Bitcoin has steadily gained acceptance from the mainstream world of finance and investing in recent years, but Warren Buffett sticks to his skeptical stance on cryptocurrency.
He told Berkshire Hathaway’s annual meeting of shareholders on Saturday that it was not a productive asset and was not producing anything tangible. Despite a shift in public perception about bitcoin, Buffett still wouldn’t buy it.
“I don’t know if it will go up or down next year, or in five or 10 years. But the one thing I’m pretty sure of is that it’s not producing anything,” Buffett said. “There is magic and people have attached magic to a lot of things.”
Even bitcoin enthusiasts tend to think of cryptocurrency as a passive asset that investors buy and hold and hope to see its price rise over a long period of time. Buffett himself commented that there is “no one” who is short of bitcoin, everyone is a long-term holder.
For more sophisticated crypto investors, some coins provide a way for them to use their crypto productively – either through loans or as collateral – to create additional portfolio benefits. However, they are still young, highly speculative, and have not entered the mainstream like bitcoin.
Buffett explained why he doesn’t see value in bitcoin, comparing it to things that generate other kinds of value.
“If you said … for a 1% stake in all farmland in the United States, pay our group $25 billion, I’ll write you a check this afternoon,” Buffett said. “[For] $25 billion I now own 1% of the farmland. [If] you offer me 1% of all the apartment buildings in the country and you still want $25 billion, I write you a check, it’s very simple. Now if you told me you have all the bitcoin in the world and offered it to me for $25, I wouldn’t take it because what would I do with it? I should sell it to you one way or another. It won’t do anything. The apartments will produce rent and the farms will produce food.”
For years, investors have wondered how to value bitcoin in part because of its potential to perform different functions. In Western markets, it has established itself as an investment asset, particularly over the past year as rates and inflation have risen. In other markets, people still see huge potential for its use as a digital currency.
“Assets, to be of value, have to deliver something to someone. And there’s only one currency that’s accepted. You can find all kinds of stuff – we can set up Berkshire coins … but in the end it’s money, he said, holding up a $20 bill. “And there’s no reason in the world for the government of the United States … to let Berkshire’s money replace his.”
Buffett and Charlie Munger have both made hostile comments towards bitcoin in the past. Most famously, Buffett said bitcoin is “probably rat’s death squared.” Munger doubled down on that sentiment on Saturday.
“In my life, I try to avoid stupid and evil things and make myself look bad compared to someone else – and bitcoin does all three,” Munger said. “First, it’s stupid because it’s still likely to go to zero. It’s bad because it undermines the Federal Reserve system…and third, it makes us look like fools compared to to the communist leader in China. He was smart enough to ban bitcoin in China.”