It’s been a tough year for Bitcoin and its sponsors. Even in 2018, the Oracle of Omaha himself predicted that he and other cryptocurrencies were in trouble.
“They’re going to come to a very bad end,” Warren Buffett told CNBC at the time.
After reaching an all-time high of around $69,000 per unit on Nov 10, 2021, the world’s leading digital currency has erased around 75% of its value to sit at $16,600 at the end of the trading day in December 19th.
Investors who once thought they had missed the opportunity of a lifetime now sigh with relief; Meanwhile, those who bought at the peak are trying not to think about their losses.
What would the world’s most famous investor say to those who might be thinking of activating their investment apps and buying Bitcoin at a bargain price?
“If you… owned all the bitcoin in the world and you offered it to me for $25, I wouldn’t take it,” Buffett told CNBC earlier this year.
In addition to Bitcoin’s disappointing track record, here are three more reasons why Buffett doesn’t come close.
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1. It has “no unique value”
The billionaire investor does not like Bitcoin because he considers it an unproductive asset.
Buffett has a well-known preference for stocks in corporations whose value – and cash flow – comes from making things. But cryptocurrencies have no real value, Buffett said in a CNBC interview in 2020.
“They don’t breed, they can’t send you a check, they can’t do anything, and what you hope is someone will come along and pay more for them later, but then that person has the problem.”
Although Bitcoin It’s intended to provide real value as a payment system, this use is still quite limited. In Buffett’s opinion, Bitcoin’s value comes from optimism that someone will be willing to pay more for it in the future than you are paying today.
2. He doesn’t think cryptocurrencies count as money
Buffett has made extremely cutting comments about Bitcoin and cryptocurrency over the years: “I don’t have any Bitcoin. I don’t own any cryptocurrency, I never will,” he said. CNBC there in 2020.
As a tradable asset, Bitcoin has grown. But does it meet the three criteria of money? According to the most common definition, money is supposed to be a medium of exchange, a store of value and a unit of account.
See more information: 4 easy alternatives to grow your hard-earned money without the choppy stock market
But Buffett calls it a “mirage”.
“Doesn’t pass the coin test,” said the billionaire in CNBC in 2014. “It is not a durable medium of exchange, it is not a store of value.”
He adds that it’s a very effective way to transmit money anonymously. But: “a check is a way to transmit money too,” he said. “Are checks worth a lot of money just because they can transmit money?”
3. He doesn’t understand
Buffett became one of the most successful investors in history by investing in stocks he understands.
“I’ve gotten myself into enough trouble with things I think I know something about. Why the hell should I go long or short on something I know nothing about?”
But people like to play games, he said CNBC after a Berkshire Hathaway annual meeting in 2018, which is another problem with non-performing assets.
“If you don’t understand, you get a lot more excited than if you did. You can have anything you want to imagine if you just look at something and say, ‘this is magic’”.
Like does Buffett Picks Winning Stocks?
The billionaire investor follows the value investing strategy — which focuses on buying undervalued stocks in strong companies and holding them for the long haul.
Simple, right?
Berkshire Hathaway looks for companies with good profit margins and those that produce unique products that cannot be easily replaced. As Warren Buffett once said in a letter to his shareholders, “It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
But Buffett’s distaste for crypto stocks doesn’t necessarily mean you shouldn’t buy Bitcoin. Even the billionaire backtracked on sectors he previously spoke out against.
He famously avoided tech stocks even at the height of the dot-com bubble, and now his company’s biggest holding is Apple.
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This article provides information only and should not be construed as advice. It is provided without any kind of warranty.
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