If something is "virtual," does it really exist? This question has haunted us since the beginning of our journey as Homo sapiens.
When it come to Bitcoin and other cryptocurrencies, this is an important question. You can buy and sell stocks, bonds, paper currencies and commodities such as corn and wheat. They exist in the real world. You can physically deliver them, although they are mostly electronically represented
Which brings us to Warren Buffett, one of the best investors in history, who recently said: "You can not value Bitcoin because it is not an asset that produces value ... it's a real bubble in that kind of thing".
For those of you dedicated to deciphering each Buffett statement, its meaning is clear: cryptocurrencies are not tangible investments. They do not generate profits or pay dividends. How do you value them if they have no intrinsic value or "book"? & people who buy bitcoin simply betting that price will go up.
Although I have always argued that there is a place for cryptos in modern finance - governments should not have the monopoly on the means of exchange - we need a refined understanding of whether computer code is an adequate replacement for hard currencies.
The only powerful factor about currencies, and even gold, is that there is a limited amount of them. Well, that's very true, until governments start printing money, which generates inflation in many cases.
It is also said that there is a limited amount of Bitcoin, although we still do not know much about how it was created or about its mysterious creator. That is worrisome.
However, Buffet has a real concern. If you do not know what goes into something, which means a lack of transparency, it may be snake oil. Here is Buffet's concern:
"It does not make sense, it's not regulated, it's not under control, it's not under the supervision of any ... Federal Reserve of the United States or any other central bank, I do not believe in all this at all. to implode. "
Although anyone can speculate about conventional investments such as stocks and precious metals, it is important to know what Bitcoin is. Despite what Peter Thiel, one of founders of PayPal, says, it is not gold.
"I'm skeptical of most of them (cryptocurrencies), I think people are a bit ... underestimating bitcoin, especially because ... it's like a way of reserving money, it's like gold, and it's just a reserve of value, it is not necessary to use it to make payments, "said Thiel.
This is where we have to make a distinction: you can put all the tangible gold extracted on the planet in a large pool. You can never do that with a cryptocurrency. That requires a better definition of how to value a virtual denomination of wealth.
Anyone is free to speculate on anything from land to football matches. It is human nature. However, do not confuse a cryptocurrency with something you may have in your hand, such as gold.
Remember that most of gold on earth is in the ocean, dissolved in quadrillions of gallons of water that you can not even drink.