
Warren Buffett was dead wrong about technology. He admitted so himself: he wished he had invested in Google and Microsoft, and he considers them to be among the two largest investing mistakes in his career.
Why did Buffett not pull the trigger at any stage, even when it was clear that Google and Microsoft had scaled exponentially and had dominated the market?
It’s because Warren does not understand technology. According to Buffett, he only invests in industries that he understands — and technology is not one of them.
The more you know about an investment, the more confident you can be going in investing in it.
Let me give you an example: cryptocurrencies.
Over the past seven months, I’ve immersed myself in blockchain technologies and cryptocurrencies, including Bitcoin, Ethereum, and Litecoin. The more I learn, the more convinced I am that these are sound long-term investments.
Let me lay down my arguments for Bitcoin in particular:
- Supply and Demand: The supply of Bitcoin is capped at 21 million, and demand has been increasing exponentially as financial institutions such JP Morgan and Morgan Stanley adopt blockchain technology. Japan has even made Bitcoin a legal form of currency.
- Safety and Security: Bitcoin is a public distributed ledger, meaning that all transactions are publicly available and recorded for all time. The eyes of millions of developers monitor it at all times. There’s a common misconception that Bitcoin is mostly used to illegally trade things such as drugs and guns. Traffickers of illegal goods are quickly caught, and most of those who are not will eventually be caught because the record of their transaction will exist forever on a public ledger. This system is much safer than traditional banks.
- Decentralized system: Bitcoin and other cryptocurrencies are decentralized, meaning that no central government, bank, or institution has control over how it functions. Instead, developers propose amendments to the code, allowing security to be one step ahead of potential hackers and threats.
- Bank the Unbanked: Bitcoin allow the more than 1 billion unbanked people in the world to trade goods and services through the cryptocurrency market.
Ethereum is similar to Bitcoin, except it utilizes smart contracts — binding agreements from the sender and receiver written in code. Not many people know about it, though this is changing rapidly. As more people hear about Ethereum, investments will grow, leading to a much higher price. For example, in just the six months between November 2016 and May 2017, the price of Ethereum has increased from about 9 dollars to over 140 dollars (Update on June 28, 2017: The Price is now over 300 dollars)!
I bought my first few Ethereum in November 2016, and now I sorely wished I had bought more than a few. As they say, “The best time to plant a tree was 20 years ago. The second best time is now.” As I say, “the best time to invest in Bitcoin was when it launched in 2011. The second best time is now.”
Visit my original post at https://www.onepercentbettereveryday.com/money/2017/6/24/blog-6-the-rise-of-cryptocurrencies-and-blockchain-technology-a-case-study-on-supply-and-demand
