Value-investing veteran Warren Buffet has stated in a recent interview at CNBC that his famously unimpressed position on Bitcoin has not changed:
“(It’s) oo bad. Bitcoin -its ingenious- and blockchain is important, but it has no unique value. It doesn’t produce anything at all. I mean you can stare at it all day and no little Bitcoins come out of it- it’s a delusion, basically.”
CNBC interviewer Becky Quick noted that Buffet’s “delusion” rhetoric is nonetheless tamer than previous statements he’s made in which he called Bitcoin “rat poison squared.”
While acknowledging that his position may evolve, according to reporting by Kate Rooney, Buffet went on to compare Bitcoin with ‘phony’ products like ‘yo-yos,’ said it “attracts charlatans” and added that the coin’s escalating value was due, not to its value, but because it had accessed a relatively large investor market:
“If you do something phony by going out and selling yo-yos or something, there’s no money in it — but when you get into Wall Street, there’s huge money.”
Buffet told Quick, “I’m really sorry it happens because people get their hopes up that this is gonna change their lives, and it was a very ingenious thing to figure out, make it more expensive to produce them as you go along…but the function…blockchain does not depend on (bitcoins)…I’m sympathetic to people that want to (invest profitably).”
Arguably, unregulated and unethical trading of bitcoins and other cryptocurrencies has resulted in much value being “transferred” from neophytes to more experience and unscrupulous investors, some of whom conducted billions in wash trade and “pump-and-dump” scams across the globe.
In October 2018, Stanford-trained Brazilian Professor Jorge Stolfi warned the SEC not to approve bitcoin ETF’s because bitcoin is a negative sum system with increased valuation fed in exclusively by participants, like a pyramid scheme:
“Like in penny stock scams, some early buyers have more chance to make a profit; but only at the expense of later investors, and only if they are lucky to cash out before the collapse. Even then their gains will come from the losses of other investors; so that the expected profit of a generic investor is strictly negative.”
According to Investopedia, poker and tennis games and options and futures trading markets are “zero-sum game(s) because one player’s gain is the other’s loss.”
“These closed-gaming ecosystems are different than the regulated stock market, Investopedia writes, “because trades are made on the basis of future expectations and traders have different preferences for risk, (whereby) a trade can be mutually beneficial.”
“Investing longer term is a positive sum situation because capital flows facilitation production and jobs that then provide production and jobs that then provide savings and income that then provide investment to continue the cycle.”
Stolfi described bitcoin as “negative sum” because miners “tax” or remove fees from the network to pay themselves for processing it.
Bitcoin advocates point to the network’s value in theoretically providing a “uncensorable” means of transmitting money across a network that cannot be shut down by any government or individual.