This is not a surprising statement – but its power comes from an important voice and will definitely hurt the cryptocurrency industry.
And the timing is terrible for the market, as cryptocurrencies have been enjoying a good momentum of the rally for weeks.
Billionaire Charlie Munger, 99, once again lashed out at cryptocurrencies, to which he attributes no positive benefits. Quite the opposite: He urges the U.S. to follow China’s lead and simply ban it.
Munger stated in an opinion piece that appeared in The Wall Street Journal on February 2 that in the U.S., in recent years, privately owned enterprises have issued thousands of new cryptocurrencies, large and small. And these subsequently went public without any prior governmental pre-approval of disclosures.
The renowned investor laments that, in some instances, a sizable block of cryptocurrency has been sold to a promoter for practically nothing, and then the public invests at much higher prices without fully realizing the pre-dilution in favor of the promoter.
He refers to it as wooly and wild capitalism. And he quotes the old saying, “A mine is a hole in the ground with a liar on top,” which is credited to Mark Twain.
Then the vice chairman of Berkshire Hathaway, the holding company he runs with CEO Warren Buffett, delivers a killer blow to cryptocurrencies. He says cryptocurrency is not a currency, a commodity, or a security. Instead, it is a gambling contract with a near 100 percent house advantage, made in a country where gambling contracts are traditionally regulated only by states that compete in laxity.
What should we do as a result? Munger offers a drastic remedy: The U.S. should immediately pass a new federal law to stop this from happening.
He advises the American authorities to follow two intriguing precedents to accomplish this. In the first instance, the Communist Party of China recently outlawed cryptocurrencies after properly deciding they would bring more harm than good.
“And, in the second precedent, from the early 1700s, England reacted to a horrible depression that followed the blow-up of a promotional plan to get vast profits by using slow-moving sailing ships to trade with very poor people halfway around the world,” he added.
He went on to say that in its grief when this foolish campaign blew up, the English Parliament was plain and simple: it outlawed all public trading in new common stocks and held this rule in place for almost 100 years.
Munger appears to imply that there is no other option, even though the White House and Congress are now working on rules for the industry following the overnight collapse of the FTX crypto exchange. It was worth $32 billion in February 2022 before imploding a few months later.
“What should the U.S. do after a ban on cryptocurrencies is in place? Well, one more action might make sense: Thank the Chinese communist leader for his splendid example of uncommon sense,” the billionaire said.
Despite receiving a lot of attention, the famed investor’s op-ed did not stem the surge in cryptocurrency prices.
According to monitoring firm CoinGecko, the market was up 6.1% to $1.1 trillion at the time of writing. Bitcoin, the most popular cryptocurrency, rose 4.3% in the last 24 hours to $24,062.63.
Munger and Buffett are fierce opponents of cryptocurrencies. Last year, they trashed Bitcoin and cryptocurrencies at Berkshire Hathaway’s annual shareholder meeting.
Mangler said he tries to avoid stupid, evil things that make him look bad, and Bitcoin does all three of those things. “It’s stupid. It can go down to zero,” he stated.
Buffett, 92, didn’t hold back either. He stated that if you told him you had all of the Bitcoin in the world and gave it to him for $25, he would refuse because he wouldn’t know what to do with it. Why should he acquire Bitcoin if he tries to get rid of it?
Buffett also stated in April that he has no idea whether it will rise or fall in the next year, five or ten years. But he is sure of one thing: it does not create anything. It has a magical quality, and humans have associated magic with various things.