
with somebody else.
Bitcoin does all three.
They first started talking about Bitcoin in early 2018.
Since then, Bitcoin has increased 400%, while Berkshire Hathaway, the
investment company, has gone up 75%.
So how can Bitcoin be so bad if it's doing
so well?
And why do these two, who are regarded as the
epitome of financial wisdom, despise Bitcoin?
Could they, dare I say it, be wrong?
I've spent the past month trying to to answer this
question.
I did not expect to find what I found.
Bitcoin is the apex property of the human race.
There is no property invented in the history of mankind
that is better than Bitcoin.
There's no intrinsic value to this asset.
If you have the superior asset, it's going up forever,
Laura.
Now it is in the process of going to 0,
except for Bitcoin, which will probably go negative.
And I think 2025 is going to be the spectacular
year north of 300,000 for Bitcoin.
I can say almost with certainty that they will come
to a bad ending and that it is going to
scale from a little more than a trillion dollars today
to $25 trillion in 20-30.
It's kind of a pure greater fool theory.
I would shorted if there was an easy way to
do it.
It will be as significant for freedom as the birth
of the Internet.
Bitcoin is worthless artificial gold.
I think it's a scumball activity.
To understand Bitcoin you need to understand the problem.
I'm going to put you in the shoes of a
30 year old living in the US.
It's 2020 and the whole country gets shut down.
Yes, that rarely happened.
But this guy Ryan has been responsible his whole life.
He's worked hard since he was 18.
No partying, no travelling, definitely no silly Amazon purchases.
He saved up $100,000 to buy a house and to
take care of his family.
But then the pandemic comes and he decides I'm going
to keep being responsible and lock my money away until
times are less volatile.
Traditionally considered a good decision.
Three years later he comes back to his money and
he can't buy.
The house.
Prices are 37% more expensive to fill up his car.
It's double the price.
That $100,000 that he spent 12 years working so hard
for is worth $70,000 in real terms.
And that's just three years.
This is what he gets for working hard.
95, saving, no gambling, no speculation.
He gets hit with what's known in the finance community
with the silent tax.
The silent tax is not just in the great country
of the USA, in most countries it's much worse.
If we use the same example with the same amount
and the same time period but changed him to being
in Argentina with pesos, he would have 15,000 left today.
I wish this was a made-up story in some inverse
reality, but it's not.
The thing we know as traditional currency has got major
flaws to it.
If only there were another way.
If you go back in history, you notice that this
issue is not some modern day problem.
It's been going on for more than 100 years.
With more than 100 currencies.
The dollar is losing 7 to 10% of its value
a year for 100 years.
That means over the course of 100 years, the dollar
loses 99% of its value.
My house in Miami Beach was purchased for $100,000 in
1930.
I bought it for $14 million in 2012.
Today, you know.
Yeah.
So 100,000 to 50 million in less than 100 years,
that's not the house getting more valuable.
That's the currency getting less valuable.
OK.
If you took a if you took any amount of
money, take $100 million in the year 1900 and invested
in any currency in the world, you would have lost
100% of your money in every currency except for the
dollar or maybe the # every currency collapse.
The winner of every war in the 20th century was
the United States, and so the winning currency loses 99.5%
of its value.
Everybody else you lose everything.
The problem is, if you hold the wrong currency, you
get burns.
The problem with this is every single currency is the
wrong currency.
It's only a matter of how badly you get burns.
The reason why is because all of them have one
thing in common.
They are controlled by a central power.
A power which purposely, legally, and silently dilutes the people's
currency.
But what if I told you there was a new
currency which didn't?
The idea of currency is fundamentally a good one.
I'm a fisherman and you're a lumberjack.
I fish.
I have some leftover, so I give some fish to
you, and in return you give me some logs.
Hang on, I don't need any logs.
Well, use this piece of paper instead to store the
value so you can use it on something that you
do need.
That piece of paper is what we call currency.
Or a store of value.
The problem comes not with the concept of currency, but
with the people who control that currency.
This institution is known as the Central Bank or in
the USA, the Federal Reserve.
Like your uncle who can't shake his gambling habits, the
central bank has a nasty habits of their own.
the Fed was pretty too much money.
Federal Reserve pumping money in The Federal Reserve just printed
$300 billion.
