As opposed to that, Munger observed, it’s a gambling contract with a nearly 100% edge for the house, engaged into in a nation where gambling contracts are usually only governed by states that compete in laxness. Clearly, the United States has to pass a new federal legislation to stop this from happening.
Munger and his business colleague Warren Buffett have long argued that cryptocurrencies are not real, movable, or productive assets. Munger’s most recent remarks come at a time when the cryptocurrency sector was struggling with issues including failed projects and a lack of liquidity, which were made worse by the collapse of FTX, previously one of the biggest exchanges in the world.
Over $2 trillion was lost from the bitcoin market’s value in 2017. According to Coin Metrics, the price of bitcoin, the biggest cryptocurrency in the world, fell 65% in 2022 before rising nearly 40% to trade at roughly $23,824.
Source: Yahoo Finance
The prominent investor said that thousands of new cryptocurrencies were recently released by privately held corporations and listed on exchanges without prior authorisation from the government. Some have been given away to promoters for practically nothing, Munger claimed, and then the general public invests at much higher prices without fully realising the pre-dilution in favour of the promoter.
He mentioned two interesting examples that may help the United States choose wise decisions. First, trading, order matching, token issuance, and derivatives for virtual currencies are expressly forbidden in China. Second, Munger noted that the English Parliament outlawed any public trading in newly issued common stocks beginning in the early 1700s and maintained this outlaw for almost 100 years.
What should the United States do now that a cryptocurrency prohibition is in effect? Another course of action would be to express gratitude to the Chinese communist leader for his excellent display of extrasensory perception, Munger suggested.
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