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Even though cryptocurrency investors hate BTC, what can they learn from Charlie Munger?

Legendary investor and billionaire Charlie Munger, known as Warren Buffet’s right-hand man who helped establish the Berkshire Hathaway investment company, died at the age of 99.
According to this forwarded Munger’s family, who left the company on Nov. 28, notified Berkshire that “he passed away peacefully this morning at a hospital in California.”
Munger, who has served as vice chairman of Buffett’s empire since 1978, has a net worth of $2.6 billion and was frequently praised for espousing a sound investing and stock-picking philosophy during his tenure, and was sent to Berkshire.
Although Bitcoin and cryptocurrencies were not the investments favored by Munger and Buffett, they were once called Bitcoin (Bitcoin) “rat poison” and “rat poison squared”, crypto traders can still benefit from the lessons learned from Munger’s 60 years of business experience. Some investment approaches Munger vouches for include:

Invest only in what you know

Munger emphasized that Berkshire Hathaway typically classifies stocks into one of three baskets when evaluating a potential investment.

“We have three baskets of investments: yes, no, and very difficult to understand.”

This last point may justify Munger and Buffet for never investing in Bitcoin and cryptocurrencies, but the message that emerges is that they avoid investing in things they don’t know about.
Buffet has previously admitted that he and Munger (both considered tech skeptics) were “too stupid to understand” the potential of Amazon’s e-commerce business in the 1990s and underestimated the company’s founder, Jeff Bezos.
Berkshire also didn’t invest in Microsoft or Google. “We couldn’t make it”Munger once commented: reflecting on the company’s decision not to invest in Big G.
However, Berkshire turned to industries it knew well, such as banking and food and beverage, and made huge profits from investments in Bank of America, American Express, Coca-Cola and later Apple, although it initially decided not to invest. John LeFevre remembers Munger this way:

Charlie Munger’s formula for success is simple and perfect:

– Spend less than you earn
– Invest prudently
– Avoid toxic people and activities
– Delay of gratification
– Never stop learning

Munger and Buffet also mastered the art of valuation by questioning a company’s balance sheet before making an investment decision; Munger once claimed this was the only smart way to invest.

“All smart investments are value investments […] “To evaluate the stock, you have to evaluate the company.”

While blockchains and protocols cannot be valued using a discounted cash flow model or other traditional methods, a wealth of data can be collected from on-chain transactions, from the number of daily active users to transaction volume to the total value locked (relative to the market). capitalization) and net inflows and outflows, to name a few.

Temperament, not IQ, contributes most to investment success

Munger has never been one to jump headfirst into a new trend, preferring to stay on the more conservative side of investing.
He has said in the past that many people with “high IQs” become bad investors because of their bad temperaments. But the “big investors” act cautiously and think deeply:

“Great investors are always very careful. They think things through. They don’t rush. They’re calm. They’re not in a hurry. They don’t get excited. They just look at the facts and appreciate them. And that’s what we’re trying to do.”

“Irrational emotions must be kept under control”Munger said on another occasion.

Related: Berkshire Hathaway’s Charlie Munger says Bitcoin is a ‘disgusting’ product created ‘out of thin air’

Munger, who has been in the investment field for more than 60 years, remembered how important patience is in accumulating wealth.
“Big profits depend not on buying or selling, but on waiting.”.

Strengthen belief and manage volatility

Munger has witnessed several crashes in Berkshire’s investment portfolio over the decades, including the Black Monday crash of 1987, the financial crisis of 2007-2008 and, most recently, the COVID-19 pandemic.
He once noted that long-term investors must learn to shore up their investments when adverse macroeconomic conditions trigger market crashes:

“If you are not prepared to react calmly to a 50% drop in market price two or three times a century, you are unfit to be an ordinary shareholder and deserve the mediocre outcome you will receive.”

“There will be periods of strong tension, and there will be periods of great success.”Munger shared. “You have to learn to live with them”.

Munger was born on January 1, 1924 and passed away just 34 days shy of his 100th birthday.
“Berkshire Hathaway would not be where it is today without Charlie’s inspiration, wisdom and involvement.”Buffett said in a statement.

Translation by Walter Rizzo

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