In this video, Warren Buffet explains why crypto and all the other weird NFTs, are essentially lousy “investments” because they represent nothing.
If it were not for the hysteria, social media, and irresponsible financial-investment news outlets the Ponzi scheme that is crypto would all be revealed as a ploy.
As Buffett explains, crypto has no value and does not produce anything of value that can be analyzed according to traditional financial accounting criteria. If assets have value they have to deliver value to someone and that does not apply to bitcoin-crypto.
As noted on this site many times, crypto does not belong in any legitimate investment portfolio for a long-term investor of any age. If you want to take a pure speculative bet on it, try your luck. You may make a sell it for more than what you paid for it if there are more investors behind you who get sucked into the hysteria vortex.
Crypto Shows the Failure of Financial Literacy Programs
But to gain legitimacy, crypto hypesters make the false claims that crypto is an asset class, that it is an inflation hedge, and that it is as good an investment as gold. All are false.
Instead, the hype about bitcoin and NFTs is a fantasy. Take the case of a young crypto buyer who told CNBC that he bought “a meme coin,” called unisocks, or $SOCKS, which is a digital token representing a claim on a physical pair of socks. Yes, he invested in fantasy socks, but you can buy real ones at Marshall’s for $3.
There are many other crypto scams in this relatively new hyped investment and the number of scams is evident on a weekly basis. People who buy bitcoin (they should not be classified as investors) have no idea what fees and expenses they are paying.
The popularity of crypto also demonstrates the failure of financial literacy efforts that are now a big business and are offered by many large corporations in their 401(k) programs. Unfortunately, these programs are not too critical about the hidden side of the investment world, including the hidden fees in most 401(k) plans, as well as the conflicts of interest inherent in many corporate plans between recordkeepers and plan sponsors.
Who is Using Bitcoin and Why?
So, what is fueling crypto fanaticism?
Central banks, economists, and some more energetic regulators openly question the need for crypto. Central banks in many developed nations are considering a digital version of their own currency, which will deflate the bitcoin bubble overnight.
But as it now stands, crypto has a few major purposes and goals:
- To destabilize central banks;
- To launder money;
- To evade taxes;
- To scam greedy, naive individual investors;
- To serve as a placeholder for the expanding world of online sports betting;
- So professional investors can make fast, short-term profits via scalping from other naive retail investors.
- Caveat emptor, but like the tulip bulb mania, it won’t make a difference in this age of political and financial hysteria.