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The Almighty Buck

Warren Buffett Predicts 'Bad Ending' for Cryptocurrencies (cnbc.com) 326

"97% of all bitcoins are held by 4% of addresses," reports Credit Suisse (in an article cited by Slashdot reader CaptainDork). And elsewhere this week, Warren Buffett told CNBC that speculation in bitcoin and other cryptocurrencies "will have a bad ending," adding that looking out five years he'd gladly bet against all of the cryptocurrencies.

Meanwhile, CNBC senior analyst Ron Insana has his own skepticism: I am predisposed to view them as just speculative tokens in a cryptocurrency bubble that has inflated more quickly than any other in financial market history. Admittedly I'm green with envy for failing to foresee the explosive rally in the price of bitcoin when it was first brought to my attention several years ago. Having said that, there are many things I find quite ironic about how bitcoin and other "cryptos" are described. First, they are largely denominated, or discussed, in U.S. dollar terms... If the dollar is archaic, as the crypto-enthusiasts believe, why not speak only in crypto-terms...?

It's much easier to buy and sell dollars, stocks or commodities than it is to trade bitcoin and its brethren. The conversion of one crypto to another is relatively easy on these embryonic exchanges. But getting your digital wealth converted into cold hard cash is more problematic... And while the growth has been impressive, it remains very difficult to walk into any establishment and exchange a digital token for goods or services.

The article notes that the U.S. dollar still accounts for 65% of all global economic transactions, due to its status as the world's reserve currency, and concludes that "The adoption of cryptocurrencies as a global source of funds has a long way to go before staking a claim to the world's economy."
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Warren Buffett Predicts 'Bad Ending' for Cryptocurrencies

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  • by MikeDataLink ( 536925 ) <mikeNO@SPAMmurraynet.net> on Sunday January 14, 2018 @12:35AM (#55924825) Homepage Journal

    He's right in the fact that this is likely a bubble. It will likely correct. I highly doubt bitcoin will ever return to zero (unless there is a nuclear war and then so will the dollar). Every market corrects, even the stock market.

    He's wrong in the fact that he thinks of bitcoin as a fiat currency. Its not and never will be. Bitcoin will be like diamonds in the regard that it will carry a constantly changing value. Bitcoin although called a crypto-"currency" should be considered a crypto-"stock".

    • by gravewax ( 4772409 ) on Sunday January 14, 2018 @12:38AM (#55924841)
      Cryptos in general might not return to zero, however I would think Bitcoin will. It just has too many basic flaws, once its bubble pops I think it should completely collapse, it may or may not be replaced with something similar (but without the gigantic fucking flaws) but that is another question.
      • I would point out that Bitcoin has popped, quite a few times by now. It doesn't zero out tho and keeps coming back. In fact, can someone point out a cryptocurrency that has crashed, completely zeroed out and winked out of existence?
        • I would point out that Bitcoin has popped, quite a few times by now.

          Indeed. It peaked at $19.5k on Dec 18th, and it now trading at $14.1k. That is about a 28% drop. Bitcoin has dropped by more than that many many times, and has always recovered.

          Many people, right here on Slashdot, were saying Bitcoin was in a bubble when it reached the "ridiculous" valuation of $1 back in 2011.

          Also, I take issue with this statement from the summary: "looking out five years he'd gladly bet against all of the cryptocurrencies." Bitcoin is traded on futures markets, so it is absurd to say

          • by Plus1Entropy ( 4481723 ) on Sunday January 14, 2018 @01:11AM (#55924999)

            Bitcoin has dropped by more than that many many times, and has always recovered.

            This is the exact characteristic of a bubble. And for every bubble there have been people claiming exactly what you claim.

            It always recovers, until it doesn't.

            • This is the exact characteristic of a bubble.

              It is also the characteristic of every market for every commodity ever. Markets fluctuate.

          • Re: (Score:2, Insightful)

            by Anonymous Coward

            Just because you have an idiot willing to pay $1000 for something doesn't mean it's not overvalued at $1. Bitcoin is one of those things.

