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Saturday, January 29, 2022

Warren's bit and my bit on bitcoin

Warren Buffet mentions the Tulip Mania. If you have not heard of it, read about it here


Not so long ago a merchant found a lot of monkeys that lived near a certain village. One day he came to the village saying he wanted to buy these monkeys. He announced that he would buy the monkeys at $100 each.

The villagers thought that this man must be crazy. How can somebody buy stray monkeys at $100 each? Still, some people caught some monkeys and gave it to this merchant and he gave $100 for each monkey. This news spread like wildfire and people caught monkeys and sold them to the merchant.

After a few days, the merchant announced that he will buy monkeys at $200 each. Even the lazy villagers now ran around to catch the remaining monkeys. They sold them at $200 each.

The merchant then announced that he will buy monkeys for $500 each. The villagers start to lose sleep. They caught six or seven more monkeys, which was all that was left and got $500 each.

Then the merchant announced that he is going on holiday for a week, but when he returns, he will buy monkeys at $1,000 each. He said that his employee will be left in charge, and would take care of the monkeys he bought pending his return. And the merchant went on holiday.

The villagers were frantic and very sad as there were no more monkeys left for them to sell at $1,000 each as was promised by the merchant.

Then the merchant’s employee contacted them and told them that he would secretly sell them some monkeys at $700 each. The news spread like wildfire. As the merchant promised on his return that he would buy monkeys at $1,000, they would make a $300 profit on each monkey.

The next day the villagers queued up near the monkey cage. The employee sold all the monkeys at $700 each. The rich bought monkeys in large lots. The poor borrowed money from money lenders and bought the rest of the monkeys. Then they waited for the merchant to return.

He never returned. They tried to find the employee. He had left too.

The villagers then realised that they have been duped into buying useless monkeys at $700 each, and were now unable to sell them.

Which all sounds very much like Bitcoin. If the price goes up what can you do with Bitcoins other than sell them to someone else who thinks they will go up in price even more? And what can you do with Bitcoins when they fall in value? NOTHING!

I don’t know, but just like the villagers trading monkeys, Bitcoin will bankrupt a lot of people and make a few people filthy rich.

Maybe it should've been called Money Business right from the start.

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