‘It will all come to a bad ending. The idea that it has some intrinsic value is just a joke.’
Warren Buffett has been quite vocal about his disregard for bitcoin. He calls it a ‘mirage’.
His criticism reminds me of his comments on gold.
Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.
Perhaps Buffett is right in his cynicism about both.
That, however, has not stopped gold from rising five times its value in last 20 years. And bitcoin achieved that feat in less than a year.
Come to think of it, gold and bitcoin do have something in common.
Gold derives its value from being a hedge against currency risk. As against the fiat money that the authorities around the world print mindlessly as per their whim (in turn eroding the value of the currency), the supply of gold is finite.
Bitcoin too is the answer to these flaws of conventional currency.
Free from the control of governments, only 21 million bitcoins can ever be created.
It’s based on the solid blockchain technology that even big banks are slowly adopting.
Mining them is a complicated process, which controls the supply, and in turn preserves value.
However, that’s where the similarities end.