Charlie Munger pulled no punches on cryptocurrency during the Daily Journal’s shareholder meeting last week, calling it “worthless”, “crazy stupid gambling”, and “massively stupid”, among other more profane remarks.
Munger, the vice-chairman of Berkshire Hathaway and long-time business partner of Warren Buffett, expanded on his string of anti-crypto views during the meeting.
“I think the people that oppose my position are idiots”, Munger said when asked if he considered the other side of the crypto debate.
Advocates of crypto point to greater privacy, security, transaction speeds, and reduced cost as benefits of cryptocurrency.
In the past, Munger has responded to such arguments by calling crypto a “currency that’s good for kidnappers” and saying it is “rat poison squared”.
Munger praised the Chinese leader, Xi Jinping, for his foresight in banning crypto in September 2021, adding that crypto “makes us [America] look foolish” and that he is “ashamed of my country for allowing this”.
In a Wall Street Journal op-ed in February, Munger articulated his position on crypto more eloquently.
For Munger, crypto is an example of “wretched excess” due to gaps in regulation, and the underlying technology, blockchain, is a good idea that has been “carried to excess”.
Central to his argument is that crypto is not a productive asset, it is merely a “gambling contract with a nearly 100% edge for the house”.
Further, crypto undermines the Federal Reserve system and national currencies, which, according to Munger, have “turned man from a successful ape into a modern human”.
Replacing such a system, for Munger, is like replacing air.
According to Munger, the driving force behind crypto is a combination of fraud and delusion.
Fraud because the ‘house always wins’ and delusion as it is predicated on greater fool theory – the idea that someone else will come along and pay more for it than you did.
These comments from Munger have escalated from the Berkshire shareholder meeting in May 2022, where Munger claimed that crypto would “likely go to zero”.
This escalation comes after the collapse and subsequent bankruptcy of Sam Bankman-Fried’s FTX crypto exchange in November 2022.
The collapse of the $32 billion FTX raised doubt about the viability of cryptocurrencies while also calling into question the role of regulators and investors who failed to enforce basic governance structures.
FTX had its assets frozen on 10 November and formally filed for bankruptcy a day later. It is currently under investigation by the US Securities and Exchange Commission (SEC).
In 2022, the crypto market lost $2 trillion in market cap. Bitcoin, the leading cryptocurrency, decreased by over 60%.
The FTX implosion and the destruction of wealth have led to calls for increased crypto regulation by the SEC, with some, including Munger, calling for an outright ban.
The SEC has said that increased scrutiny of crypto exchanges and cryptocurrency, in general, will be a priority in 2023.