the last 7 months have been hectic for bitcoin, and now it is crashing hard.
After reaching an all-time high of $69,000 per unit in November 2021, the world’s leading digital currency has erased more than 67% of its value, standing at just over $21,000 on Tuesday, June 14.
Reading: Warren buffett on bitcoin
Reluctant investors who just a couple of months ago thought they had missed out on a once-in-a-lifetime opportunity now breathe a sigh of relief; meanwhile, those who bought at the peak are trying not to think about their losses.
what about warren buffett? what would the most famous investor in the world say to those who might be thinking of activating their investment applications and buying bitcoins at a bargain price?
buffett has made his share of extremely curt comments about bitcoin and cryptocurrencies over the years: “I don’t own bitcoin. I don’t own any cryptocurrency, I never will,” he told cnbc in 2020.
It’s “probably rat poison squared,” buffett once said.
here are three reasons why buffett won’t come around.
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1. 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 shares of corporations whose value (and cash flow) comes from producing things. but cryptocurrencies have no real value, buffett said in an interview with cnbc in 2020.
“they don’t reproduce, they can’t mail you a check, they can’t do anything, and you hope someone else comes along and pays you more money for them later, but then that person has the problem.”
Although bitcoin is intended to provide real value as a payment system, that use is still quite limited. As Buffett sees it, bitcoin’s value comes from the optimism that someone else will be willing to pay more for it in the future than they are paying today.
2. does not believe that cryptocurrencies count as money
As a tradable asset, bitcoin skyrocketed. 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.
but buffett calls it a “mirage”.
“It doesn’t pass the test of a currency,” the billionaire said on cnbc in 2014. “It’s not a durable medium of exchange, it’s not a store of value.”
adds that it is a very effective way to transmit money anonymously. But: “A check is also a way to transmit money,” she 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 keeping stocks he understands.
“I get in enough trouble with things I think I know something about. Why the hell should I go long or short something I know nothing about?”
but people like to gamble, he told cnbc after a 2018 berkshire hathaway annual meeting, that’s another problem with non-performing assets.
“If you don’t get it, you get much more excited than if you do. you can have anything you want to imagine if you just look at something and say, ‘that’s magic’.”
how does buffett choose the winning actions?
The billionaire investor follows the value investing strategy, which focuses on buying undervalued stocks of strong companies and holding them for a long time.
berkshire hathaway looks for companies with a good profit margin and that make unique products that are not easily substituted. 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 mean he shouldn’t buy bitcoin. even the billionaire has approached sectors in which he had previously spoken.
He notoriously avoided tech stocks, even at the height of the dot-com bubble, and now his company’s largest holding is Apple.
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