Why does Warren Buffett hate cryptocurrency | Lessons from the legend of Tulip Mania


Hi, I’m Edward welcome to the channel
Have you ever wondered why Warren Buffett seems to hate cryptocurrency so much and hate Bitcoin in particular
Well, I looked into it a little bit and if you understand the history of money and you understand something about tulipmania
I think it explains the story very well. So if you’d like to learn more stay tuned
Okay, let’s start with the history of money
Nobody knows how money was actually invented. It’s probably was invented many times around the world
Probably many many times, but it’s lost in history
It’s been around for so long
but we have some clues as to how money might have started and
Probably it happened with assess trade and barter system and after reason started settling down and living together in villages
Probably we started to trade products back and forth. Now what would happen if
I wanted to trade for a particular product from you
But you didn’t have that product at that moment. What would we do?
So for example, let’s say I wanted to trade a goat for some fresh vegetables
It’s wintertime. You want the goat, but you don’t have the vegetables yet. What would you do?
Well, you might give me some sort of token that
Represents the vegetables that you owe me and say hey, don’t worry bring this token back. It’ll be a reminder for me next spring
I’ll plant extra vegetables
And I’ll pay you back for the goat that I’m taking right now
so that token could be anything so
what’s really interesting about the history of money is we’ve seen all sorts of things used as tokens of
storing value in the
so for instance one interesting quote that
Warren Buffett made fairly recently as he said, you know bitcoin is something like seashells or something. Well interestingly enough
It’s very ironic that he said that because seashells have been used all over the world in Asia in Africa North America
They’ve been used as a storm of value
for absolutely centuries
in fact
I just recently found out that that shells are seashells are still being used as a sort of store value
occasionally in the Solomon Islands so who knew?
So anyway, it made me start to think why is Warren Buffett talking about
Seashells and you know comparing Bitcoin to seashells
Clearly Warren Buffett knows that seashells were used as money at one time
So, why would he think that that’s somehow comparing Bitcoin and seashells?
Make bitcoin seem illegitimate. I
Think there’s a secret here. I think there’s there’s a point to his thinking that we have to understand
so
first of all
What you have to understand about Warren Buffett is he hates the idea of just storing your
Money in something so he’s never been a big believer in in gold. For example
He’s always thought that gold is kind of a waste why?
You have to understand he sees a store of value is very different than the money-making asset