            • Just because you have an idiot willing to pay $1000 for something doesn't mean it's not overvalued at $1.

              Just because you predicted a bubble when it was at $1, doesn't mean you get to say "I told you so" because now it is worth "only" $14,000.

        • In fact, can someone point out a cryptocurrency that has crashed, completely zeroed out and winked out of existence?

          Take a look at https://bitcoinexchangeguide.com/deadcoins/ [bitcoinexchangeguide.com]. I tried to post the list here, but I keep getting "Filter error: Lameness filter encountered"
    • a crypto stock that leaves a trail distributed all over the world...
    • A fiat currency with only 21 million units issued is still a fucking fiat currency. There's no inherit value to bitcoin. That's a fiat currency.

      • Re: (Score:2, Interesting)

        by Anonymous Coward

        I am amazed how much the Bitcoin evangelists harp on the 21M limit, given the infinite supply of altcoins that are not any worse, and sometimes better (faster transactions/lower power consumption per transaction/etc).

      • by Koby77 ( 992785 )
        While it may be true that bitcoin has no inherent value, the underlying bitcoin mining network does generate value as it processes transactions securely, and maintains a record keeping ledger (blockchain).

        Furthermore, it also has an inherent cost to produce (electricity) which prevents the arbitrary addition of currency into the system (banker loans, government printing, counterfeiter printing), which then is then a very valuable feature for those who desire a currency as a long term store of wealth.
      • No, you have misunderstood what fiat means: backed by force. If you dick around with a country’s currency enough they have an army to stop you.

        It is more accurate to say bitcoin is not even a fiat currency.

    • by sjames ( 1099 ) on Sunday January 14, 2018 @02:45AM (#55925175) Homepage Journal
      The big argument for Bitcoin retaining any value was it's usefulness and eventual use as a daily means of exchanging value. Taking a week for a transaction to clear and stratospheric transaction costs negate that future use. Even a conference for Bitcoin isn't accepting bitcoin now!

      Nobody is going to accept transaction costs of more than a few percent for small transactions and nobody is going to sell anything more expensive than a cup of coffee without using an escrow and waiting until the transfer to that escrow clears before they hand over the product or service. That pretty much kills it as a means of value exchange except as a last resort.

      The final nail in the coffin, it is just as traceable as a credit card or bank transfer. The people who touted it as being as anonymous as cash have been proven wrong.

      Given that, what is the new theory for it retaining any value at all? It IS a fiat currency. The bit of digital data and the whole blockchain carry no intrinsic value outside of the value exchange, just like any fiat currency. If that bit of data represents anything at all, it represents the burned coal that produced the power to run the mining machine. How valuable do you suppose already burned coal is?

      Like most modern financial instruments, when the music stops, a very few will make some money and a bunch of people will find no chair.

      • The thing about pyramid schemes and bubbles is that many people do not realize how many participants are aware that they are participating in pyramid schemes and bubbles. I would not be surprised if the MOST COMMON reason for participation would be "This will end soon, I'd better participate right now before it ends".

        And that, and not gullibility, is probably the main reason why the bubbles and pyramids are so pervasive. Interest-based economy where money is commodity gives rise to "get rich fast" hopes - t

      • The people who touted it as being as anonymous as cash have been proven wrong.

        Traceability and anonymity are two different things. The problem is that people didn't know the difference between the two and thus were "proven wrong" simply because they used the wrong word, and you're falling into the same trap.

        Bitcoin is traceable.
        Bitcoin is anonymous.

        Compare it to this slashdot post. It is traceable. You can click my name and compare it to the other posts I made. You can build a complete history of what I said. That said it is also anonymous. Without me providing some 3rd party hint at

    • He's right in the fact that this is likely a bubble. It will likely correct. I highly doubt bitcoin will ever return to zero

      Bitcoin is fucked within a half decade, but not for the reason Buffett thinks (standard market forces alone likely won't do it.) Quantum computers are progressing at a rate akin to Moore's law when viewed in qubit densities, they're currently at just over 40 qubits. When they hit about 1,048 qubits Shor's algorithm becomes practical for cracking public key cryptosystems like ECDSA and RSA - so that's right around a half decade until Bitcoin security is worthless.

