Today CNBC reported that Warren Buffett, the famous billionaire investor, claims that bitcoin is not an “investment”. Stocks, bonds, and real-estate, THOSE are investments in his viewpoint. But bitcoin and other cryptocurrencies are not.
Buffett’s opinion, shared by many mainstream investors, is that due to the fact that the purchase of bitcoin, or any cryptocurrency, is not purchasing something that can either potentially produce a profit in and of itself, or is not needed for some other essential purpose, then it is not an investment. An investment must be able to fulfill one of those two objectives. An investment must produce its own profits, or be needed for some other purpose.
Simply keeping cryptocurrencies in a wallet, and nothing more, will never directly generate a profit. Bitcoin is unlike a stock which generates returns due to the underlying business activity, and bitcoin is unlike land because no one NEEDS to own cryptocurrency to build a house, raise a family, and have a place to live.
Buying cryptocurrency is really just speculation (which is very different from investing). You are speculating that the next guy will pay more then you paid – and that guy is speculating that his “next guy” will pay even more. Buffett is 100% correct that cryptocurrencies only generate profit if someone else will pay you more for it then you paid.
For most investors, Warren Buffett’s opinion is considered very important since he built, and is the CEO of, Berkshire Hathaway company, which is worth over $80 billion. He is famous for his “buy-and-hold” (HODL) strategy for stocks, bonds, real estate and more. He looks for investments that he can hold for at least 10 years. Anything less then that and he feels an investment is not worth buying.
At other times he has called cryptocurrencies a “mirage“. He has also be previously quoted as saying: “In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending“. But he has also been wrong before. He admits that he missed out on buying Amazon and Google. The photo is a replica of an actual billboard which appeared outside of Warren Buffett’s office.
Will Buffett be right or wrong about cryptocurrencies?
Read the full CNBC article here
