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Does the recent Bitcoin flash crash mean Warren Buffett is right to hate cryptocurrency?

The past month and a half has been a bumpy ride for bitcoin.

After the first quarter of 2021 that led to an unprecedented peak of $63,000 per unit in mid-April, the world’s leading digital currency is now hovering around $45,000, thanks in large part to Tuesday’s crash of nearly 15%.

The dismissive investors who only two weeks ago thought they had missed the opportunity of a lifetime are now sighing with relief. In the meantime, those who bought in at the peak are trying not to think about their losses.

And what about Warren Buffett? What will the world’s most famous investor say to those who might consider launching their investment apps and buying Bitcoin at an affordable price.

“Maybe it’s rat poison square,” Buffett once said.

Contrary to the interests of civilization

Berkshire Hathaway Logo Smartphone

Igor Golovniov / Shutterstock

While Buffett chose not to comment on cryptocurrency during his Berkshire Hathaway annual shareholder meeting earlier this year, Berkshire Vice President Charlie Munger did nothing.

“I don’t welcome a very useful currency to kidnappers and extortionists,” Munger said during the much-interested question-and-answer session at the meeting. “The whole damned development is disgusting and goes against the interests of civilization.”

Not to be outdone, Buffett has made his share of very categorical remarks about bitcoin and cryptocurrency over the years: “I don’t own any bitcoin. I don’t own any cryptocurrency, and I never will. CNBC in the year 2020.

Here are three reasons why Buffett shouldn’t approach him.

1. It has absolutely no unique value

Warren Buffett points

Larry W. Smith/EPA/Shutterstock

The billionaire investor does not like Bitcoin because he considers it an unproductive asset.

Buffett has a well-known preference for stocks of companies whose value — and their cash flow — comes from producing things. Buffett said cryptocurrencies have no real value CNBC interview in 2020.

“They don’t reproduce, they can’t email a check, they can’t do anything, and what you’re hoping is someone else will come along and pay you more money later, but then that person has the problem.”

Although Bitcoin He is With the aim of providing real value as a payment system, this use is still very limited. As Buffett sees it, the value of bitcoin comes from optimism that someone else will be willing to pay more for it in the future than you are paying today.

2. He does not think that cryptocurrency is money

Cryptocurrency in a leather wallet on a wide wooden background Bitcoin Ethereum Litecoin Corn Ripple

stockphoto-graf / shutterstock

Bitcoin flourished as a tradable asset. But does it meet all three criteria for money? According to the most common definition, money is supposed to be a medium of exchange, a store of value, and a unit of account.

But Buffett calls it a “mirage.”

It doesn’t pass the currency test, said the billionaire. CNBC in 2014. “It is not a permanent medium of exchange, and it is not a store of value.”

He adds that it is a very effective way to transfer money without revealing your identity. But, he said, “a check is a way to transfer money as well.” “Are checks worth a lot of money just because they can transfer money?”

3. He doesn’t understand it

Warren Buffett points

Larry W. Smith/EPA/Shutterstock

Buffett became one of the most successful investors in history by sticking to the stocks he understood.

“I get in enough trouble with things I think I know something about. Why in this world should I take a position long or short in something I know nothing about?”

He said but people like to gamble CNBC After Berkshire Hathaway’s 2018 annual meeting, another issue with non-produced assets.

“If you don’t understand it, you will be much more excited than if you did. You can have anything you want to imagine if you look at something and say, ‘This is magic.'”

How do Do Buffett pick a winning stock?

Warren Buffett speaking on stage to pressure

Laurent Gillieron/EPA/Shutterstock

The billionaire investor follows a value investing strategy – which focuses on buying undervalued stocks of strong companies and holding them for the long term.

Simple, isn’t it?

Berkshire Hathaway looks for companies that have a good profit margin and those that offer products or services that are not easily replaceable. Some of the biggest holdings in the giant Berkshire financial portfolio include Bank of America, leading credit card company American Express, and beverage giant Coca-Cola.

As Warren Buffett once said in a letter to his shareholders, “It is far better to buy a great company at a fair price than to buy a company at a great price.”

But Buffett’s aversion to crypto stocks doesn’t mean you shouldn’t buy bitcoin. Even the billionaire has come in the sectors he has spoken out against in the past.

He was best known for his avoidance of tech stocks, even at the height of the dotcom bubble, and now Apple is his company’s biggest possession.

Create an income source instead

Funny couple resting on the sofa and looking at the phone

fizkes / shutterstock

Bitcoin has made a lot of rich people along the way. But that doesn’t mean you missed out on an investment opportunity – just listen to Buffett’s wise words and focus on assets that produce cold, hard cash.

For example, some popular investment services allow securing a steady stream of rental income by investing in premium properties – from commercial developments in Los Angeles to apartment buildings in New York City.

You’ll get a chance to learn about the high-end properties that real estate tycoons usually have access to, and you’ll receive regular payments in the form of quarterly dividends.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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