The questions surrounding the true value of Bitcoin swirled even more this week as an Internet and technology pioneer didn't take kindly to Warren Buffett's recent remarks surrounding the crypto-currency.
It's been widely reported Warren Buffett, with a net worth of nearly $64 billion, suggested the popular crypto-currency bitcoin was a "mirage," during an interview with CNBC earlier this month.
At a conference Marc Andreessen, who co-founded Netscape, an ardent Bitcoin enthusiast -- and investor -- didn't appreciate the comment and suggested Buffett overstepped his expertise by commenting on the technology. He then took to Twitter and clarified his remarks by saying:
My actual quote: "Track record of old white men who don't understand tech crapping on tech they don't understand still at 100%."— Marc Andreessen (@pmarca) March 25, 2014
Just six hours later Andreessen returned to Twitter and fired off a series of nine tweets, where he highlighted his own personal admiration of Buffett, saying, "Warren Buffett is a personal hero of mine -- clearly brilliant investor and businessperson but also philanthropist and humanitarian!"
However, two short minutes later Andreessen continued by noting, "But Warren has maintained for decades that he knows nothing about technology and does not seek to know anything about technology." And proceeded to suggest the negative opinion on Bitcoin from Buffett and others like him was unwarranted.
Although he said he was happy to meet with Buffett and further discuss the topic, he also provided the reason for his somewhat disparaging remarks about Buffett by saying, "when people who don't understand tech attack new tech, it's fair game to call them on it. People should know what they're talking about."
Buffett once remarked a key to investing was to "never invest in a business you can't understand," so it's easy to believe his own opinion on Bitcoin was one of sheer misunderstanding. This could help explain why Andreessen so distinctly disdained Buffett's comments.
But a further glance at Buffett's actual stance on Bitcoin reveals he knows exactly what it is and its value:
It's a method of transmitting money. It's a very effective way of transmitting money and you can do it anonymously and all that. A check is a way of transmitting money, too. Are checks worth a whole lot of money just because they can transmit money? ... I hope Bitcoin becomes a better way of doing it, but you can replicate it a bunch of different ways and it will be. The idea that it has some huge intrinsic value is just a joke in my view.
In an earlier interview when asked about Bitcoin, Buffett noted Bitcoin doesn't meet the definition of a currency as a result of the reality people exclusively consider its value relative to the dollar.
He highlighted the entire theme of Bitcoin has been "very speculative," and drew comparisons to tulip madness -- the financial crisis in the Netherlands in 1637 which was one of the first economic booms and busts -- and people were simply buying a selling with the hopes bitcoin would go up or down.
On Tuesday, the IRS took the same stance as Buffett and said virtual currencies -- like Bitcoin -- would be viewed as pieces of property for tax purposes instead of legal tender. But beyond that, it's important to see Andreessen was simply incorrect when he asserted Buffett didn't understand bitcoin.
Buffett notes the underlying technology and process which allow Bitcoin to function is valuable, but the belief a single Bitcoin is worth anything is simply speculative. That's not to suggest the price will plummet this day, this week, or this year, but simply at its core, it isn't an investment.
There are likely to be sizable changes in the payments and broader banking industries, but whether those come from Bitcoin or somewhere else is still to be determined. When there are firms like MasterCard, and Visa, -- firms Berkshire Hathaway has total investment of nearly $700 million in -- as well as eBay and Google all angling for position, it's tough to believe a fledgling currency will be the ultimate winner.
Before Buffett began his remarks on Bitcoin he said, "you're going to be a lot better off owning productive assets over the next 50 years than you will be owning pieces of paper," which is something to always remember when considering any investment.
Patrick Morris owns shares of Berkshire Hathaway. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.