Warren Buffett considers businesses businesses that produces something create a service offers something to the public
These are what he considers assets
Now of course gold is its own asset class, but it’s not a money-making asset
It basically just sits there. It only makes money if somebody is willing to buy more of it
And I think this is the problem that Warren Buffett has with cryptocurrency
The only way that you really can make more money is if somebody is willing to pay more for your Bitcoin
Than you paid for it
So, of course, we don’t know what’s gonna happen with the price of Bitcoin and various other cryptocurrencies. They could go up a lot
But I think we want to be very careful about
Buying when we buy these cryptic because um, they’re not actually making anything. They’re not businesses
There’s no real reason for the price to go up except somebody else wants to pay more for it
So let me give you a story from history that I think is quite interesting back in the 1600s
This was considered the Dutch Golden Age and the Dutch at this time were traveling around the world there were great traders
They were trapped traveling all over Asia and Eastern Europe
they are very famous for trading with the Japanese and at one point had had a
Monopoly in Japan so they were trading silk and they were trading spice all around Europe
Bringing it from Asia making a ton of money
So this is the age of the Dutch East Indian company, so I’ll put a link down below
In the description, you can learn more about the East
the Dutch East India Trading
Company which is a very famous company the time and in fact was the first
multinational corporation so
The Dutch were very famous for trading these exotic products from from Asia
But they were also very famous for profit trading more mundane products from Eastern Europe
Wood grain, and so on and they were stockpiling a lot of it. So when other countries
ran out of food or how to had some sort of a crop failure the Dutch often would come to the rescue and
Make a ton of money added at the same time
So the Dutch at this time in the Dutch Golden Age were making tons and tons of cash. So
Where do we store the cash? Well a
hundred years or maybe a hundred years 150 years. I forget now
tulips had been first imported into Holland from
Turkey and these
tulips right from the beginning where were
quite valued by the Dutch because of the vibrant colors of the flowers and so on and you know,
People just loved them. They were new
Originally these bulbs these tulip bulbs were only
handled by professional flower traders and
only they would would purchase from each other but
suddenly
Because of all the extra cash washing around because of all this trade that the Dutch were doing money started flowing into these
tulips these tulip bulbs and actually regular people average investors were starting to buy these bulbs and
The idea was hey if I buy these bulbs
Maybe somebody was willing to pay more for them later and the price will go up and the price really did go up
In fact at the peak some bulbs were selling for many years of an average laborers
full yearly salary
so it they got to
astronomical prices and there was no good reason because it’s not a
Profit-making asset it was just a store of value like a seashell
so suddenly
Eventually, somebody realized or number of people realized hey
These prices are insane. These are tulip bulbs. What are we doing?
And the price suddenly collapsed now it did nothing to the economy but per se the Dutch
Golden Age continued for many many more years after the
This first bubble. And by the way, this tulip mania bubble is considered the first bubble
the first financial bubble and
In the end a lot of people lost a lot of money. A lot of people were financially ruined
So what can we learn about this? I?
think
The reason Warren Buffett hates Bitcoin so much is he sees two problems
It’s only a store of value which he doesn’t love in the first place
He thinks it’s a waste to leave your money in a store of value
Number two, he sees the risk
From history that if prices do get say let’s look at Bitcoin
I see all over the place people saying it’s gonna get to a hundred thousand or a million at a certain point
You’re gonna have to ask yourself gee bitcoins at a hundred grand
Why would it why is it at this price and why would it go any higher a million? What if it got to a million?
Why would it maintain that price and we have to be logical about it?
The only reason it would ever attain a hundred thousand or more
I’m not saying it won’t it could the only reason it would is more and more people think that somebody else in the future
Will buy it from them for a higher price
so
My suggestion is go ahead and buy bit Bitcoin or go ahead and buy
Whatever cryptocurrency you want to invest in. I do support it. I think as an asset class
It makes sense to to have it as a percentage of your overall asset investment plan
But that’s the key have a plan
Know what you’re going to do with it know what your exit price is. Make sure you’re not buying into high
I think you should sit back. Don’t get so excited about the price. Let’s see what happens
stocks
Everything every asset class goes up and down and if you buy it at the wrong time
You could be in a serious problem
for example, I’m gonna put in a link down below about the price of the hundred year price of gold know that that
Graph that I’m gonna add it’s it’s adjusted for inflation
So keep that in mind, but if you take a look that at the last two peaks of gold
There was a 30 year gap if you bought at in the 1980s at the last peak of gold
Or the second last peak of gold it took you 30 years to get your money back. So what I’m saying is, you know
Maybe bitcoins a good price right now. I don’t know but at a hundred thousand should you be a buyer?
I’m not so sure I would be waiting for a sharp
Correction in price before I purchased any more cryptocurrency at this point if you already own it. Hey, no problem
But if you’re new to it, and you’re just buying cryptocurrency for the first first time
I would highly suggest you be patient and wait for a sharp correction in price before you make any purchases
Number two, I think you absolutely have to have a plan. Are you going to be trading in and out of this security?
I’m going to be making another trading video very shortly
Talking about how you can actually profit from the volatility of cryptocurrency
But should you be a buy and hold person at a very high price or should you trade in and out of it?
I think you should probably trade in and out of it. Just like you would gold or some other asset
That’s that’s not a money-making asset
Okay, so I have three tips for you when you’re thinking about buying cryptocurrency at this point
Remember, it’s not an asset. Sorry. It’s not a money-making asset. So keep that in mind. So make sure you do your homework
My suggestion is this actually this is not my suggestion. My suggestion is coming from a guy named Jim Cramer
I read his book a hundred years ago called
Confessions of a street addict the one line. I really remember from that book is you should be spending one hour per week
per asset just
Studying the news what’s going on? So if you’re not prepared to put in at least an hour a week
Studying the news on Bitcoin or whatever crypto currency or crypto currency in general
My suggestion is don’t invest get a professional to help you
To keep track of what’s going on because prices move very quickly in this market
Number two learn from history. Look at that tulip mania story
Don’t put all of your eggs in one basket if you’re gonna buy cryptocurrency, make sure it’s part of your overall diversification
Strategy, I’m not gonna tell you what percentage
Cryptocurrencies should be in your portfolio. But keep it reasonable make sure that you know, you don’t have everything in cryptocurrency
it should be spread through other stocks and perhaps even bonds depending on your
Risk tolerance. And again, if you need help with this, I suggest seeing a financial professional before you make any investment at all
Number three, this is really important. Don’t invest more than you’re prepared to lose
What’s that number? So obviously it’s really easy to get greedy and go. Oh my god, you know cryptocurrencies up
20% It’s up 50. It’s up 200% Let’s just dump money into it. It’s easy to get greedy
Don’t get greedy with this kind of and with any investment. Don’t get greedy with this kind of investment
What’s the size of investment should you make I would say take a look at the number on the piece of paper and say?
To yourself if I lost 70 or 80 percent of this money
permanently
How would I feel about that?
If you can look yourself in the mirror and say all right. Yeah, I lost 80 percent
It’s gone forever
But it was worth the gamble and that’s that might be an appropriate amount of cryptocurrency
if on the other hand, you look yourself in the mirror and you say
70 80 percent loss of this it would financially destroy me
Obviously, you have too much. So if you’re losing sleep over the amount of cryptocurrency you have, especially
if you’re going to lose sleep thinking about losing 70 or 80 percent of your cryptocurrency
You’ve got too much I would suggest
Lightening the amount of cryptocurrencies. You have your portfolio. So I hope these stories helped you
I hope that
The tips I gave you are useful for you
And I wish you a lot of luck investing in the cryptocurrency market if you have any questions
Leave her in the comments below and I’ll get back to you as soon as I can

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