In one week that has gone up $800 billion.
Because if the government printed a zillion more money than
it had unlimited money, the Federal Reserve and the central
bank in Japan and the central bank in England and
the central bank in Europe printing staggering amounts of money.
Inflation is going to last for years.
The Fed's nasty habit is printing money.
Unfortunately, what happens when you print more money into the
system, it devalues the current money that's already in the
system.
So everyone's cash that they're saved in the bank effectively
gets devalued by how much is printed.
And then you're left with the savers who become losers
and the not savers they stay broke too.
Either this is just the way things have been, is
now and will always be and we must just deal
with it, or we can find a solution.
Someone who knows this problem very well is a person
who goes by the name of Satoshi Nakamoto.
Whether he'd been burned by inflation in the past, whether
he'd lost faith in the traditional financial system, whether he
was just bored looking for an easy way to become
a millionaire, we don't know.
We're not even sure if Satoshi was a he or
a single individual.
The only thing that we do know is that Satoshi
was the one who invented Bitcoin in January 2009.
This mysterious online currency gets created.
It's designed in a way to solve all of the
issues of modern currencies.
One, it's not controlled by anyone.
It's power is decentralized across millions of computers.
If one computer or even 1000 get in the wrong
hands, you still have a million others to keep the
currency safe.
2 It has a maximum supply of 21 million coins.
This way, the currency cannot be inflated.
This means people like Ryan aren't left penniless simply by
doing nothing.
3 Unlike gold, the currency can be transferred at the
click of a button, which is very powerful concept.
Let's say you wanted to transfer your wealth to a
new country.
Your current country has turned corrupt.
Too much crime, controlling government, whatever.
OK, no problem.
A few clicks and you send your money anywhere, any
place, anytime.
Or, if this is too hard, remember your private key,
password and your entire net worth can literally be stored
in your head.
It sounds like a pretty good invention.
So that begs the question, why the heck do these
two financial sages hate it?
To work this out, we need to answer into the
mind of Warren Buffett.
I've studied Warren Buffett ever since I was a nerdy
18 year old just heading into uni, so I know
exactly why Buffett hates Bitcoin.
In January 2011, Buffett was preparing to make a big
investment.
It's spotted a company which fits his investing philosophy and
could make him a lot of money.
His philosophy is to buy stocks for a reasonable price,
where the cash flow quickly pays you back the price
and then even more for years to come.
This philosophy has consistently worked for him throughout the years.
He decides to make his move and he snaffles up
55,000,000 shares of IBM.
This stock has just made $15 billion in income and
has a market cap of 200 billion.
If all goes well, this company should pay his money
back quickly and then he'll have a free cash flow
machine.
This investment is perfect for Ron Buffett because he doesn't
like to do what's known as speculating, buying something that's
not producing much in the hopes that one day it
will.
Buffett considers this too risky, and his worst nightmare is
to lose his shareholders money even more than losing his
own.
So when a new asset comes along that produces literally
nothing, is a currency that's not used in everyday life,
and even worse, one that's purely online, Buffett doesn't even
let it touch the purview of his investing framework.
And then there's Charlie.
Manga Charlie.
Well, let's just say he's a bit more to the
points than Warren.
When Charlie buys a stock, he doesn't hold back.
In 1978, he saw Berkshire Hathaway and put most of
his family wealth in the company.
He found Costco many moons ago and went large into
the stock.
When Manga sees something that he likes, he takes an
extreme position.
But this concept works both ways.
Sometimes I call it crypto crapo, and sometimes I call
it, well, crypto.
I think it's rat poison.
A key argument behind manga is he thinks Bitcoin is
evil.
Now I can see how a human can be evil,
a system can be evil, a cult can be evil.
But a currency?
This doesn't make sense, or does it?
Unfortunately, it's not just the peaceful freedom seeker who has
adopted Bitcoin.
It has also become a great currency for criminals.
This is a very, very bad thing.
The country did not need a currency that's good for
kidnappers and so on.
Let's say I'm doing something illegal.
I'm a drug trafficker.
Full disclosure, I'm not a drug trafficker.
I've just sold $1,000,000 worth of drugs to a dealer.
So the dealer sends the money to my bank accounts.
Hang on.
I don't want this money going to my bank account.
