Crypto-mania may have taken hold, but these hard-core critics haven’t changed their minds.
Everyone is talking about cryptocurrencies and Bitcoin this year. Bitcoin, the world’s first and largest cryptocurrency, topped the price of $ 60,000 in March. In recent weeks the price has dropped significantly, but as of this writing it is still up over 35% since the start of this year.
Many are optimistic about the coin’s future. But it’s also important to listen to Bitcoin bears. Even if you don’t agree, it’s a good way to temper your crypto enthusiasm.
1. Warren Buffett
The very successful investor has long believed that the history of crypto would not end well. In 2018, Buffett described Bitcoin as “probably squared rat poison.”
Its main concern is that Bitcoin is a speculative asset that produces nothing and has no intrinsic value. He sees it as similar to the tulip mania that took hold in the Netherlands in the 1600s, with people buying something in the hope that they could sell it for even more than they paid for.
âWhen you buy non-performing assets, all you rely on is whether the next person is going to pay you more because they’re even more excited about another person’s arrival,â he said. stated on CNBC TV. “But the asset itself doesn’t create anything.”
He’s not the only one who likens it to tulipomania, which many cite as the first stock market bubble. Tulips were the staple item of the 1600s in Europe. Tulips were difficult to grow, and some varieties were particularly valuable. Speculation has gotten so out of hand that it is said that you can buy a house with just one tulip bulb – until the bubble bursts and confidence falls, along with tulip prices.
Buffett’s lack of enthusiasm for Bitcoin is to be expected, as it goes against his main investment strategies. He is a value investor who seeks to buy undervalued stocks or companies with long term economic value. He also only invests in things he understands.
2. Peter Schiff
The CEO and chief strategist of Euro Pacific Capital has said that the only cryptocurrency he will support is one that is backed by gold. This is hardly surprising, given that he is a strong believer in commodities like gold, silver and oil.
He told Kitco News: âThe only cryptocurrencies that would make sense would be legitimate cryptocurrencies. Just as I don’t like fiat currency i.e. paper money backed by real money, I don’t like fiat digital currency. But, if you have a digital currency backed by gold that is redeemable in gold then it’s fine, it’s great, I think it would work just fine.
Schiff is also not optimistic about the dollar. But he thinks we’ll see Bitcoin fall before the dollar. âI personally think the Bitcoin bubble will burst before the dollar bubble. We might have a cryptocurrency crisis before a dollar crisis,â he said in a recent interview with the online financial TV channel Real Vision.
3. Paul Krugman
The Nobel Prize-winning economist and New York Times columnist has long been a Bitcoin skeptic. He raises concerns about energy consumption, which he says translates into high transaction costs and a lack of government support. He believes government support is what gives traditional (fiat) currency its value.
Additionally, in a recent column, he claims that Bitcoin has had 12 years to prove itself as a currency and has failed. âTwelve years later, cryptocurrencies play almost no role in normal economic activity. Almost the only time we hear of their use as a form of payment – as opposed to speculative trading – is associated with illegal activity, âhe wrote.
Krugman likens Bitcoin to a huge, long-standing Ponzi scheme. Everything good is worth what people are willing to pay for it. People keep buying even if they don’t fully understand the technology so the prices keep going up.
That said, he recently tweeted that he had given up on predicting the end: “But I have given up on predicting imminent demise. There always seems to be a new generation of believers. Maybe think of it as a sect that can survive indefinitely. “
4. Bill Gates
Microsoft founder Bill Gates has a different reason for not investing in Bitcoin: the environment. He told the New York Times in a recent interview: “Bitcoin uses more electricity per transaction than any other method known to mankind.”
Bitcoin’s carbon footprint has been in the spotlight recently after Elon Musk suspended Tesla’s purchases over environmental concerns. According to research from the University of Cambridge, the digital currency uses as much electricity in a year as a country the size of the Netherlands, a fact unrelated to the tulip mania.
Are they right to be critical?
When Bitcoin drops nearly 50% in six weeks (as it has done in recent months), even the most die-hard Bitcoin fan could be forgiven for wondering if these investors are right to stay away.
There is a lot of hype. And it’s a relatively untested market. As such, there is nothing wrong with sticking to raw materials or investing only in environmentally friendly technologies, especially if you are risk averse. But if you are willing to take risks in exchange for the potential higher rewards, you may decide to diversify by investing a small portion of your portfolio in cryptocurrency.
Maybe you think Bitcoin, or the blockchain technology behind it, has potential. Or you can agree with those who say that the company will eventually move away from traditional money. Ultimately, it’s about doing your own research. Bitcoin has big critics, but it also has big fans – like Mark Cuban – and it’s worth understanding both sides of the debate.
If you do decide to invest, sign up with a leading cryptocurrency exchange so that it is safe to do so and only invest the money you can afford to lose. That way, if the bubble bursts, you will have nothing left.
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Emma Newbery owns Bitcoin.
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