      There are plenty of shills saying that Bitc

    • It may not go to zero, but I suspect it'll go very low and have very niche usage. Bitcoin is not scaling. It's hampered by the very features that its designers thought made it more robust - the requirement for a consensus of miners, and the entire mining concept with its implied permanent deflation. It needs major modifications to work, and there's no short term incentive amongst those who control it to agree to those modifications.

      I think BTC is best seen as an interesting prototype built by people who

  • With all of the geniuses on Slashdot, it's hard to understand why they aren't the most wealthy people in the world, and pikers like Buffet need to be schooled by them.

    Meanwhile, I have the bitcoin challenge. Take every cent you have, the retirement accounts, banking accounts, refi the house, and put it all into bitcoin. It's a no brainer, and you can't lose.

    And watch how quickly I'll get modded as troll, and no one takes the challenge.

    • by phantomfive ( 622387 ) on Sunday January 14, 2018 @12:53AM (#55924927) Journal
      Don't know about that, but I sure wish I had ignored the nay-sayers on Slashdot a few years back when you could still mine bitcoin on the CPU. It would have been easy, it would have been fun, but I listened to too many negative people and lost out. Oh well.
      • by SirSlud ( 67381 ) on Sunday January 14, 2018 @03:13AM (#55925251) Homepage

        But if you were sane, you'd have cashed out by now. Or if it took nothing to get, you'd ride it until after it crashes. Basically, there's no alternate universe that proves you made X dollars by doing the other thing, so why bother? The only people I've known who've held alt coins told me how much they've made while they were still holding. I've yet to meet a single person who can show me the tens of thousands they made sitting in their bank accounts right now. (Not to say they don't exist, but people also win lotteries, doesn't mean I feel bad for not playing.)

        • But if you were sane, you'd have cashed out by now. Or if it took nothing to get, you'd ride it until after it crashes.

          More likely cashed out part of it. You don't need to cash out all of it. That's a normal strategy for handling these risky trades.

        • But if you were sane, you'd have cashed out by now

          Would you also have recommended cashing out at $1000 or $100 ?

        • Yes this is exactly the thing I say. I had many bitcoins once upon a time. I sold them for a few hundred. I think omg what if I had them still, well I wouldnâ(TM)t, for the exact reason I sold them then. I would have sold them at 100, 500, 1000, how on earth could I have not sold them at 10000? As the stat states 97% of them are being infinitely held by people who will never sell them! The rest are speculators...

      • If I bought 100 bitcoins back when they were worth pennies I'd have $1.3 million right now. I could be cashing out $50k a week on the exchanges. But oh no Slashdot said and still says they are worthless...

      • Here's the thing though: The naysayers were right.

        I know that'll be hard for a lot of people to understand, because they're operating in hindsight. In hindsight, yes, you can say, "I should have bought into bitcoin with everything I had as soon as possible, and then sold out when bitcoin was at its peak." However, that doesn't mean they were wrong at the time to say, "You shouldn't bother with bitcoin. It's nonsense."

        It's sort of like... Imagine you're playing blackjack, and you have 20. Some idiot te

    • it's hard to understand why they aren't the most wealthy people in the world, and pikers like Buffet need to be schooled by them.

      Buffett himself is doing quite well. But the ordinary people who agree with his views are not any wealthier than the ordinary people who invested in bitcoin.

      • by Oddhack ( 18073 )

        Buffett himself is doing quite well. But the ordinary people who agree with his views are not any wealthier than the ordinary people who invested in bitcoin.

        The ordinary people who are Berkshire shareholders are doing just fine, thanks. I don't know if all of us "agree with his views" but most of us rather appreciate his investing and business performance.

