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I want to start this article by saying that I am a huge fan of Charlie Munger, and I have learned a lot of my investing strategy from him and his business partner Warren Buffett. That said, I'm also a big believer in some crypto projects, and I invest in crypto. When I saw that he put out a piece saying that the U.S. should ban crypto, I knew that I had to read it. Here's my response to his article.
While reading the article he wrote, I will note that I do agree with some of the things he says. He outlines some problems with some crypto that I agree with. He mentions that the creators of new cryptocurrencies often get coins for "almost nothing" then states, “After which the public buys in at much higher prices without fully understanding the pre-dilution in favor of the promoter." This statement, in my opinion, is objectively true. This does happen.
Munger then stated that the U.S. should follow China's lead which banned crypto and pass laws to prevent crypto trading and the formation of new cryptocurrencies. This is obviously where I disagree with Munger. If he had simply stated that crypto is a bad investment, I would say that I respect his opinion but disagree and that would be the end of it. Calling for a ban, however, is very different. I believe that some cryptocurrencies are good, and I would like to see more good cryptos created. Even if one believes that there are no good cryptocurrencies, I still don't believe that they should support a ban of them as I believe that people should have the right to invest in what they believe in. If someone invests in a bad project and loses money, that was their decision to make. Thinking that someone shouldn't have the freedom to make that decision for themselves is an opinion I do not understand how one could have.
Munger then wrote, "A cryptocurrency is not a currency, not a commodity, and not a security. Instead, it’s a gambling contract with a nearly 100% edge for the house, entered into in a country where gambling contracts are traditionally regulated only by states that compete in laxity.”
Some cryptos are definitely used as a currency. Bitcoin, for example, has been and continues to be used as a currency along with many other projects. One can argue if it's a good currency or not, but I don't see how one can argue that it's not a currency. Most cryptos get their prices from supply and demand and can be bought and sold, so I would consider it a commodity. One can also take loans out against crypto and pledge it as collateral which would in turn make it a security also.
I don't agree at all that cryptocurrencies should be banned. I also don't agree that new projects shouldn't exist. I believe that people should decide for themselves what they want to invest in and what projects they want to support
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