After bitcoin got breathtakingly close to the $10k mark, a couple of finance legends decided to offer their thoughts on the coin.
Which likely contributed to bitcoin falling close to 10% from peak to trough in the last day and a half.
Who are these "legends" and what did they say exactly?
(Source: https://www.cnbc.com/2018/05/04/warren-buffett-invests-for-the-long-term.html)
First up was none other than Warren Buffett.
The Oracle of Omaha.
He is considered by many as the greatest investor of all time, and with good reason. He is a self made billionaire mostly related to his investing abilities.
At his annual shareholder meeting this weekend, Warren Buffett said:
"bitcoin is probably rat poison, squared."
(Source: https://www.cnbc.com/2018/05/05/warren-buffett-says-bitcoin-is-probably-rat-poison-squared.html)
Pretty strong words from the old Oracle!
Though that shouldn't be all that surprising as he has been a bitcoin bear for some time now. A few months back he said that he would gladly buy 5 year puts on bitcoin but wouldn't short it because he is certain it will end badly.
Next up was none other than Bill Gates.
Another in the top 5 list of wealthiest people on the planet.
Bill Gates said on Monday (today) morning:
"I would short bitcoin if there was an easy way to do it."
(Source: https://www.cnbc.com/2018/05/07/bill-gates-i-would-short-bitcoin-if-i-could.html)
These are a little more surprising remarks coming from the creator of Microsoft.
Well guess what, I have some good news for you Mr. Gates, you can short bitcoin!
In fact, let me point you in the right direction. You can short it on bitmex.com. Here's the link to get your account set up today:
https://www.bitmex.com/register
Short as much as you want!
(Source: https://www.cnbc.com/2018/02/16/bill-gates-artificial-intelligence-is-good-for-society.html)
Now that those two market moving statements are out of the way, lets look into them for some context.
The first one from Buffett about bitcoin being like rat poison squared is really not all that surprising coming from him.
After all, this is the same guy that hates derivatives, told people not to invest in Amazon, and didn't trust the whole internet tech boom of the 90's.
Basically, he sticks to what he knows and discounts anything he doesn't.
His main beef with bitcoin was that it doesn't generate any cash flows. The same complaint he levies at gold. Which he went on to mention right after his statement about bitcoin at his annual meeting.
His point being that if you held gold from the time of Christ until now, your annual percentage returns would be fractions of percents.
However, if you were able to invest in things that paid dividends or had cash flows over that same time period, your returns would be exponentially higher.
To be honest, he is not wrong.
Gold and bitcoin do rely on someone paying more for them than you did for them to go up.
However, that hasn't stopped gold from being a store of value and it has been finding buyers for thousands of years.
In my opinion bitcoin is going to do just that.
It does everything that gold does, only better. It's transferable, it's divisible, it's limited and scarce, and it's not controlled by any central authority.
All great things one would look for in a store of value.
Bitcoin may never generate cash flows or pay dividends, but it has a place as a store of value.
(Source: https://news.bitcoin.com/peter-schiff-bitcoin-digital-fools-gold/)
Moving on to Bill Gates...
His comment about shorting bitcoin is a lot more surprising to me.
First of all, Bill Gates is not a trader nor is he really an investor, at least not to the degree of Warren Buffett.
Bill Gates is an inventor and creator of technology.
He is certainly skilled in that aspect and that is his specialty.
However, taking investment advice from him would be akin to taking investment advice from Tiger Woods.
Nothing against Tiger, I am sure he is a decent investor of his money, though my point is that he is a professional, just not a professional investor.
In this instance I would take Bill's advice over how to build my next operating system well before I would take his advice on where I should invest my money.
That being said, I sincerely hope Bill Gates does find a way to short bitcoin because him covering that short position would be major fuel added to the fire when bitcoin ultimately starts making a big move higher.
There are some investing professionals that are worth listening to, though I don't think I would classify Bill Gates as one of them.
Stay informed my friends.
Follow me: @jrcornel