Buffett Defames Cryptocurrency But Blockchain Holds Promise
Zacks Investment Research | May 07, 2018 11:24PM ET
Warren Buffett, one of the most influential and sought-after value investors, criticized cryptocurrency and its trading.
Buffett, the owner of Berkshire Hathaway (NYSE:BRKa) and its vice chairman, Charles Thomas Munger strongly criticized investments in bitcoins and other cryptocurrencies at the Berkshire Hathaway annual meeting 2018. He believes that these will soon meet their end in a miserable way.
Per Buffett, cryptocurrencies are non-productive assets. Hence, the cycle of investment might be pretty short, as it would require people interested to invest in such non-productive products. All this will lead to stagnation in the cryptocurrency industry in the near future.
Volatility of Cryptocurrency
The lack of support from global central banks has made the acceptance of cryptocurrencies difficult in real-world transactions. Additionally, a number of fraudulent initial coin offerings (ICOs) have made investors further apprehensive about the industry’s future.
Owing to all these, the cryptocurrency industry looks highly volatile. We have seen companies like Alphabet (NASDAQ:GOOGL) and Facebook (NASDAQ:FB) banning cryptocurrency ads on their platforms.
China has also imposed a ban on bitcoin trade, while a number of other countries have tightened regulations. These in turn have negatively impacted cryptocurrencies like itcoin, Ethereum, Ripple and Litecoin.
As continued volatility and rising skepticism over the future of cryptocurrencies make investors nervous, we believe, to keep risks at bay, they can shift their focus toward the underlying technology that powers cryptocurrency -– blockchain.
Blockchain Witnessing Widescale Adoption
Blockchain’s process of secured storage and transmission of data through a decentralized database is the most attractive feature of the technology. Originally used for cryptocurrency transactions, the system is transparent and incorruptible and is meant to provide unaltered information.
The distributed ledger technology (DLT) makes tampering of data impossible as a number of people are involved and have access to it. This safe system lowers monetary losses with minimum chances of double counting and hacking.
Notably, the technology has already been adopted by the insurance, banking, food supply and automobile industries among others. It is also being adopted in the shipping and freight industries, aimed at more transparency and simplicity in tracking shipments across borders and trading zones.
With such impressive visibility, the companies offering solutions and products related to blockchain operations are looking to gain immensely going ahead. Adoption of the technology is projected to reach $7.6 billion by 2022 from $411.5 million in 2017 at a CAGR of 79.6%, per data from MarketsandMarkets.
Get The News You Want
Let’s take a look at some companies that are well-positioned to benefit from rapid adoption of blockchain technology.
International Business Machines (NYSE:IBM) has a strong foothold in the blockchain industry with deals in multi-line insurance, bank guarantee, automobile industry, global food supplying industry among others.
The company has also unveiled a blockchain-based banking technology aimed at aiding financial institutions to simplify and quicken cross-border transactions. The company also partnered with the largest container shipping firm in the world, A.P. Moller-Maersk, intended to deliver a secure and efficient industry-wide trading platform using blockchain technology.
We believe that with a variety of blockchain deals and more in the pipeline, this company will gain from the increasing adoption of the technology. IBM has a Zacks Rank #3 (Hold) and a long-term earnings growth rate of 4.95%. You can see Zacks Investment Research
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