Banks are highly regulated.
They require identity documents.
They need legal statements to prove large transactions.
The account can be frozen or seized.
I could get caught, no problem.
Send the money to my Bitcoin address instead, and I'll
remain anonymous.
Yes, the transactions are kept on the blockchain, but the
identities?
No one knows.
And there you go.
I've just made $1 million illegally, anonymously.
Bitcoins greatest benefits becomes its greatest downfall.
No one can control it, so no one can control
the criminals.
Ah, you say you want freedom, but how much freedom
do you rarely want?
Enough freedom for criminals to operate financially.
The success of Bitcoin is fundamentally different to most assets.
Bitcoin success depends on how many people want it.
If no one wants to buy a bond from you,
it doesn't matter.
You still receive yearly coupon payments if no one wants
to buy your stock, while the business still earns money
anyway.
If no one wants to buy your farm, it keeps
producing crops, but if no one wants to buy your
Bitcoin, it's worthless.
However, on the flip side, if everyone wants it, it
becomes very valuable.
This is why the people that own it a surprisingly
loud about owning it.
They need others to adopt it so that the price
goes up.
And the most important people that they need on board
is the institutions, the big money Black Rock, Vanguard, hedge
funds, governments.
We all know China's move to holding gold instead of
the US dollar, but imagine if they moved to Bitcoin.
Now I hear a lot of crazy price predictions that.
To be honest, I don't know where they pull these
numbers up from but let's try be realistic.
If all goes well, how big could Bitcoin get?
Right now Bitcoin has a market cap of $700 billion.
Another asset class that is considered a store value is
gold.
Gold's market cap is 11 trillion.
If Bitcoin were to get as big as gold, it
could 15X or you could argue it's better than gold.
Maybe it should be double gold's market value.
That would be a 30X in price, but that's very,
very bullish.
Gold has been used for storing value for hundreds of
years.
Bitcoins barely being used for 10.
That's one outcome for Bitcoin.
The other outcome you probably don't want to hear.
This has been the fate that many other cryptos have
already experienced.
Bitcoin is by no means the perfect form of currency.
In May 2021, Elon Musk Tesla stopped accepting Bitcoin as
a form of payment.
Why?
I thought Bitcoin was the currency of freedom and Elon
Musk is almost the flag carrier of this.
He sold Bitcoin not because it's decentralized and free, but
because of its energy use.
A Harvard Business Review calculated that Bitcoin consumes around 110
terawatt hours per year.
That's 0.55% of global electricity production, or roughly equivalent to
countries like Malaysia or Sweden's energy draw.
I'm a Put that bluntly, that's a damn lot.
And it's a damn lot on the environment, adding slow
transactions, annoying fees, and the volatility of the free market,
and you have a currency that is pretty painful to
use.
Just go ask El Salvador.
El Salvador adopted Bitcoin as their second national currency in
September 2021, going to great lengths to see it ubiquitous.
But in late 2023, it's very rare for businesses and
people to use the crypto.
It's too slow and it's too volatile.
Imagine just holding your savings and a few months later
it's gone down 20%, and then the next month it's
up 20%.
That's your financial life's work.
You'd have to be markers or Riley's to not get
emotionally affected by that.
The sad reality about Bitcoin is it has a lot
of flaws as a currency, and all of these flaws
may cause it.
Don't say it, don't say it, don't say it.
To go to it's stupid because it's very likely to
go to 0.
It's worthless, it's no good, it's crazy, it'll do nothing
but harm, it's anti social, it's just disgusting.
It's like somebody else is trading turds and you decide
I can't be left out.
It will come to a bad ending.
There's this interesting battle that's going on in the finance
world right now.
It's kind of like the battle between the left and
the right.
The left is talking about all of the possibilities and
benefits if we try a new system, and the right
is talking about everything that could go wrong.
The new financial influences are saying it's great.
The old are saying it's rat poison.
Except unlike politics, with Bitcoin, I don't think there's going
to be an outcome that's in between the two parties.
This coin, something that you can't touch, hold, or control,
could fix the age-old problem of broken currencies.
Or it could be the coin that ironically hurts the
very people that it intends to save.
I'm not going to be a fence sitter.
I don't agree that this coin is evil.
I prefer a world with crypto than without.
But the risks are very real.