The notional idea is that Charlie Munger, the Vice Chairman of Warren Buffett's investment titan, Berkshire Hathaway, has compared crypto trading to the sale of harvested baby brains.
But what does he actually mean by this?
Firstly, let's consider whence Munger approaches this. He is by no means a failed investor. He is a literal billionaire and is at ninety-four years of age.
He has nothing, particularly, to gain from poo-pooing Bitcoin and cryptocurrency in general.
What, therefore, is he getting at?
It has to be remembered that Munger (and by extension Buffett) is old school. He is used to trading a stock or investment and therefore backed by equity and the resultant stake in the company, including not only profit share but also voting rights. Voting rights confer power and, alongside profit share, represent a tangible stake in a company.
Cryptocurrencies (with notable exceptions such as NEO) simply do not offer the same equity. It therefore isn't entirely unreasonable to state that a cryptocurrency such as Bitcoin is not backed by anything - for a start, DOGE isn't backed by anything other than a popular meme.
Consider also the levels of outrageous market manipulation that occur. Crypto is unregulated, meaning that hilst trading, whales can do whatever they want, with no recourse to action for the minnows such and you or I who are affected by their actions. They are the scumbags. Munger has no argument with anyone worth less than $1m. We quite simply aren't on his radar.
However, if you have $500,-$1bn net worth you are not only in a position to freely manipulate a currency such as ZCion (current market cap of $212m), but there is not only single law that will come close to preventing you from doing so. Maybe that's who Munger was actually speaking to?
But where does that leave us? Are we to fall into an abyss filled with a lack of liquidity, plummeting values and deteriorating use cases?
Cryptocurrencies are a burgeoning industry and technology, and one whose true value will only be being to be realised in two or three years' time: when current rising stars such as Cardano, EOS and Wanchain have begun to deliver real-world applicability and created a genuine demand for their tokens. Until then, we have to remember that, in eyes of old school, risk-averse investors, Bitcoin and crypto as a whole is another world that makes little or no sense to them.
And we would be wise to remember that Mr. Munger's views reflect those of the average person on the street. We should not be deriding them: we should be figuring out the best way to change their minds.
Because only once we do that will doors of mass adoption truly open.
Onwards and upwards 🙂