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Warren Buffett about Bitcoins

warren buffet about cryptos

November 6, 2020 | 

6327 Views | 

JOHN K MWANIKI | 

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Berkshire Hathaway CEO Warren Buffet is one of the most legendary investors ever. The businessman has made a fortune betting on the stocks most likely to perform. He sure has been on point with most of the bets. 

The success has made him one of the most respectable figures in the economy. 

Of his investment plans, he has never embraced Bitcoin. While most investors are raving about the coin, he has given it a wide berth. He has often described the crypto as worthless. He even vowed never to own the digital currency.  

The investor has only had ominous words for the virtual currencies. He, at one point, referred to them as rat poison squared and a mirage. He even believes the coins are more of a gambling device than an asset. 

The only crypto he has ever interacted with was through gifting. He, however, gave them out to charity without ever using them. 

Reasons Warren Buffet Won't Invest in Bitcoin

The business mogul has made it clear that he will never invest in Bitcoin and any other cryptocurrency. This doesn't make sense to most traders. Given the coins have been gaining over the years.

Here are the main reasons why the Berkshire Hathaway CEO doesn't fancy Bitcoin;

  • He considers Bitcoin an unproductive asset.

Bitcoin and other cryptocurrencies do not produce anything. They don't function in the production of any value other than for use as a means of exchange. 

The model of virtual money is different from Warren Buffet's investment style. He prefers to invest in product company shares. The firms produce valuables while he gains from dividends. He also likes the prospects of real estate.

While vacant land might not be as productive, there are prospects of construction and gaining rent. 

The only way to gain from Bitcoin is when the value rises. 

  • Bitcoin is speculation, not an asset

Bitcoin's price movement is another reason why Warren Buffet won't invest in it. Warren Buffet is all about long term investments. He prefers buying stocks then holding for the most extended period.

Berkshire Hathaway has grown through buying stocks from reputable companies then holding for a more extended period. He even encourages traders only to buy his company shares long term. He would like them to purchase the shares if they could hold more than five years.

Such a model is not possible with cryptocurrencies. The volatility of cryptos means investors want to cash in as long as they are assured of gains. Most traders buy digital currencies when on a bullish run. They then sell them when on a bearish run. It's all about buying low and selling high. 

The prospects have seen an increase in analysis tools like technical analysis. The traders also observe support levels and resistance levels. Warren Buffet is thus convinced Bitcoin is not an investment

  • The Need to safeguard the reputation

Warren Buffet has created an excellent reputation and would like to keep it. He does not want anything that jeopardizes the reputation of Berkshire Hathaway as well.

He has often questioned the role of Bitcoin in aiding illegal transactions. Like other entities, he believes the digital currencies fuel illicit trade. For that, he wouldn't want anything to do with it.

At one point, he claimed Bitcoin's only contribution to the economy is shortening suitcases for criminals. They instead opt for the coins for the transactions. 

  • He doesn't know Bitcoin

One of Warren Buffet's investment strategy is to never invest in anything you don't know. He claims that he gets into enough problems investing in the things he understands. He won't risk putting money in Bitcoin when he doesn't understand it.

Nobody fully understands digital currencies. Blockchain technology and ledgers are new concepts. Most people struggle to grasp everything, including the tech-savvy.

Investing in Bitcoin seems more of a gamble. It's only hoping for market movements without understanding what's happening. Warren Buffet has sure not grown has rich using blind investment.

Possibility of Warren Buffet Changing his Mind over Bitcoin

Even though Warren Buffet has stated his stand on Bitcoin, most traders still believe he will change his mind. The traders believe the coin has been gaining a lot in recent times. They also think it's becoming more stable. In the end, owning Bitcoin would be the norm for any investor.

Even though opposed to investing in cryptos, Warren likes blockchain technology. He has also been friendly to the crypto developers. He has had engagements with different parties in the virtual currency world. 

One such arrangement saw him meet Justin Sun, a crypto entrepreneur. The camaraderie might end up in him taking up some digital currencies.

The changing relationship between Warren Buffet and gold is another indicator of his changing investment plans. For a long time, he has bashed gold as a non-viable investment portfolio. It thus came as a surprise when it emerged Berkshire Hathaway invested in a gold company.

The investment in Barrick Gold came at a time when the company reduced its bank investments. Most people are translating the move as a bet against the traditional economy. Some reports still argue that an investment in a gold company is not the same as in the metal. It is still the first one for him over the years of investments. 

Warren Buffet's surprise investment in the metal has made it safe. Most of the traders are now considering as a viable investment. The same would happen to Bitcoin if he were to take it up in the future.

Cryptocurrencies have been growing in recent times. They are becoming more mainstream as they undergo regulations. What most traders feared on cryptos aiding illegal transactions would subside. Bitcoin already has a public ledger with transaction records.

The cryptocurrency has also been becoming more popular with institutional investors. The success of the Bitcoin futures and other derivatives is an indication. The regulations will make it even safer. In the end, Warren Buffet might bet on it. 

Bottom Line 

As a reputable investor, Warren Buffet influences the economy. Most traders make decisions based on his investment portfolio. So far, he hasn't had the kindest of words for digital money. He is unwilling to invest in them. 

Still, the cryptos are on a growth pattern. They are gaining more relevance as they become mainstream. There are hopes of a possible change of mind on Bitcoin by Warren in the future.  

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