        • The ordinary people who are Berkshire shareholders are doing just fine, thanks

          Ordinary investors in Microsoft, Amazon, Google and Apple did a lot better.

    • With all of the geniuses on Slashdot, it's hard to understand why they aren't the most wealthy people in the world, and pikers like Buffet need to be schooled by them.

      Yeah, you would think with all that financial savvy they wouldn't be concerned about age discrimination and Indians taking their IT jobs.

      • Protecting I.T. jobs and countering age discrimination isn't an investment strategy, it is a career.

        Outside of bubbles, which gains and losses are entirely unpredictable, growth from investments typically do not happen overnight. Which means that a person has to be able to hold onto their job long enough to win big in the stock market. Which is essentially what a 401k plan is.

        Bitcoin only has one thing going for it, and that is low and limited supply. In 2020 the supply of Bitcoins is expected to be cut
  • by kenh ( 9056 ) on Sunday January 14, 2018 @12:54AM (#55924929) Homepage Journal

    Crypto currencies are fantastic investments, with their value pegged to the price of Dutch Tulip Bulbs [thefreedictionary.com]...

    • by Koby77 ( 992785 )
      Some differences between crytpocurrencies and tulips include: 1.) unable to simply grow unlimited crypto tokens for a small fraction of the current price, and 2.) tulips don't actually perform useful functions such as preventing counterfeiting, or allowing an un-inspectable and un-confiscatable international currency transfer. While it is possible that cryptocurrencies are in a bubble, and perhaps some may fail, the desire for a non-debase-able currency where people control their money instead of a governme
      • by msauve ( 701917 )
        "Some differences between crytpocurrencies and tulips include: 1.) unable to simply grow unlimited crypto tokens for a small fraction of the current price,"

        You're wrong. Where do you think Etherium, dogecoin, Litecoin, Ripple, etc., etc. came from? Anyone can take the bitcoin app, change a few bytes, and grow unlimited tokens at very low cost. No different than tulips.

        " a non-debase-able currency where people control their money instead of a government/banker"

        The mining cartels are the new government/ban
        • Anyone can take the bitcoin app, change a few bytes, and grow unlimited tokens at very low cost. No different than tulips.

          Sure, but the value of Bitcoin is not the the token. It's the network.

          The mining cartels are the new government/banker. Transaction fees, collusion to prevent an increase in block size.

          The mining cartels were in favor of increasing block size. It's the bitcoin developers and owners that were against it.

          • by msauve ( 701917 )
            "The mining cartels were in favor of increasing block size. It's the bitcoin developers and owners that were against it."

            Uh, no. It's the miners who control whether the blockchain forks to support larger blocks (or some other method of more transactions per block) are successful. It's the miners who have kept that from happening.
    • I knew we couldn't have a bitcoin story without someone on the spectrum yelling about Tulips. They are not alike.

  • Tulips... (Score:5, Informative)

    by gurps_npc ( 621217 ) on Sunday January 14, 2018 @01:30AM (#55925051) Homepage

    Bitcoin is another tulips. Some cryptocurrency will always have value, just as tulips still sell for as much as $10. But they once sold for literally 10x the annual income of a skilled craftsmen.

    My personal favorite is the wikipedia's page list of what was exchanged once for a single tulip bulb, which included (among other things) four tun of beer and two hogshead of wine AND a silver cup to drink it (1 hogshead = 79 gallons, 4 hogshead = 1 tun, so clearly a beer lover).

    A mania is basically when non-professionals enter the market for speculative purposes, rather than because they want/need the core item.

    This is clearly happening with the cryptocurrencies. The only question is, what will their real value end up after the mania has ended.

    • By your definition the entire stock system is of no value. I'm sure the S&P 500 "mania" will die down any day now.

      • By your definition the entire stock system is of no value.

        It's actually of negative value, because its success is predicated upon the destruction of our biosphere — that is after all how companies operate. If you made corporations responsible for their waste tomorrow, the stock market would crash on the same day because most of those entities would be unable to turn a profit while complying, and they would therefore go rapidly out of business.

