Chamath Palihapitiya, a self-proclaimed ‘disciple’ of billionaire investor and Berkshire Hathaway CEO Warren Buffett, recently revealed that he is bullish on bitcoin, and that his ‘mentor’ is wrong about the cryptocurrency.
As covered, Buffett has recently stated that bitcoin is “probably rat poison squared,” while Berkshire Hathaway’s vice chairman Charlie Munger doubled down on his words and noted that to him “it’s just dementia. It’s like somebody else is trading turds and you decide you can’t be left out.”
While speaking to CNBC’s “Squawk Box,” Palihapitiya , a tech venture capitalist and former Facebook executive, used Buffett’s investing advice to argue he believes his mentor is wrong. Per his words, the billionaire advised to “define a circle of competence and stay within it.” Palihapitiya noted that “technology is not in his circle of competence.”
Palihapitiya – who’s been in the cryptocurrency market since 2012 - added that cryptocurrencies like bitcoin are important, as they aren’t correlated to the rest of the market. Per his words, he feels in “two different universes. I need a passport to go between the bitcoin world and the regular world.”
The tech venture capitalist, when confronted with Buffett claiming bitcoin is a non-productive asset, revealed he agreed, but noted it’s like buying insurance. He said:
“The people that owned bitcoin in 2012 all the way up to now view it as a hedge to the traditional financial infrastructure. Whether that’s true or not is unclear, but that’s how we’ve all viewed it.”
To him it’s important not to forget the 2008 financial crisis, as things investors thought were hedges broke down. Since bitcoin isn’t correlated to the rest of the traditional financial infrastructure, he added:
“In 2018 or ‘19, heaven forbid we go through another cataclysmic financial event, we are going to see the same fundamental correlation and so again I ask, why would it not make sense to have a non-correlated hedge?”
Addressing Warren Buffett’s position on cryptocurrencies, the venture capitalist noted it’s “really unfair to not understand something, and then to disparage it.” Buffett has in the past claimed buying bitcoin isn’t investing, and that cryptocurrencies in general will come to a bad ending. When asked whether he would open a position to short the market, he claimed it wouldn’t make sense, as he already gets into enough trouble with things he understands something about.