Charlie Munger attacks cryptocurrencies and announces their end, just as he did with Tesla in 2009. But he was very wrong.
Berkshire Hathaway Vice Chairman Charlie Munger has done it again. During the annual meeting of the Daily Journal Corp.Munger called Bitcoin and cryptocurrencies “a venereal disease,” expressing his agreement with the Chinese government’s decision to ban them completely.
Munger, a well-known detractor of the crypto industry, said that the United States' policies are wrong to allow the use and trade of crypto assets in the country. Although the harsh words of the American businessman, investor and philanthropist have sparked countless reactions in the crypto community, the one that is currently attracting the most attention is that of Tesla owner Elon Musk; one of the richest and most important men in the world.
On his Twitter account, Musk told a story from almost 13 years ago. Responding to a tweet from investor Bill Lee, Musk said that in 2009 he had been at a lunch with Munger, who at the time “He told the whole table all the ways Tesla would fail”. Musk, as the owner of Tesla, said that Munger's words made him quite sad, but he decided to respond anyway that “it was worth a try anyway”.
Clearly Munger's verdict on Tesla did not hold, despite having outlined numerous ways in which the automaker would go to zero and despite his extensive experience in the business world. Today, Tesla is a multinational company with nearly 100.000 employees and more than $53.000 billion in annual revenue.
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Munger's "safe" assumptions
According to the entrepreneur's assumptions, the price of Bitcoin will go to zero within the next 100 years. During the meeting, Munger said that this was a “safe assumption” based on the extreme volatility and lack of regulation of cryptoassets. However, it is worth remembering that volatility is a characteristic that has accompanied Bitcoin throughout its intense history.
High volatility
bitcoin price reached Bitcoin reached parity with the US dollar on February 10, 2011. Today, 11 years later, it exceeds $40.000 per unit; showing a growth of 4.000.000% in just over a decade thanks to volatility. This characteristic is part of the nature of Bitcoin and has proven favorable for long-term investors; although as the cryptocurrency has matured in the market, its level of volatility has been decreasing. In April of last year, the prestigious global bank JP Morgan published a report noting that Bitcoin's historical volatility had decreased by about 80% in recent years.
Source: CoinMarketCap
Lack of regulation and illegal activities
As for the lack of regulation, Munger said that the adoption of cryptocurrencies is related to their “usefulness” for carrying out illicit activities. Nothing could be further from the truth, considering the recent seizure of bitcoins by federal authorities in New York. Last week, the US Department of Justice reported that it had seized more than $3.600 billion in bitcoins that were related to the Bitfinex hack.
Following the arrest of two citizens, apparently involved in hacking and attempted money laundering with these bitcoins, Deputy Attorney General Lisa O. Monaco stated that, contrary to what some think, cryptocurrencies “They are not a safe haven for criminals.” This is due to the transparency, immutability and accessibility that the blockchain allows anyone, who can explore the transactions and movements that take place on the network at any time and from anywhere.
On the other hand, while countries such as China and India are in favor of a complete ban on cryptocurrencies, other jurisdictions continue to move forward in creating new regulatory frameworks to offer a friendly and responsible environment for participants in the crypto industry, allowing for innovation and technological development, while reducing the risks of financial crimes and other illicit activities.
Chainalysis, one of the most consulted blockchain analysis firms, designed a platform called Market Intel to track cryptocurrency movements. On this platform, Chainalysis shows that BTC addresses involved in illicit activities represent less than 0,15% of the volume transacted with this cryptocurrency on the market.
“Proud to have avoided them”
Munger said he had not invested in Bitcoin or other cryptocurrencies and was proud to have avoided them all along. For the entrepreneur, cryptocurrencies have no value beyond speculation. Although this is an entirely personal decision, in May of last year, the managers of the BNY Mellon Dynamic Value Fund, which published a report with low returns obtained between the last quarter of 2020 and the first quarter of 2021, They regretted having invested in gold instead of cryptocurrency-related companies.
In addition to this, Munger's statements against cryptocurrencies come at a time when Berkshire Hathaway invested $1.000 billion in Class A shares of the neobank Nubank, based in Brazil, which offers exposure to Bitcoin through an exchange-traded fund (ETF)Berkshire Hathaway also reduced its exposure to traditional financial companies such as Visa and Mastercard, whose shares have fallen 5% and 9%, respectively, in the last few hours.
In response to Elon Musk's tweet, one of the most influential Bitcoiners in the crypto industry, Michael Saylor, president of MicroStrategy, responded in support of his perseverance. “Nothing ventured, nothing gained”, Saylor wrote.
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