Cryptos are BS (Bill Maher's arguments)... Are they?

In my earlier post, Sell in May, Go away, I argued that the equity markets would take a pause and that crypto would take another leg up (after treading water for a month or two). And here we go, as if on cue, crypto reach a new high and last night Bill Maher stated "Nothing with Crypto turns out good" during his New Rules segment on his wonderful show Real Time with Bill Maher. In full disclosure, I love the man and his show. His New Rules rant has a few wonderful zingers by the way. (for example when discussing Bitcoin's energy usage he compares it to that of NY State, with the exception of the Governor's mansion which he states uses candles - a little wink to Cuomo's romantic overtures). 

I tend agree with most of his arguments. Last night however, I couldn't disagree more. It's always a good exercise to see the other side of a coin/debate when formulating an opinion, especially one as important as an investment thesis. So here goes, I thought I would go over some of his key points.

• He starts by acknowledging that crypto/Bitcoin is gaining wide acceptance. He lists the numerous companies that have started allowing customers to pay for goods and services with crypto and that 1 in 10 Americans used their stimulus checks to buy some form of crypto. That's a positive use case and better than what was the case just 12-24 months ago, and certain much more useful than in 2017 during the exponential previous run up in crypto.
• He lists the main crypto names and then spends a bit of time on the fringe crypto names, including Dogecoin. On that one, Bill is spot on. I just don't see how that one can/should be worth $50 bil (it's up a lot over the past 24 hours reaching a new all time high). 
• But then he loses me. He says Dogecoin is just like all of the other crypto, because "the whole thing is a joke." He's way more of an expert at jokes than I am , and he has made a remarkable career out of telling them. But if $2 trillion + are invested in this asset class, if major corporates accept them, and if smart contracts are being built using the crypto infrastructure, then I am not too sure what the joke is.
• He claims that our financial system is real and that crypto are not. True that Apple makes real money (what another amazing quarterly earnings report by the way). Then he claims he doesn't understand crypto and that nobody else understands it either. Well I certainly cannot claim to be an expert, and I fully admit that many people are simply speculating rather than investing for the long term, however there are plenty of crazy smart individuals who make compelling arguments for why crypto is real and here to stay. Bill Maher even calls the leaders in the space nerds. I am happy to follow them any day of the week. A little Google sleuthing will reveal numerous articles and videos for all to digest the pro crypto arguments. (Interestingly when he talks about the origins of Bitcoin he mangles Satoshi Nakamoto's name.) 
• On the flip side, there is quite a compelling case to be made the the fiat currency world, notably that of the US dollar with trillions of it being printed every single year, is an even greater joke. That is for another blog post however.
• He mentions a Warren Buffet quote that crypto "have no value and don't produce anything." With all due respect to the Oracle of Omaha, I am not sure he would be the best person to focus on something that is revolutionizing technology. That's not exactly his area of expertise. He was once asked why he didn't invest in technology, and his response was that he didn't invest in companies he didn't understand. That is a very sensible tactic, but also invalidates Mr Maher's point of using a Warren Buffet quote to dismiss crypto.
• He goes on a tangent about how people live in a virtual world, and makes an analogy to mining for Bitcoin as opposed to mining for physical commodities. Not sure if this helps advance his case. The point of the miners is to make sure that the data on the blockchain is accurately maintained. That's a good thing.
• Then he states that nothing of value is created. Tell that to the people who have used Bitcoin and other currencies to buy goods and services, or Ethereum to forge contracts. Those are real.
• The final argument is the energy consumption of using and mining these currencies. Guilty your honor. He is right on that. Mining crypto does use up a lot of energy. But so does transportation, production of consumer goods, etc... Over the past few centuries, all advances in industrializing nations have had negative environmental effects. As mentioned in one of my earlier posts, this is not a Bitcoin problem. It's a political problem and there is a solution. Vote in politicians who will do something about it. The glass half full argument would be that this could actually accelerate the adoption of more green/environmental friendly energy sources. Anything that has an extreme effect such as crypto energy usage is bound to be taken care of sooner, rather than later. Let's see.

Thanks Bill. I love your arguments and you do make a few valid points. None that actually change the investment thesis however.