Last week the Oracle of Omaha and the third wealthiest person on the planet with net worth $84 billion Warren Buffett set himself straight concerning cryptocurrencies. Buffett, who had never appeared to be an eager fan of cyber money, claimed that bitcoin and its brethren are not the investment.
These harsh words, apparently, were not appraised by crypto-enthusiasts and some of them even decided to confront the old-school investor. Among them, there is a venture capitalist and a co-constitutor of Union Square Capital – Fred Wilson.
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Buffett’s Approach Undermined
Some months ago Warren Buffett said that bitcoin “will come to a bad ending.” All the time he has been calling cryptos speculation and, ultimately, last week in the interview with a Yahoo journalist, the investment guru explained why he thinks so.
According to Buffett, neither bitcoin nor other cryptos can show off with intrinsic value. Buffett compared piling into bitcoin to investing in a business which continually brings profit. Thus, he concluded that there is no value that bitcoin constantly produces – there is nothing that it brings out.
The price of BTC does not depend on its actual value but on what people believe in. Everybody who buys bitcoin, Buffett said, only hopes the next person will give more for it. And that is not an investment, the rich man said. It is speculation.
Perhaps, Buffett has a point as a person, famous for the investment strategy “buy and hold.”
But some of his young counterparts – venture investors would disagree with him. Fred Wilson, who was among those who founded Union Square Capital, a company which has piled into Kickstarter, Twitter as well as Tumblr, tried to prove Buffett wrong.
In his AVC blog, dated May 6, Wilson did not attack the old-school investor. However, he explained why Buffett is wrong. In accordance with Wilson’s words, what Buffett does is only to look at bitcoin’s fiat number on a bourse.
Wilson said if he did that, he would think like Buffett. But he emphasizes that cryptocurrencies are not what is supposed to be analyzed with the use of old methods and approaches. BTC is more than just speculation, as per the VC investor. What makes it valuable is the technology which is its core.
Bitcoin Does Have Value, Says Wilson
In his blog, the investor went on to explaining what cyber-money produce – and that is decentralized infrastructure.
“They are the fuel that powers a new form of technology infrastructure that is being built on top of the foundational internet protocols,” wrote Wilson.
He clarified that such digital coins as BTC or ETH produce services that the blockchain nets offer like smart contracts. And the last ones are “the most important innovation we have yet seen in crypto.”
As it is known, smart contracts are computer protocols which are aimed at facilitating, verifying and enforcing the performance of a contract digitally. Smart contracts are there to provide a higher level of security and decrease the operation expenditure. It’s actually the smart contracts which permit users to carry out irreversible and traceable transactions.
Wilson concluded that Buffett is wrong in applying classical methods to assessing the value of bitcoin. In his opinion, cryptos need a fresh approach because those are the type of money that had never existed before.
The investor even offered his old-school counterparts to read a book “Cryptoassets” by Chris Burniske. Wilson said this piece would help them understand that cryptos are a new type of internet. By the way, this is a kind of the internet, as he said, that will comprise decentralized nets exclusively. And cryptos there will be used to remunerate the companies and separate users who assist the net in extending.