The underlying business model that I have looked at is fraud. Cryptocurrencies are nothing more than white papers, a hope in the way the world will be.
The founder of Hotmail had this to say about cryptocurrencies.
Even since Bitcoin was created a decade ago, cryptocurrencies have never been short of critics, with popular figures like Warren Buffet and Jamie Damon some of the biggest critics of Bitcoin and other cryptocurrencies. The critic’s group now have a new member in, Sabeer Bhatia, the founder of email service, Hotmail.
Bhatia made his position known during an interview with media outlet, Arabian Business, when he stated that digital currencies have been operating a business model that was built on fraud.
Bhatia was known for the development of email service Hotmail which he sold to Microsoft in the 90’s for $400 million. Talking further on the issue, Bhatia added that comparing the cryptocurrency boom with the dotcom bubble is too generous, as he noted that companies such as Pets.com were among the first attempts at a business model that later turned out to be valuable.
The likes of Pets.com and the Books.com were at least versions of e-commerce platforms that are only growing today. There [were] missteps back then but, guess what, we’re doing everything online today. They were right… but they were too early and didn’t have the staying power like an Amazon. Those failures tried to pick a vertical and wanted to be the solution for that segment. [There’s] nothing wrong with that.
IOTA seems too good to be true
The cryptocurrency that Bhatia criticized the most was IOTA, which he believes is “too good to be true.”
IOTA, which is currently the ninth largest cryptocurrency in the world, experienced a boom last year along with the entire cryptocurrency market but has since seen its market value drop by more than 60% over the past few months as the bear cycle continues to play out. Even though the project has been making giant strides and has recently signed partnerships with some big companies like Volkswagen and Bosch, Bhatia is of the view that the value of the coin is something that is purely speculative.
Explaining his point, he stated;
There is a token called IOTA, which is based on the Internet-of-Things. But they haven’t sold a single device to anyone. The whole idea is: ‘In the future, one IoT device will be able to talk to another IoT device and settle any financial transaction between them using blockchain. That’s the idea. And although it’s never been implemented, the idea is worth $15bn? Really? The values are entirely speculative.
Bhatia, just like other critics, acknowledged that the blockchain technology has huge potential especially for settling cross-border payments. He, however, warned investors to be careful so as not to lose money investing in a cryptocurrency that is too good to be true and which, according to him, doesn’t create value for the society.
He concluded by stating;
The most successful companies of the last 10-15 years have been networks. Facebook, WhatsApp, Instagram, and even Uber is kind of a network. It seems that cryptocurrencies are trying to grow a network and people buy tokens and people participate in the growth of the network. But what is the network really doing? The fundamental question of creating value for society is one they carefully dodge.
Warren Buffet and Jamie Damon the biggest Bitcoin critics
The cryptocurrency world has faced criticism from so many people over the years but the two biggest critics of Bitcoin are head of Berkshire Hathaway and billionaire investor, Warren Buffet and JP Morgan CEO, Jamie Dimon.
In an interview last month, Buffet regarded Bitcoin as a rat poison. He stated;
In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending. If I could buy a five-year put on every one of the cryptocurrencies, I’d be glad to do it but I would never short a dime’s worth.
Jamie Damon has always been against Bitcoin, but his position is understandable considering the fact that he is the head of one of the largest banks in the world. The CEO of JP Morgan Chase, last year called those investing in Bitcoin stupid. He stated;
If you’re stupid enough to buy it, you’ll pay the price for it one day. The only value of bitcoin is what the other guy’ll pay for it. Honestly I think there’s a good chance of the buyers out there are out there jazzing it up every day so that maybe you’ll buy it too, and take them out.
He later walked back some of the statement when he admitted that the blockchain technology, the underlying technology of Bitcoin is real and has a very huge potential
Just last week, the duo, during an interview on CNBC warned investors to be careful about Bitcoin. The duo was asked who hates Bitcoin more. Buffet replied
I set a high standard. I don’t know whether Jamie can top me or not.
Jamie warned investors to be “Just beware” and said;
I don’t want to be a Bitcoin spokesman.
Just like Bill Gates was proven wrong when he doubted the power of the internet, cryptocurrency enthusiasts believe that Buffet and Jamie would be proven wrong when they finally see the importance of cryptocurrencies and blockchain to the future of the global economy.