It’s been a tough year for Bitcoin and its supporters. In 2018, the Oracle of Omaha itself predicted that Omaha and other cryptocurrencies were headed for trouble.
“You’re going to end up very badly,” Warren Buffett told CNBC at the time.
The world’s leading digital currency has lost about 75% of its value after peaking at about $69,000 per unit on November 10, 2021, and on trading day December 19, it hit $16,600. Finished with dollars. Holdout investors who once thought they missed a golden opportunity are now breathing a sigh of relief. On the other hand, those who bought at a high price try not to think about losses.
What does the world’s most famous investor say to people looking to launch an investment app and buy bitcoin at bargain prices?
“Even if you owned all the bitcoin in the world and offered it to me for $25, I wouldn’t take it,” Buffett told CNBC earlier this year.
Other than Bitcoin’s disappointing track record, here are his three reasons Buffett can’t get close.
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1. “No unique value”
Billionaire investors hate Bitcoin because they see it as an unproductive asset.
Buffett is known for his preference for stocks of companies whose value and cash flow come from manufacturing. But cryptocurrencies have no real value, Buffett said in a 2020 CNBC interview.
“They can’t breed, they can’t send you checks, they can’t do anything. I hope someone else comes along and pays more money later, but that person is a problem.” is holding.”
Bitcoin aims to provide real value as a payment system, but this use is still quite limited. As Buffett sees it, the value of Bitcoin is based on the optimism that someone will be more willing to pay in the future than you are paying now.
2. He doesn’t think cryptocurrencies are money
Buffett has made some very scathing comments about Bitcoin and cryptocurrencies over the years.
“I don’t have Bitcoin. I don’t own cryptocurrency and I don’t intend to own one,” he told CNBC in 2020.
As a tradable asset, Bitcoin has grown rapidly. But does it meet the money’s three criteria? According to the most common definition, money is considered a medium of exchange, a store of value, and a unit of account.
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But Buffett calls it “fantasy.”
“It fails the currency test,” the billionaire told CNBC in 2014. “It’s not a permanent medium of exchange, nor is it a store of value.”
He adds that this is a very effective way to transfer money anonymously. But:
“Checks are also a way of sending money,” he said. “Is a check worth a lot of money just because you can transfer money?”
3. he doesn’t understand
Buffett has become one of the most successful investors of all time by sticking with stocks he understands.
“I am troubled enough by what I think I know. Why am I so good or short in what I know nothing?”
But people love to gamble, he told CNBC after Berkshire Hathaway’s 2018 annual meeting.
“When I don’t understand it, I get a lot more excited than when I do. Just look at something and say ‘This is magic’ and you can imagine anything you want. ”
How does Buffett pick winning stocks?
Billionaire investors follow a value investing strategy. It focuses on buying shares in strong companies at bargain prices and holding them for the long term.
Berkshire Hathaway is looking for companies with high margins and unique products that cannot be easily replaced. As Warren Buffett once said in a letter to shareholders, “It is much better to buy a great company at a fair price than to buy a fair company at an amazing price.”
But just because Buffett hates cryptocurrency stocks doesn’t mean he should necessarily buy bitcoin. Even the billionaire is finding success in fields he previously opposed.
Even at the height of the dot-com bubble, he was notorious for avoiding tech stocks, and now his company’s biggest holding is Apple.