How to Pitch Crypto to Warren Buffett
“[Bitcoin is] probably rat poison squared”.
- Warren Buffett (Berkshire Hathaway 2018 annual shareholder meeting).
“Cryptocurrencies basically have no value and they don’t produce anything… I don’t own any cryptocurrency and I never will” .
- Warren Buffett (CNBC interview, February 24th 2020)
Where did we go wrong?
Most people who are excited about crypto react to Buffett’s comments with the proverbial “OK, boomer” mentality.
Buffett is old and doesn’t get it. He missed out on Amazon and Google and does not understand technology. Why listen to him when it comes to crypto?
Dismissing one of the greatest investors in history should be done with caution. Instead, it would be better to try to understand Buffett’s comments coming from the point of view of a value investor.
Note: it’s likely no one has ever pitched crypto to Buffett in terms he can easily understand.
Further, we argue that if one were to pitch crypto according to the true nature of the technology, it would become clear that cryptoassets are precisely the type of investments that Buffett could get excited about.
Warren Buffett is a value investor
Much has been written about Warren Buffett’s value-based and long-term investment strategy. A strategy most famously outlined in Benjamin Graham’s book The Intelligent Investor: The Definitive Book on Value Investing.
The value investing premise is easy to understand. Buy stocks that exhibit strong fundamentals and earnings power. Invest in companies with business models that stand the test of time, and thus have the potential for continued growth.
Buffett has never been a fan of investing in gold, or any other non-productive asset. This is based on the reasoning that gold does not generate any income or produce value. It’s price is simply based on what other people are willing to pay for it.
“Cryptocurrency” is a misunderstanding
Our focus at Token Terminal is to showcase that cryptoassets are not speculative, but productive assets that should be valued based on the cash flows they produce. Tokenholders of crypto protocols resemble shareholders in traditional companies — both tokens and shares give their owners financial and governance rights.
For example, Compound can be thought of as an open-source, Internet-native version of Lending Club. Users who use the Compound platform to borrow assets pay interest, which is divided between the lenders and owners of the Compound protocol.
Shifting the narrative from speculation to productivity
All crypto protocols today are comparable to startups in terms of their maturity. Investors base their decisions, not on today’s cash-flows, but the potential for future growth. Still, we think it’s important to change the narrative of tokens being merely speculative assets or currencies. Instead, they should be viewed as ownership shares in Internet-native companies.
Our hypothesis is that the world’s most valuable services will be owned and operated directly on the Internet.
Crypto protocols can be programmed to provide any kind of digital service directly to a global audience — from open financial instruments to computing resources. Protocols that emerge as winners within their respective vertical will become part of the core infrastructure of the Internet.
We think that the narrative about Internet-native companies could have a decent shot at converting Warren to a value-based, long-term HODLer.
For more, check out Token Terminal’s website and Twitter.
The authors of this content, or members, affiliates, or stakeholders of Token Terminal may be participating or are invested in protocols or tokens mentioned herein. The foregoing statement acts as a disclosure of potential conflicts of interest and is not a recommendation to purchase or invest in any token or participate in any protocol. Token Terminal does not recommend any particular course of action in relation to any token or protocol. The content herein is meant purely for educational and informational purposes only, and should not be relied upon as financial, investment, legal, tax or any other professional or other advice. None of the content and information herein is presented to induce or to attempt to induce any reader or other person to buy, sell or hold any token or participate in any protocol or enter into, or offer to enter into, any agreement for or with a view to buying or selling any token or participating in any protocol. Statements made herein (including statements of opinion, if any) are wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader or any other person. Readers are strongly urged to exercise caution and have regard to their own personal needs and circumstances before making any decision to buy or sell any token or participate in any protocol. Observations and views expressed herein may be changed by Token Terminal at any time without notice. Token Terminal accepts no liability whatsoever for any losses or liabilities arising from the use of or reliance on any of this content.
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