Warren Buffett Doesn’t Believe in Bitcoin — Should You?

Wednesday, October 16, 2013Fortune The Most Powerful WomenWashington, D.
Stuart Isett / Fortune The Most Powerful Women

In 2018, billionaire investment guru Warren Buffett said his Berkshire Hathaway firm “will never have a position” in cryptocurrency. Four years later, the Oracle of Omaha is as sour on crypto as he was back then — maybe even more so.

No matter how certain the crypto bulls are about the future of digital tokens, it must be at least a little disheartening to hear one of history’s most successful investors heap so much scorn on a bet they’ve wagered on so heavily.

Here’s a look at Warren Buffet’s Bitcoin beliefs, and what you might have to learn from the world’s most famous crypto naysayer if you think you can’t go wrong by betting on blockchain.

‘It Doesn’t Produce Anything’

According to a new study from GOBankingRates, most Americans who don’t invest in crypto are sitting on the sideline because they don’t understand it. Others are turned off by its volatility, its perceived lack of security or the fact that it’s under-regulated. Others said thanks, but no thanks, because they simply don’t think cryptocurrency has a future.

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Warren Buffett, however, has an entirely different reason for writing off crypto: He doesn’t consider it to be a productive asset.

“Whether it goes up or down in the next year or five years or 10 years, I don’t know,” Buffett said at his annual Berkshire Hathaway shareholders meeting on April 30, as reported by CNBC. “But one thing I’m sure of is that it doesn’t multiply, it doesn’t produce anything.”

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The Real Estate Comparison

In 2019, the Associated Press reported that Buffett’s real estate company had become the biggest in the nation, so it stands to reason that property is an asset class he would go to for a crypto comparison.

In a video from the conference, Buffett said he would write a check for $25 billion on the spot if the meeting’s attendees owned all the farmland or all the apartment buildings in America and they offered him a 1% stake in either.

But what about Bitcoin’s $700 billion-plus market cap?

“If you … owned all of the Bitcoin in the world and you offered it to me for $25, I wouldn’t take it,” Buffett said.

His logic was that “the apartments are going to produce rent and the farms are going to produce food.” But with the world’s entire supply of Bitcoin, Buffett pondered, “What would I do with it? I’ll have to sell it back to you one way or another. It isn’t going to do anything.”

The difference between real estate and crypto, in Buffett’s words, is “the difference between productive assets and something that depends on the next guy paying you more than the last guy got.”

Berkshire Really Doesn’t Like Bitcoin

In a testament to the Oracle’s continued clout, Forbes reported that Bitcoin and Ethereum dropped about 5% in the wake of Buffett’s statements at the shareholder meeting, and that the former was at least in part attributable to the latter. But it wasn’t just Buffett.

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Berkshire Hathaway Vice Chairman Charlie Munger, according to Forbes, said at last year’s shareholder meeting that crypto is “disgusting and contrary to the interests of civilization” — a heavy indictment indeed. Not to be outdone, Buffett called cryptocurrency “probably rat poison squared” with “no unique value.”

Buffett Is Bearish on the Future of Cryptocurrency

About one in five of the respondents to the GOBankingRates study who don’t invest in crypto avoid it because they don’t believe it has a future. They’re in good company with the world’s most famous investor, who thinks Bitcoin will be a bust as long as green money is in circulation.

According to Buffett, “Assets, to have value, have to deliver something to somebody. And there’s only one currency that’s accepted.

“You can come up with all kinds of things — we can put up Berkshire coins … but in the end, this is money,” Buffett said while holding up a $20 bill to illustrate his point. “And there’s no reason in the world why the United States government … is going to let Berkshire money replace theirs.”

In the end, Buffett seems to think Bitcoin is just another fleeting shiny thing that won’t be able to deliver on its promises — but that it will succeed in leaving a whole lot of broke believers in its wake.

“It’s got a magic to it and people have attached magic to lots of things,” Buffett said.

Buffet Never Bets on What He Doesn’t Know

About 60% of the respondents in the GOBankingRates study who don’t dabble in crypto avoid it because they don’t understand it. They should be proud to have so much in common with a man who built a 12-figure fortune by picking the right horses.

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Buffett — who has long advised people to invest only in things they understand — said in a 2018 crypto-themed interview with CNBC, “I get into enough trouble with the things I think I know something about. Why in the world should I take a long or short position in something I don’t know about?”

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