Warren Buffett and Charlie Munger have always been vocal about their dislike of bitcoin or cryptocurrency. In the recently held annual shareholder’s meeting by Berkshire Hathaway, the duo took another swipe at it and said that bitcoin will likely crash to zero.
There’s no denying that Buffett and Munger don’t like bitcoin and that remains a fact until this day. If you’ve been following Buffett for a while now, you know that he holds shareholder meetings every year. During that time, he talks about anything related to investing. He rarely talks about the negative side of things. But this year, he didn’t shy away from speaking his mind about bitcoin.
When asked if he would invest in bitcoin if it was offered to him for only $25, he said no because he can’t do anything with it. If it does get one, he’ll have no choice but to sell it back.
Why Buffett Doesn’t Like Bitcoin?
There are five reasons why Buffett doesn’t like bitcoin.
- It doesn’t produce anything. A house will give you rental income while a bond produces interest. The same thing cannot be said about bitcoin.
- Bitcoin depends on another person paying a higher price for what you own. You can only make money out of bitcoin if someone else is willing to pay more for the bitcoin you have.
- Buffett is worried about fraud since bitcoin allows anonymous transactions.
- The dollar is the only currency used and accepted in the United States.
- The United States won’t let bitcoin replace the dollar as its currency.
A Different View On Buffett’s Take On Bitcoin
Although it’s true that bitcoin doesn’t produce anything as a currency, it was never made to produce anything in the first place. Just like the US dollar, it doesn’t produce anything but a lot of people from different parts of the globe want to own it.
On the second point, for bitcoin to be profitable, it needs someone else to be willing to pay more for it. But just like the US dollar, many people are willing to pay more in order to get it. Bitcoin may eventually become a currency that other people would be willing to pay more for.
As for the fraud problem, it’s an issue that the bitcoin community has to address. But once appropriate rules and regulations are set in place, the problem of fraudulent and shady transactions can be lessened or averted.
Bitcoin may not yet be a widely accepted currency that is used for various kinds of transactions, but it’s already starting to take hold. Some stores like Domino’s and fancy.com allow bitcoin as the mode of payment. In the past, people used gold and silver to trade. Now, we use different currencies. There may come a time when bitcoin will be used in place of cash.
Charlie Munger’s Take On Bitcoin
As for Charlie Munger, he considers bitcoin as something that is “stupid and evil” and something that makes him “look bad in comparison to somebody else.” That’s why he avoids cryptocurrency. He believes it’s stupid because it’ll eventually crash to zero. It’s evil because it undermines the national currency and the Federal Reserve System. Lastly, it makes the United States look more foolish than China’s communist leader. He believes that China was smarter than the US because it was able to ban bitcoin right from the get-go.
That’s it for today. And as promised, here’s a bonus tip.
If there’s anything that we can learn from Warren Buffett, it’s to make sure that you build a portfolio that will survive especially during market panics, just like what happened back in 2007-2009. Don’t take positions that will lead to a permanent loss of use investing techniques that would only harm you in case of a financial crisis.
Thank you for staying with me until the end. Don’t forget to like and share this blog if you found it relevant and useful. You can check out also our previous blog such as “Warren Buffett Won’t Buy Bitcoin Even At $25“. What do you think about bitcoin? Do you agree with Warren Buffet and Charlie Munger? Or do you have a different point of view? Leave your comments below.
Recommended books for further reading:
- The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits
- Stock Market Investing For Beginners: The Investment Guide – How to benefit from the crisis, invest in stocks and generate long-term passive income incl. ETF and Stock Picking Checklist
- Rich Dad’s Guide to Investing: What the Rich Invest in, That the Poor and the Middle Class Do Not!
- Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage
- How to Make Money in Stocks: A Winning System In Good Times And Bad
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