Disclaimer: This is not investment advice. I am not a financial advisor or investment guru. I am just a guy living life. I write these articles for entertainment and information purposes only. You should do your own research and consult any advisor you deem prudent before making investment decisions.
Google tells me that Warren Buffett is worth about $148 Billion Dollars. An amount of wealth that just seems unfathomable to the average person. Needless to say, I respect Warren Buffett's approach to wealth building immensely. But even billionaires can be wrong sometimes. Sometimes they can be dramatically wrong.
At the 2022 Berkshire shareholders meeting, Buffett explained his stance on Bitcoin saying, "If you told me you own all of the Bitcoin in the world and you offered it to me for $25, I wouldn't take it because what would I do with it? I'd have to sell it back to you one way or another. It isn't going to do anything."
This was said in April of 2022, a time when Bitcoin had reached prices of more than $40,000 per coin but the price was also trending downward losing nearly 50% of its value. Had Warren Buffet purchased $148 Billion Dollars of Bitcoin in 2022 at $40,000 per coin, he would have initially lost about half of his net worth, but today just a couple years later it would have more than doubled his total net worth. He would be worth about $357 Billion Dollars today with Bitcoin trading at about $96,500 per coin. Not a bad return on investment. So why the dramatic statement that he would not give even $25 for all of the Bitcoin? He would rather have four or five McDonald's big macs than all of the Bitcoin in the world? Really?
If we take his statement at face value, his opposition to Bitcoin is that it "isn't going to do anything" which to Buffett is a major downside. On the surface, that makes sense. Bitcoin doesn't really "do anything" as Buffett says. Meaning, it doesn't produce an iPhone like Apple, or a crop like farmland does. It doesn't make a car like Tesla, or processing units like Nvidia. But Bitcoin is not a business. Why should we expect it to do business things?
Bitcoin is a digital asset and digital commodity. It is a store of value and unit of account. Therefore, Bitcoin's most direct competitors are not exactly businesses. Bitcoin is an alternative to traditional stores of value such as gold, silver, the U.S. Dollar, the Euro, the Japanese yen, and the Mexican peso. But it also is a competitor to all other stores of value such as securities (like stock in Berkshire Hathway), fine art, exotic cars, and real estate. Bitcoin, therefore, competes with just about everything as a store of value.
And the question becomes, not whether Bitcoin produces a product or anything for that matter...of course, it does not. It's not even something you can tangibly hold. It is, in the end, basically numbers appearing digitally on the screen of your computer or phone, but created and supported by advanced programming and technology and one of the largest, most power networks in the entire world. Bitcoin doesn't even have the beauty of gold or silver, that you can hold in your hand or fashion as jewelry. But that doesn't mean Bitcoin isn't valuable.
To determine whether Bitcoin is valuable, we should ask: how does Bitcoin compare with all other assets as a store of value and unit of account? Much of the wealth generated by the world is stored. In fact, it must be stored, or it is lost. Would you work a 40-hour week without your effort wasn't being "stored"? What if employer told you that instead dollars, you will be paid for your labor in apples (not the company but the fruit)? You would have some value from that, enough to survive momentarily. You could eat the apple and make apple juice. This would keep you alive. But not for long. You would have to be able to store the apples, and the apples would soon rot. Perhaps you might get lucky and set-up an apple stand where you can sell the apples for dollars or something else of value that you need. This sounds like a lot of work. All your effort wouldn't be store...it would just be lost (or require additional work to capture).
In reality, the same issue of store of value exists with the U.S. Dollar and all other world currencies. Suppose you get paid $1,000 per week at your job, But then the U.S. government prints trillions of Dollars. Yes, Trillions. For example, the Federal Reserve printed $3.3 Trillion Dollars in the year 2020 alone. This is not only poor policy, it's evil. It's wicked. It's disastrous. The $1,000 you earn in 2019, is not really worth $1,000. Sure your bank account will still show that you have $1,000, but its true value has been eroded by the printing of money. You may as well only have $500 now. The value of your dollars are constantly decreasing (typically at the rate of 7% to 10% per year). Review every government created currency over time, and you will find that it erodes in value over time. In other words, as a store of value, government created currencies are a total failure.
But what about other stores of value?
Fine art. You need to be rich to own, or use a company like Masterworks (which is more akin to a security than owning a valuable piece of artwork). Even if you could own the fine art directly, you need to be able to store, preserve, insure it, and protect it from theft, destruction, disaster etc.
What about real estate? You can't really buy real estate for merely $1,000. But even if you could, you would have to pay insurance on it, protect from disaster, and manage it if renting it. Sounds like a lot of work.
What about securities like stock in Berkshire Hathaway? Any company is only as good as its centralized management, and board of directors and CEO, not to mention the necessary continued success of its product or service. Companies don't last forever.
This brings us to Bitcoin. Bitcoin eliminates inflation by its fixed supply. Bitcoin is less subject to theft, natural disaster, and far more secure to store than nearly any other asset. In factor, arguably it can be stored better and safer than any other asset. Through self-custody, you are able to store your Bitcoin without a bank (which could fail) or any other third party. For the first time in history, your money is your money. A thief can't break into your self-custody wallet, unless they have your 12-word key.
Bitcoin is decentralized and not subject to the whims of a CEO. Bitcoin is not perfect, but it is the best form of money and store of value ever created. It is the apex store of value in today's world and it is just getting started. The world has not yet fully realized it. When it comes to the business of storing value, Bitcoin is king. Forget the world, not even the oracle of Omaha (Buffett) has realized it yet.
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