“There is magic and people have attached magic to a lot of things.” Words from investment maestro Warren Buffett and guess what he is referring to – Bitcoin. There have been instances where Buffett has shared hostile comments about the cryptocurrency world. At a recent Berkshire Hathaway annual shareholder meeting, he said that even if all the bitcoins in the world were offered to him at $25, he wouldn’t take it. Now that’s a strong statement and that too coming from the man himself, one with a huge fan base when it comes to investment ideas.
Buffett sees no value in Bitcoin
The valuation of cryptocurrencies has long been a question we all ask ourselves and Buffett’s reserves are for the same reason. He sees no value in Bitcoin and any other crypto. He explains: “Assets, to have value, must deliver something to someone. And there is only one currency that is accepted. You can make up all sorts of things – we can put in Berkshire coins … but in the end it’s money,” he said, holding up a $20 bill. “And there’s no reason in the world for the United States government… to let Berkshire’s money replace its own.”
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Buffett, as stated above, is unsure of the value of cryptos, so he seems uninterested. Let’s see how cryptocurrencies are valued and whether these digital assets will have a future or not.
How are cryptocurrencies valued?
A word that defines cryptocurrencies is “volatility”. We have seen crypto investors become millionaires during good times while losing all their investments in one day during down times. The reason for this is the simple fact that cryptos are valued based on their demand, usefulness, and effectiveness. Therefore, the values of cryptos depend on the number of new coins mined on a network, which is based on the simple formula of demand and supply. The crypto market fluctuates based on perceptions of its value on any given day. Since cryptocurrencies are digital currencies, it is the user who creates value for them. An increase in the purchase of a token increases its demand and value. As more and more investors or institutions start investing in bitcoin and it is accepted as a form of payment, its utility is experiencing a spike and hence its value is increasing.
The market capitalization of a token is a clear indicator of a coin’s value.
Market cap = total circulating supply * price of each coin.
Cryptocurrencies are volatile digital assets whose price movements depend on various factors. A one-word tweet from biggies like Elon Musk has the power to turn the tide on those coins. Governments around the world are still finding ways to regulate cryptocurrencies and with maestros like Buffett and Charlie Munger having such a strong stance against these assets, the future looks uncertain.
Read also : Why is the crypto market falling?
Will Crypto crash again?
While some cryptocurrency experts are all set for a bright future for these digital assets, some believe the market will crash soon. Major institutions like Visa and Mastercard are embracing cryptos with the launch of crypto products. 2022 has not been a good year for cryptocurrencies, especially Bitcoin (BTC). Bitcoin hit its all-time high of $69,044.77 in November 2021 in an event that went viral just 10 years after the same cryptocurrency was worth just $1. Bitcoin is now trading at US$33,664.50 at the time of writing and is in the red. Will it hit rock bottom soon or crumble further is a question everyone is asking. There are institutions like Libertex, a crypto and stock trading platform, which predicted that a single BTC could reach a price between $900,000 and $1,000,000 by 2030. While gurus of investment like Charlie Munger think it will be $0 soon.
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