It has been a difficult year for Bitcoin and its supporters. Even in 2018, the Oracle of Omaha himself predicted that it and other cryptocurrencies are in trouble.
Warren Buffett told CNBC at the time: “They will come to a very bad end.
After hitting an all-time high of around $69,000 per unit on November 10, 2021, the world’s leading digital currency has since lost about 75% of its value, at $16,600 on the end of the trading day on December 19.
Holders who once thought they’d missed out on a one-of-a-kind opportunity are breathing a sigh of 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 app and buying Bitcoin at a bargain price?
“If you… owned all the bitcoin in the world and you gave it to me for $25, I wouldn’t take it,” Buffett told CNBC earlier this year.
Beyond Bitcoin’s disappointing performance, here are three more reasons why Buffett isn’t approaching it.
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1. It ‘has no unique value’
Billionaire investors do not like Bitcoin because it is considered a non-yielding 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 a CNBC Interview 2020.
“They don’t spawn, they can’t mail you checks, they can’t do anything, and what you’re hoping for is someone else coming along and paying you more to buy them. , but then that person has a problem.”
Although Bitcoin To be intended to provide real value as a payment system, its use is still quite limited. In Buffett’s view, 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 crypto is considered money
Buffett has shared extremely harsh comments about Bitcoin and crypto 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 exploded. But does it meet the 3 money criteria? By the most common definition, money is considered a medium of exchange, a store of value, and a unit of account.
But Buffett calls it a “miracle.”
“It doesn’t meet the test of a currency,” said the billionaire CNBC in 2014. “It’s not a durable medium of exchange, it’s not a store of value.”
He added that it is a very effective way to transfer money anonymously. But: “checks are also a way of transferring money,” he said. “Are checks worth a ton of money just because they can be transferred?”
3. He doesn’t understand
Buffett became one of the most successful investors in history by sticking with stocks he knew well.
“I have enough trouble with things that I think I know something about. Why should I buy or sell something I know nothing about?”
But people love to gamble, he said CNBC After Berkshire Hathaway’s 2018 annual meeting, this is a different matter for non-manufacturing assets.
“If you don’t understand it, you will be much more excited than when you understand it. You can have anything you want to imagine if you just look at something and say, ‘that’s magic.’”
How do Buffett picks winning stocks?
The billionaire investor follows a value investing strategy – which focuses on buying undervalued stocks of strong companies and holding them for the long term.
Berkshire Hathaway looks for companies with good profit margins and companies that produce unique products that are not easily substituted. As Warren Buffett once said in a letter to his shareholders, “It is much better to buy a great company at a fair price than to buy a fair company at a great price.”
But the fact that Buffett doesn’t like crypto stocks doesn’t necessarily mean you shouldn’t buy Bitcoin. Even the billionaire has appeared in areas where he has previously voiced opposition.
He famously shied away from tech stocks, even at the height of the dot-com bubble, and now the biggest stock his company holds is Apple.
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