While being aware of the enormous importance of the financial system and the grave consequences of its collapse, I cannot refrain my concerns about how the banks have a waiver and always get out of trouble with minimal or even no consequences at all. It does not seem fair that everyday people have to struggle with inflation eating up on their hard earned savings while banks just get another routine bail out, receiving huge amounts of freshly printed money by orders of central banks. And as this wasn’t enough, their board members and CEO’s are enjoying extended vacations at luxury tropical destinations after colossal failures.
Having said that, my greatest influence as well as inspiration towards investing comes from two exemplar figures in the field. Warren Buffet and late Charlie Munger who’s geniuses do not require any further introduction. While the Berkshire Hathaway pair may appear to most modern investors as extremely conservative, I have found great value in thoroughly studying their investing approaches and business strategies. Just to pick one quote, Munger’s model of “buying awesome businesses at fair prices” resonates with me at a foundational level.
Painful as it may sound, Munger’s opinion about Bitcoin is widely known as it reduces it to pure “rat poison”. Buffet, way more diplomatic in manners, keeps suggesting that if you want to invest on Bitcoin, at least don’t put all your money there. At the same time, he describes it as an instrument that has no inherent value and the market consensus on it’s price is consequently very subjective, kind of like the Dutch tulips prices back in the day.
However grim this outlook seems to be though, after careful studying Bitcoin’s economics and innovative technology, I am convinced that there is intrinsic value in that system. On the one hand, there is the value that comes from the enormous amounts of power – and hence money in, that is invested in the production process of the coins by the miners and the assurance of no double spending through the associated proof of work algorithm. On the other hand, there is also value in the capability it offers by enabling all of us to literally be our own banks and have all of our coins – no matter how many, under our direct custody, without any need to outsource safekeeping to banks.
In that perspective, Bitcoin is a stepping stone at worst case, or a breakthrough at best towards the solution of this injustice by taking banks out of the equation. It offers a financial instrument with a fixed amount of end resource that is guaranteed not to change at any time in the future. So, despite its ludicrous price swings up to the present day, it is inflation free. Nonetheless, it is designed to do so by another genius, its elusive creator Shatoshi Nakamoto. So, despite all the criticism it has received from the representatives of the traditional economic system, Bitcoin is still up and running if not thriving since its inception back in 2009. It has faced so many challenges that had made it even more robust and it keeps moving forward thanks to its incredible global community.
On the side, please note that I am not referring using Bitcoin for gambling, trading or speculative tactics since they are a completely different game, governed by very different rules. A more of a synonym to value investing would be long term investing. And when I say long I mean really long. Not just holding for 5 or 10 years, but more like 20 years to forever!
In this regard, value investing does not need to exclude Bitcoin from its arsenal of potential instruments. In essence Bitcoin is equivalent to an awesome business that can, at times, be bought at fair prices. It can be gradually acquired through dollar cost averaging techniques or in any other way each individual investor sees fit. In the worst case that Bitcoin reduces to zero, we will still be able to claim that we have supported a revolutionary solution to the infinite bank bailout problem and got to keep our coins as well. All other scenarios though seem like a financial heaven!
2 ☽ ion-