Just over a year after its $69,000 peak, Bitcoin has plummeted more than 70% – here’s why Warren Buffett hated cryptocurrency all along

'They will come to a bad end': Just over a year after its $69,000 peak, Bitcoin has plummeted more than 70% – here's why Warren Buffett hated cryptocurrency all along

‘They will come to a bad end’: Just over a year after its $69,000 peak, Bitcoin has plummeted more than 70% – here’s why Warren Buffett hated cryptocurrency all along

It’s been a rough 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’re going to come to a really bad end,” Warren Buffett told CNBC at the time.

After hitting an all-time high of about $69,000 per unit on November 10, 2021, the world’s leading digital currency has since cleared about 75% of its value, reaching $16,600 by the end of the trading day on December 19.

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

What would the world’s most famous investor say to those thinking about launching 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.

Aside from Bitcoin’s disappointing track record, here are three more reasons why Buffett won’t come close.

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1. It has ‘no unique value at all’

The billionaire investor dislikes Bitcoin as he sees it as 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 CNBC job interview in 2020.

“They don’t reproduce, they can’t send you a check, they can’t do anything, and what you hope is someone else comes along and pays you more money for it 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 you are paying now.

2. He doesn’t think crypto counts as money

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

As a tradable asset, Bitcoin boomed. 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.

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

But Buffett calls it a “mirage.”

“It doesn’t pass the test of a currency,” the billionaire continued 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 effective way to transfer money anonymously. But: “a check is also a way to transfer money,” he said. “Are checks worth a lot of money just because they can transfer money?”

3. He doesn’t understand

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

“I get in enough trouble with things I think I know about. Why on earth would I take a long or short position in something I know nothing about?”

But people like to gamble, he said CNBC after a Berkshire Hathaway annual meeting in 2018, which is another problem with non-productive assets.

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

How is doing Buffett Picks Winning Stocks?

The billionaire investor follows the value investing strategy, which focuses on buying undervalued stocks of strong companies and holding them for a long time.

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’s much better to buy a great company for a fair price than an honest company for a great price.”

But Buffett’s aversion to crypto stocks doesn’t necessarily mean you shouldn’t buy Bitcoin. Even the billionaire is dropping by in sectors he has previously spoken out against.

He notoriously avoided tech stocks even at the height of the dot-com bubble, and now Apple is his company’s largest holding.

What to read next

  • ‘Hold onto your cash’: Jeff Bezos says you might need to rethink buying a ‘new car, fridge or whatever’ – here are 3 better recession-proof buys

  • Here are 3 easy money moves to boost your bank account today

  • Want to invest your spare change but don’t know where to start? Try this investing app before December 31 and get $20

This article provides information only and should not be taken as advice. It comes without any kind of warranty.

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