America's superstar investor has a lot to say on cryptocurrency and it is not positive, why?
For years, Warren Buffett has been against cryptocurrency for a multitude of reasons which he mentions to the public. Despite Bitcoins 300% increase from this time last year, he is on the record calling the platform "rat poison squared." Let's delve into a few reasons why Buffett is unsupportive of the space.
Lack of intrinsic value
Buffett is a fan of investing in assets that generate value over time but producing a product. There is no tangible growth in cryptocurrency according to him that appreciates over time like a company might. Instead, he states that cryptocurrency is simply hoping that the net purchaser of your assets pays more than you did, generating you profits. This is on ongoing cycle of nothing backing the currency yet hoping the next buyer will think of it at a higher value, in turn, increasing its price.
Lack of understanding in the space
One of the greatest pieces of advice that Buffet preaches is to understand what you are investing in. He expresses the trouble he gets in when investing in something he is unable to explain to another person, or understand, hence his apprehension towards investing in cryptocurrency. Crypto is very confusing and hard to understand its background within blockchain, along with its over 10,000 different types of coins. However this is a personal preference that be mitigated with appropriate research, decreasing risk.
Not a Store of Value
Buffett told CNBC that it will never work as a currency. "It is not a durable means of exchange, it's not a store of value," he said
Bitcoin does not prove to be a great digital currency, and Buffett has recognized that as a large red flag to the public. Originally when the coin came out, that is what its marketed itself as yet has not yet succeeded.
Why Warren Buffett is so against bitcoin. The Motley Fool. (2021, July 17). Retrieved Feb 17, 2022, from https://www.fool.com/the-ascent/cryptocurrency/articles/why-warren-buffett-is-so-against-bitcoin/