        We all pay, with our health and lifespans, for the maintenance of the corporate beast.

        • Initially, perhaps those stocks would crash. However, make it a requirement that businesses clean up after themselves and the market will equalize. It will become a cost of doing business, like taxes or medical insurance.

          As long as we focus on growing our economy to raise the quality of life for all, and not reducing the livelihood of our fellow man to generate a difference in economic value, our economy will bounce back from becoming sustainable and environmentally friendly. Such requires a long term foc
      • 1) My entire POST was about how mania does not mean it has no value.

        2) I should have clarified that mania is not when a few amateurs enter, but instead when the market is dominated by the amateurs. The stock market is in fact dominated by professionals that look at a lot of information with only a few amateurs chasing the instant get rich. But in a huge market of hundreds of millions, 'a few' = millions. But by far most shares traded are done by machines, then by major institutional investors, with indi

    • Some cryptocurrency will always have value, just as tulips still sell for as much as $10.

      I'm not so sure about that. When the mania fades, there's nothing to keep it from becoming totally worthless. I think it's entirely possible that, in 20 years, we'll be looking at it as a weird fad, like tulips or beanie babies. However, at least tulips are pretty flowers and beanie babies are stuffed animals, and some use can be made of them. The same can't really be said of a string of essentially random bits.

      Now I think it's entirely possible that there will be some form of cryptocurrency in everyda

      • You are making a unfounded statement.

        1) They are not trading 'string of essentially random bits'. I
        2) There is and always has been a real need for MONEY. Money being a means of exchange.
        3) There is and always has been a real need for money that is NOT controlled by any government. Hence the original money was metal that the government could not declare worthless because people always needed metal.

        Please remember that bitcoin et. al. was not intended to be a huge mania, it was created to fill a real nee

  • Old man yells at cloud

  • Inflation caused by devaluation of currency due to the overproduction of units of the currency was solved by the indigenous peoples of the North West Coast of North America centuries ago. Their answer to currency speculation was very effective. The problem was that: the artisans that created the money out of hand hammered copper currency sheets ran amok and the supply of sheets went out of control. So the wisdom of the potlatch was created to end currency speculation and the hording of currency. Naturally w
  • There's almost too much incorrect information in that summary to even address. Nobody cares about bitcoins. The alternate and better cryptos have a higher combined market value by far and aren't owned by 4% of wallets. The big exchanges have been around for years, it's easier to send crypto around the world than cash which is exactly the point, crypto cannot crash below the cost of hardware+electricity for long without rebounding, it has an upwards trend because of reward splitting schedules, and I demonstr
  • Why should a certain string of digits have a special value because it satisfies some arbitrary mathematical equation, even a fancy one? There in an infinite supply of digit strings and also an infinite supply of equations. The notion of "mining" is that there is some sort of scarcity involved, but infinite is infinite, NOT scarcity.

    The fundamental premise of cryptocurrency is fatally flawed. Just a speculative bubble on the theory that someone will pay a higher price in the future.

    Of course that's also the

    • Why should a certain string of digits have a special value just because it sits on a harddisk platter of a bank, even a fancy one ? There is an infinite supply of digit strings, and also an infinite supply of harddisks. The notion of "printing money" is that there is some sort of scarcity involved, but infinite is infinite, NOT scarcity.

      The fundamental premise of fiat money is fatally flawed. Just a speculative bubble on the theory that someone will pay a higher price in the future.

    • by etash ( 1907284 )
      Please address your question to Adobe, Autodesk and others. Their software is "just a string of digits".
      • by shanen ( 462549 )

        So have you (and the other responder) invested any real money in cryptocurrency? If so, you're welcome to your gold rush. Don't say I didn't warn you.

        I actually think there is still time to profit from the foolishness. However I do NOT think I am smart enough to know when the bubble is going to burst. Once you start gambling, it's just too easy to play one more more hand and put down one more bet.

