Just over a year after peaking at $69,000, Bitcoin has fallen over 70%, here’s why Warren Buffett has always hated cryptocurrency

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‘They’ll end badly’: Just over a year after peaking at $69,000, Bitcoin has fallen over 70%, here’s why Warren Buffett has always hated cryptocurrency

It’s been a tough year for Bitcoin and its backers. Even in 2018, the Oracle of Omaha itself predicted that it and other cryptocurrencies were headed for trouble.

“They will end very badly,” Warren Buffett told CNBC at the time.

After hitting an all-time high of around $69,000 per unit on Nov. 10, 2021, the world’s leading digital currency has since erased around 75% of its value, sitting at $16,600 at the end of the trading day. December 19.

Recalcitrant investors who once thought they had missed the opportunity of a lifetime are now sighing in relief; meanwhile, those who bought at the top try not to think about their losses.

What would the world’s most famous investor say to those who might consider launching their investing apps and buying Bitcoin at a bargain price?

If you…had all the bitcoin in the world and offered it to me for $25, I wouldn’t take it, Buffett told CNBC earlier this year.

Besides Bitcoin’s disappointing track record, here are three other reasons why Buffett won’t go near it.

Don’t miss 1. It has no unique value

The billionaire investor dislikes Bitcoin as he considers it an unproductive asset.

Buffett has a well-known preference for stocks of companies whose value and cash flow comes from producing things. But cryptocurrencies have no real value, Buffett said in a 2020 CNBC interview.

They don’t breed, they can’t mail you a check, they can’t do anything, and what you’re hoping for is someone else to come along and pay you more money for them later, but then this person has the problem.

The story continues

Although Bitcoin is intended to provide real value as a payment system, this use is still quite limited. According to Buffett, the value of Bitcoins comes from the optimism that someone else will be willing to pay more for it in the future than you are paying today.

2. He doesn’t think crypto counts as money

Buffett has made his share of extremely cutting remarks about Bitcoin and cryptocurrency over the years: I don’t have Bitcoin. I don’t own any cryptocurrency, I never will, he told CNBC in 2020.

As a tradable asset, Bitcoin has exploded. But does it meet the three criteria of money? According to the most common definition, money is meant to be a medium of exchange, a store of value and a unit of account.

Read more: 4 easy alternatives to grow your hard-earned money without the choppy stock market

But Buffett calls it a mirage.

It doesn’t meet the test of a currency, the billionaire told CNBC in 2014. It’s not a sustainable medium of exchange, it’s not a store of value.

He adds that it is a very efficient way to transmit money anonymously. But: a check is also a means of transmitting money, he says. Are checks worth a lot of money just because they can transmit money?

3. He doesn’t understand it

Buffett has become one of the most successful investors in history by sticking to stocks he understands.

“I have 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 gamble, he told CNBC after a Berkshire Hathaway annual meeting in 2018, which is another problem with non-performing assets.

If you don’t understand it, you get a lot more excited than if you do. You can have anything you want to imagine if you just look at something and say, it’s magic.

How does Buffett pick winning stocks?

The billionaire investor follows the value investing strategy of buying undervalued stocks of solid companies and holding them for a long period of time.

Simple, right?

Berkshire Hathaway looks for companies with a good profit margin and those that make 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 great company at a fair price than a fair company at an exceptional price.

But Buffett’s distaste for crypto stocks doesn’t necessarily mean you shouldn’t buy Bitcoin. Even the billionaire returned to sectors against which he had previously spoken out.

He notoriously avoided tech stocks even during the height of the dotcom bubble, and now his company’s largest holding is Apple.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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