Warren Buffett recently criticized Bitcoin again, saying that it has no value, unlike farmland or real estate, except for what people will pay for it. And he may have a point—but as with most things, it’s more complicated than that. Crypto supporters quickly shot back at Buffett, stating that what he is describing may be true because it is a currency. What value does any currency have, except for what people will pay for it? What value is the USD today compared to other currencies?
We think of many countries’ currencies as stable within a small margin, but this isn’t always true. What value was the German Reichsmark in 1923? At its worst, it took 4 trillion Reichmarks to equal one USD. This is an extreme example & a cautionary tale that any currency is built around the collective trust in its value.
What Is Value?
There is another angle to consider, however. Currency generally has no value except as a method for exchange by two parties that agree on the said value, making it more convenient to buy and sell things without barter. You might sell me your three goats for one of my cows, but if I only want to buy two goats, some uncomfortable decisions have to be made for the poor cow. Buffett is undoubtedly an intelligent and proven genius when it comes to investing.
However, one key element that he and many other fiat-focused investors don’t consider is that cryptocurrency has utility beyond normal currency. If you consider that when taken on a global scale, using fiat currency of any type has significant challenges. Still, we’ve never known anything else, so we don’t even see them anymore. As I write this, I am two days into my 3-4 day waiting period to transfer a modest $200 from a US bank to an EU account.
Bad luck caused the transfer over a weekend, so it’s likely to take an additional 1-2 days. I won’t even know until the transfer has gone through because, during the transfer itself, there is zero information available on its status….