        As regards your "substantive" reply, please tell me what function you think is performed by a bitcoin or any oth

  • Currently, Cryptocurrencies are a means of allowing gamblers to gamble. This is highly constructive and productive for the general markets for a few good reasons.

    Volatility in trading is a major problem. Classically, gamblers (investors) have creatively attempted to carve out niches that have had devastating impacts on society. For example, the price of grain isn't driven by supply and demand. The price of grain is driven by commodity trading. This means that if the gamblers on the stock markets who actuall
    • by etash ( 1907284 )
      a tether is backed a by a usd. and what is a usd backed by ? It's turtles all the way down. Tether doesn't solve any problem. It scams people by giving the impression of solving a problem.
    • by orlanz ( 882574 )

      OK... where to start. A lot of what you said about Bitcoin, is alrightish. Everything you said about the stock market is pretty much dead wrong.

      Warren Buffet isn't a regular trader. He is a hybrid between a lender and trader. His funding doesn't come from purchasing the same shares as you or I would. He gets special control, walkout clauses, and schedules. He also has restrictions like not being able to do shareholder control, or having to hold the shares for X time (similar to CEOs). So he might giv

  • "97% of all bitcoins are held by 4% of addresses,"
    And how is this different from stocks or bonds? An enormous fraction of all wealth is owned by the wealthiest 4%, like Warren Buffet.

    I think the staying power and value of bitcoin will be continue to be due to people in nations like South Sudan and Venezuela with high inflation rates and limited access to trading in other currencies.

  • "97% of all bitcoins are held by 4% of addresses"

    Oh, so concentration of wealth is a stability concern with cryptocurrencies? Warren Buffet is one of the top eight people who hold as much wealth as the bottom half of the human population. Didn't seem to stop him from becoming a billionaire, which is a level of wealth concentration that serves nothing more than Bigger Dick syndrome.

    All of this doesn't really matter anyway. Obscene Greed will continue to drive automation and AI to replace the concept of human employment. The justification of higher educ

  • by asylumx ( 881307 ) on Sunday January 14, 2018 @09:54AM (#55926223)
    What is it about Bitcoin that makes people throw logic completely out the window? It's a really obvious bubble, and in many ways worse than most bubbles because there is literally nothing of value underneath it all. For example the housing bubble(s) (plural because it's pretty cyclical, seems like we're on the up-rise of another one now) -- at least when it pops, you have land & structures to show for it. Did you pay too much for that at the top of the bubble? Yes, but you can still turn those into income to help cut your losses. Stock bubbles -- same thing, history has shown that if you play the long game, the bubbles and their popping aren't really as devastating as they seem.

    I'm not sure -- did people behave like this when the beanie baby craze was going on in the 90s? Did they react with insults and call you stupid if you tried to point out that it's a bubble? I knew lots of people who were in that bubble, and none of them are rich now -- do YOU know any beanie baby millionaires? Possibly the CEO of Ty...

    So Bitcoin is obviously a pure speculation market and has no intrinsic value -- what scares me more is how defensive people get when you say that. Look at the above comments for examples, there are plenty!

    My advice to BTC prospectors: Get out now. If you got into BTC early, great -- you should be able to turn that into a ton of spendable/investable cash! "But won't it cause a crash if everyone gets out now?" you ask -- possibly, but first of all it's better to be the cause of the crash by protecting yourself than the victim of the crash by waiting too long. Also, since 97% of BTC are held by a few people, the crash isn't likely unless those 4% start selling off, too...
    • >What is it about Bitcoin that makes people throw logic completely out the window?

      Greed, willful stupidity, and pretty much the same mental processes that lead to people forming and being loyal to cults.

      > Did they react with insults and call you stupid if you tried to point out that it's a bubble?

      You don't argue with a Bitcoin nut to save the Bitcoin nut. You argue with a Bitcoin nut to save the next susceptible person from being dragged into the mess.

      > I knew lots of people who were in that bubbl

  • $600 per BTC

    If you're paying more than that, you're giving your money to some rich dude or some BOFH.

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