It’s a tumultuous time now in many ways: lingering post-Covid recovery with lots of logistical issues, escalating global inflation, ravaging geopolitics, lurking recession… It’s still strange why the recent price drops in cryptocurrencies occupy so much space in global headlines as if nothing particularly extraordinary have been happening with stocks, indices, commodities and currencies.

Warren Buffett recently said at the BKR annual meeting that Bitcoin is likely to go to zero, and he (quote-unquote) “wouldn’t pay $25 for all the supply of it”. “Because what would I do with it? I’ll have to sell it back to you, one way or another. It isn’t going to do anything.” He described his views on farmland and rental properties versus Bitcoin as “the difference between productive assets and something that depends on the next guy paying you more than the last guy got. But he said he wouldn’t do the same for Bitcoin and its over-$700 billion market cap.

That contrarian phrase and rhetoric apparently created a ripple effect, and it looks like a real battle is happening between crypto enthusiasts and crypto skeptics because of that. Although BTC is still highly correlated with traditional risky assets and thinking it’ll go down significantly in value for a rather protracted period of time under certain external conditions – makes sense – very few, whether those who are for or anti, can understand why he thinks it will go to zero. In fact, crypto lived happily in a parallel world and served its purpose perfectly up until the crypto craze happened in late 2020 as a byproduct of U.S. free-checks-for-all action and overall monetary policy creating high market liquidity and unnaturally low interest rates. The only rationale why BTC value may go to zero is in case every government in the world decided to ban it (including the recently adopting it El Salvador).

Buffett tries to make an impression of a person playing down matters of security and diversity in investments. One of the most respected properties of cryptos and blockchain’s value creation is not in the obtaining of immediate profits, but in distancing from centralized finances burdened by many incurable illnesses such as insurmountable debts of their issuers, arguably inflated transaction commissioning, as well as unauthorized tracking and penalizing, whether needed or not, growing presence of controversial political factors in currency exchange rate formulas, as well as a mind-boggling possibility of a centralized financial calamity affecting all at once. The amount of printed fiat currencies exceeds the total amount of goods and services worldwide, so there is high likelihood that closing their gap will one day incur deep shock and chaos.

But, above all, Buffett seems to follow Fed Chair Jerome Powell in misunderstanding the very concept of crypto comparing it with commodities rather than currency, despite the very word cryptocurrency unequivocally pointing that crypto is NOT a commodity.

True, crypto is not a farmland nor is it a rental property – but neither the U.S. dollar is! In fact, the often used adjective “fiat” referring to modern currencies means they cannot be directly exchanged to commonly accepted units of value in given quantities. Unlike Bitcoin, which is backed by energy producing mega- and terabytes of computer data, fiat currencies aren’t backed by anything except for their issuing governments’ promises and good faith in them (which is getting less and less good by month eyeing growing political escalations among major nations leading to something, which was unthinkable a decade ago – namely forced nationalizations as a tool of last resort in diplomatic wars). No currency these days is secured against sudden revaluation or devaluation, sending values of the cited by Buffett farmland or rental properties to risk of being deeply distorted.

And the last (but not the least). The much-need by Buffett growth of the forecast will be triggered not sooner than when the Fed is done with hiking its interest rates, but at the same time, the fall in stocks will not end until the exit from the recession, which cannot be said about raw materials and crypto.