Bitcoin has become the gold standard for crypto and many people invest on the basis that there'll be huge growth in the area of blockchain technology and tokenised digital assets in the years to come.
If Bitcoin remains the gold standard for crypto then it's value will rise accordingly.
This is the problem that Buffett has with cryptocurrencies.
When you buy shares in a company you are buying claims to its future earnings at least in theory. Theory being that should the company not serve shareholder needs you can force the company to distribute the earnings/dissolve/merge etc etc. (Not going into the whole modern abomination to strip lesser shareholders of their rights to vote as Google, Facebook, Snap have done with their tiered stocks).
When you are buying Bitcoin or any other cryptocurrency and yes that means ICOs too you are buying digital tokens with no claims to anything besides being a proof of having that token. It is solely 'castles in the air' which Keynes so long ago stated regarding stock market but in the stock market it is not the sole factor.
In some ways cryptocurrency is closer to regular currency but not backed by the government's mandate to receive taxes in said currency.
In other ways cryptocurrency is closer to tulips,gold,MagicTheGathering cards in that the value is based on something that some number of people agree on(ie the market).
Except cryptocurrency has no utility besides being a token, wherein tulips, gold and MagicTheGathering cards possess some utility outside being a token of exchange.
Two: I know you said >Not going into the whole modern abomination to strip lesser shareholders of their rights to vote as Google, Facebook, Snap have done with their tiered stocks
However if you want to argue you're problems with crypto (there are many) we need to make arguments using the way things are in the real world.
Given I'm a retail investor. In one universe I place a bet on Snap for 50k. In another I took that same 50k and put it into bitcoin. In both universes my bet goes bad, both asset's price per unit goes to 0. Snap goes through the process of being liquidated. Remember I'm a retail investor, I own common stock.
Now am I better off in one universe over another? I'd argue that I'm not. However if I were Warren Buffet, I'd have been much better off bought Snap as I would have preferred shares.
Buying shares is like investing 50k in your Uncle Eddies seashell harvesting venture. In return you receive 50% share in his venture that is you get half of all future seashells harvested by Eddie.
Buying cryptocurrencies is like giving 50k USD to your Uncle Eddie and getting some seashells back but that is it! There is an active market for these seashells and price goes up and down.
However you do not get to claim any more seashells produced by Uncle Eddie.
Buying common shares implies certain rights to some enterprise while buying cryptocurrencies implies nothing.
The fact that bitcoin has gone 10 years, with limited use, to me signals just how amazing the technology is. Ten years is nothing for a tech that can last 1000 (or more..).
Bitcoin’s success in Venezuela is because it is a inflation hedge. It has allowed Venezuelaeans to hold on to their savings and out of reach from the government’s ability to confisticate wealth via inflation.
It is working exactly as Satoshi intended it to.
Isn't that what Bitcoin is doing as well? Capturing people's attention as well as development resources (minds/energy) from some of the smartest people right now?
Crypto is meaningless, stock is actually owning part of a company.
That's been the 'investment thesis' for the past 5-8 years.
And people have been bidding these things up ever higher, because any day now someone's going to figure out something actually useful to do with them...
(And in the mean time if some coiners get to skim a little cream from the irrational exuberance, I'm sure they don't mind to do so.)
But where is any coherent trend line supporting claims of huge growth in the area of blockchain technology and tokenised digital assets in the years to come.?
Seems to be wishful thinking that is completely at odds with the reality of these systems.
Am I missing something?
There's a fundamental difference between buying shares of a publicly traded company on a regulated exchange and investing in bitcoin. This is quite literally comparing apples and oranges - your examples are not only different in kind, but in purpose. Also, there is a large, rather well funded government institution who aggressively works to make sure the stock market isn't subject to the sorts of abject manipulation, ponzi schemes, and other such unsavoriness that Bitcoin has been subject to. (Side note - watching the Bitcoin market is like watching the last 150 years of finance happen in 2-3 years. It's an interesting object lesson in market manipulation and why the SEC maybe isn't a bad thing).
As to Facebook/Snap being digital crap no one needs - yes. However, just because there's no physical good being created doesn't mean their value is entirely ephemeral/a financial illusion. Facebook/Snap create value by solving a problem people are willing to spend money to solve. Bitcoin creates value by...well it doesn't yet. People invest because they hope that "there'll be huge growth in the area of blockchain technology and tokenised digital assets in the years to come." That's a nice thought, but it's an assumption.
>If Bitcoin remains the gold standard for crypto then it's value will rise accordingly.
It's funny that you mention the gold standard, a standard that was dropped because of its votility, the fact that it was subject to manipulation, and the fact that it benefited some segments of the market FAR more than other.
>...many people invest on the basis that there'll be huge growth in the area of blockchain technology and tokenised digital assets in the years to come.
I think this is undeniably true. However, I think the assumption that bitcoin will be the vehicle for this growth is incorrect, or more charitably, overly optimistic. Bitcoin has accrued a lot of non-technical overhead that I think will prevent it from being used to drive these solutions - things like its association with speculation, the fact that the majority of miners are on the Chinese mainland, etc. I think the growth in blockchain technology will come from companies and individuals taking the concepts of the blockchain and using them to build products with real value (as in, they solve a problem that someone is willing to pay money to have solved). Bitcoin's value (sadly) doesn't come from the technology, which is fascinating and interesting - it comes from the fact that it's created an unregulated market with no barriers to access, which has allowed rampant speculation, incessant hype about 'the technology of the future', and a continual influx of new money to create 'value' that ultimately, has no real value.