Buffett, Munger compare Bitcoin to dementia
SANTA MONICA – The world craze of cryptocurrency may not be as popular as it once was after Warren Buffett criticized the currency, referring to it as rat poison. The No. 1 cryptocurrency dropped eight percent in two days after Buffett’s critics circulated.
Buffett, who has been involved in bitcoin for years, criticized bitcoin for being “strictly speculative and don’t produce earnings and dividends like stocks do,” suggesting during the Berkshire annual meeting that while the currency is purchasable it will never amount to a sustainable income.
However, Buffett wasn’t alone in the belief as Berkshire vice chairman Charlie Munger echoed Buffett’s sentiments, saying, “I like cryptocurrencies a lot less than you do. To me, it’s just dementia. It’s like somebody else is trading turds and you decide you can’t be left out.”
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The reason why both of these prominent business men are criticizing the new form of currency is one easily answered by an old children’s bedtime story, The Emperor’s New Clothes. A tale that recounts a ruler who was swindled out of his money and clothing by con artist making him clothes. However, the con artist sew him a set of “invisible clothes” and continue to rave about it. In an effort of not feeling like a fool, the Emperor and all the characters in the book rave about the clothing but in their earnest to not appear like fools, they ignore the fact the Emperor has no clothing on and his walking around in his skivvies.
While Bitcoin and other cryptocurrencies are on the rise, the lack of physical evidence makes the craze as crazy as owning invisible clothes. Buffett and Munger’s remarks about the currencies simply attest that there is nothing backing the value of the money and has no proof of the value other than a pixelated set of numbers that don’t really exist — or as Buffet put it in 2014, bitcoin is simply a “mirage.”
Yet Bitcoin has outperformed many things in the market including Apple causing some cryptocurrency experts to tell investors to ignore Buffett’s and Munger’s remarks on the currency and to continue their investments.
Photos and some content courtesy of Reuters.