Buffet is one of the few incredibly successful investors/businessmen, which explains why he is second richest person in this world. We agree that Bitcoin has no intrinsic value, and the e-currency is very volatile and speculative. By nature, no currencies have intrinsic value. On the other hand, it doesn’t mean Bitcoin wouldn’t be useful. A global currency whose supply is not controlled by one centralized system can be more stable in long-term than any existing major currencies and the asset prices can reflect their intrinsic values more correctly. And a currency like Bitcon that has a very small transaction cost would add value to most counter-parties involved, but can negatively affect the intermediaries, such as commercial and investment banks, that generate multi-billion revenues from their currency business. If a currency like Bitcoin penetrates into mainstream, that would be one of the ultimate disruptive disintermediations in history. Like any disruptive innovations, this might possibly make some old technologies (existing currencies) and their owners/beneficiaries (regulators and banks) obsolete in one way or another, and shift the power to another group. Bitcoin might not be considered as one of the best investments if you were not an early investor, but it doesn’t mean a currency like Bitcoin wouldn’t be used widely. As Buffet pointed automobile and aviation industries out as an example, investors probably hadn’t made much profit from investing in the two industries as a whole. However, virtually everyone either owns or uses a car every day and we cannot imagine a world without aviation industry. And they certainly has had an incredible impact on people’s lives. Actually the fact that there existed such a large number of automobile companies in the early stage of the industry evolution helped bring down the prices fast and make them affordable. From investment perspective, as Buffet said, “Sometimes, incidentally, it’s much easier in these transforming events to figure out the losers…But there was one obvious decision you could have made back then–it’s better sometimes to turn these things upside down–and that was to short horses.”, US dollar can be the short. And there is no concern for short squeeze: the Federal Reserve only keeps printing.
Who is Satoshi Nakamoto? No one knows, at least publicly yet.
The publicly traded New York private equity and hedge fund firm Fortress Investment Group and two other investors are buying a stake in Pantera Bitcoin Partners, a San Francisco-based hedge fund operator that buys and sells virtual currencies.
The creation of the partnership represents a significant step in the push to move Bitcoin into the financial mainstream at a time when several well-publicized claims of theft have pointed to potential weaknesses in the digital currency economy.
Pantera Capital, the parent of Pantera Bitcoin, was founded in 2003 by Dan Morehead, a veteran of the hedge fund giant Tiger Management. For most of its existence, Pantera was a macro hedge fund. But since 2011, Mr. Morehead has grown increasingly fascinated with Bitcoin, he said in an interview on Tuesday. In recent months, he said, the firm’s staff of 16 has shifted its attention to work full time on investments in the virtual currency world.
Buffett blasts bitcoin as ‘mirage’: ‘Stay away!’
Warren Buffett is no fan of bitcoin.
“It’s a method of transmitting money. It’s a very effective way of transmitting money and you can do it anonymously and all that. A check is a way of transmitting money, too. Are checks worth a whole lot of money just because they can transmit money? Are money orders? You can transmit money by money orders. People do it. I hope bitcoin becomes a better way of doing it, but you can replicate it a bunch of different ways and it will be. The idea that it has some huge intrinsic value is just a joke in my view.”
Marc Andreessen twitted “Warren has gone out of his way for decades to avoid understanding new technology. Not a surprising result.”
Why Warren Buffett Is Wrong On Bitcoin
Mr. Buffett is wrong to analogize bitcoin as a check or money order because bitcoin does not represent money, it IS money. If someone sent me a check for $100, that check is just a promise to give me dollars. When someone sends me bitcoin, it is instantly spendable in its current form. I need not “cash a check” because bitcoin is already money. Do not think of bitcoin as a means to transfer dollars, it holds value by itself and it is highly liquid.
Bitcoin allows us to instantly send money to one another securely, without relying on a financial middleman who works bankers’ hours, charges transfer fees, and gambles with depositor’s money with the potential to do harm to the economy and needs to be bailed out with tax dollars.
The fact is that the financial system is outdated. Thousands fall victim to credit fraud every day. Merchants who accept those cards pay 2.7 percent off the top, and banks charge anywhere from $10 to $50 for wire transfers, and transactions take days to settle. Merchants can accept bitcoin for fractions of a percent, and transactions settle in 10 minutes. These are innovations that have will enable more people to participate in the economy.
It is also critical that we not view Mt. Gox as a failure of bitcoin. Bitcoin did not fail; its encryption was not hacked. Instead, it was a failure of the people running an exchange. The rugged beauty of the bitcoin system is that individuals are responsible for their own investments. We do not live under the belief that someone will bail us out if something happens, so we take security on as a personal moral responsibility. Our world is better when individuals take responsibility for themselves.
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