Anyone who has been paying attention shouldn’t be surprised that Warren Buffett is no fan of highly speculative investments, so when he said that “the idea that [Bitcoin] has a huge intrinsic value is just a joke in my view,” in an interview with CNBC it shouldn’t have been much of a surprise. But tech entrepreneur Marc Andreessen took issue with his stance, saying that the “track record of old white men who don’t understand tech crapping on tech they don’t understand is still at 100%,” at last week’s CoinSummit, basically preaching to the choir.
Now he wants to clarify his remarks for a broader audience.
Buffett compares Bitcoin to other payment methods
“Warren Buffett is a personal hero of mine,” Andreessen wrote on Twitter (h/t MarketWatch). “When people who don’t understand tech attack new tech, it’s fair game to call them on it. People should know what they’re talking about.”
Buffett has never claimed to be a tech guru, but his actual comments on Bitcoin, in context, show that his understanding of the cryptocurrency is actually pretty sharp. Without knowing anything about the underlying code or block chain protocol (and how many people actually do?), Buffett’s point was that Bitcoin is primarily a way of transmitting money. There are a few online stores that accept Bitcoin, (Overstock.com is a big example), but it will still convert those Bitcoins to dollars at the end of the day.
Bitcoin has no moat
But it’s the comment just before the main quote that proves Buffett isn’t really out of his element:
“You can replicate it a bunch of different ways, and it will be,” said Buffett, referring to the proliferation of digital currencies that we are already seeing online. Bitcoin is only really unique because it was the first and is still the most widely known, but it isn’t intrinsically more valuable than, say, Dogecoin. If Amazon.com, Inc. (NASDAQ:AMZN) started accepting a competing digital currency, how long could Bitcoin really maintain its position at the top of the heap?
Buffett doesn’t deny that Bitcoin is a powerful technology or that it’s something important, but he rejects the idea that it is an intrinsic store of value for good reason: it isn’t. Other currencies take their intrinsic value from the economies they allow you to interact with (thus the reason US dollars and British pounds are held for value, and Zimbabwe dollars no longer exist). You might argue that Bitcoin is an extremely soft currency, but that only reinforces his point.