Rat Poison: Why Buffett Doesn’t Care About Bitcoin
Anonymous, secure, super fast transactions – Crypto-currencies like Bitcoin, Ethereum or Ripple fascinate as an alternative, which is only possible through the underlying blockchain technology .
Its decentralized structure overcomes classical boundaries. So transactions in a network run directly from computer to computer. They are logged throughout the network. Who is behind it is unknown.
For Buffett, Bitcoin’s rat poison
While many talk about “currencies and payment systems of the future”, star investor Warren Buffett is not very good at Bitcoin. He recently repeated this at the shareholder meeting of his investment firm Berkshire Hathaway .
Buffett considers the Bitcoin hype to be a speculative bubble and says, “It must inevitably lead to a nasty end.” He spoke of unproductive fortune that attracts charlatans and does not create value. In a subsequent TV interview, he added, “Bitcoin buying follows the bigger fool’s theory, it’s just about finding someone who pays even more.” Buffett’s conclusion: “Bitcoin, that’s rat poison.”
Of course he is right when he says that people “like to gamble”. However, this is not limited to crypto money at all. Buffett’s domain is long-term investments, mostly in stocks that are undervalued and have a lot of potential . Real assets, therefore, behind which are real productive plants. These are real investments for him. And he distinguishes this from “speculative investments”, to which he counts crypto-currencies.
Is skepticism about age?
In fact, Bitcoin has so far shown extreme price swings. Yet, despite all prophecies of doom, it still exists. Bitcoin fans, who are not exactly gamer, would rather speak of an investment in the future, where the beginning is a bit bumpy.
Especially for younger people, in the face of increasing digitization, it seems perfectly normal to give virtual values the same priority as traditional physical values. Once established, speculative-driven bubbles will be less prominent. They are also available in stocks.
Maybe Buffett’s skepticism is his age, he is 87. On the other hand, he has a lot of experience. Soros was also extremely cryptocritic until recently. But lately he seems to be reorienting himself. Soros is now trading in virtual currencies. Maybe he wants to play a bit. Anyway, he became famous for his legendary bet against the British pound.
Bitcoin: Not a currency
Currently, most of the long-standing professionals are skeptical: For UBS boss Axel Weber cryptocurrencies are without substance. Felix Hufeld of the Bafin fears more speculation excesses. According to Bundesbank President Weidmann: “Bitcoin lacks value stability, the prerequisite of any currency”. Thus, the term digital currency is “misleading”. US Nobel laureate Joseph Stiglitz goes in the same direction: “Bitcoins have nothing to do with creating money, they are only successful because they bypass this system.”
From asset managers and scientists to central bankers: almost all Bitcoin & Co. lack the substance and the essential criterion of a currency. The majority sees a future for the blockchain technology, but not for bitcoins – at most in a niche. The reason: the states will not tolerate an unregulated shadow currency in the long term. At the end the prices will fall. Until then you can speculate wonderfully.