The past year has been groundbreaking for Bitcoin. And recently the cryptocurrency has reached a historic record: More than $ 61,000 for a unit – backward investors regretted being left out.
So, what does the most famous investor in the world think of Bitcoin?
It’s “probably rat poison squared,” Warren Buffett once said.
If you listen to the billionaire, cryptocurrency may not be the big financial opportunity you dreamed of, nor is it the only way to earn impressive returns if you have any money you want to put on the market. That’s what commission-free investment apps are for.
“I don’t have any Bitcoin. I don’t own any cryptocurrency, I never will, ”he said CNBC in 2020.
Here are three reasons why Buffett is not going to come close to that.
1. It has ‘no unique value’
The billionaire investor doesn’t like Bitcoin because he considers it a non-productive asset.
Buffett has a well-known preference for shares in companies whose value – and cash flow – comes from production. But cryptocurrencies have no real value, Buffett said in a CNBC interview in 2020.
“They don’t reproduce, they can’t send you a check, they can’t do anything, and what you expect is for someone else to show up and pay more for them later, but that person has the problem. “
Although Bitcoin It is it is intended to provide real value as a payment system, the use of which is still quite limited. In Buffett’s opinion, Bitcoin’s value comes from optimism that someone else will be willing to pay more for it in the future than you are paying today.
2. He doesn’t think encryption counts as money
As a tradable asset, Bitcoin has thrived. But does it meet the three money criteria? According to the most common definition, money is supposed to be a means of exchange, a store of value and a unit of account.
But Buffett calls this a “mirage”.
“It doesn’t pass the test of a coin,” said the billionaire in CNBC in 2014. “It is not a durable medium of exchange, it is not a store of value.”
He adds that it is a very effective way to transmit money anonymously. But: “the check is also a way of transmitting money,” he said. “Are checks worth a lot of money just because they can transmit money?”
3. He doesn’t understand that
Buffett has become one of the most successful investors in history by limiting himself to stocks he knows.
“I already have enough problems with things that I think I know something about. Why the hell should I take a long or short position on something that I know nothing about?”
But people like to play, he said CNBC after an annual meeting of Berkshire Hathaway in 2018, which is another problem with non-productive assets.
“If you don’t understand, you are much more excited than if you did. You can have anything you want to imagine if you just look at something and say, ‘this is magic’. “
How does Did Buffett choose winning stocks?
The billionaire investor follows the value investing strategy – which focuses on buying undervalued shares from strong companies and holding them for a long time.
Simple, right?
Berkshire Hathaway is looking for companies with a good profit margin and those that produce exclusive products that cannot be easily replaced. As Warren Buffett once said in a letter to shareholders: “It is much better to buy a wonderful company at a fair price than a fair company at a wonderful price”.
But Buffett’s distaste for crypto actions doesn’t mean you shouldn’t buy Bitcoin. Even the billionaire went through sectors of which he had already expressed himself.
He notoriously avoided technology stocks, even at the height of the dot-com bubble, and now his company’s biggest stake is Apple.
You can start investing today
Bitcoin has enriched many people along the way. But that doesn’t mean you missed the investment boat – just listen to Buffett’s words of wisdom.
Have you found a company you believe in? Even if you’re not swimming in cash, a popular investment app allows you to buy shares in companies for as little as $ 1.
You can invest in fractional shares of stocks, options, exchange-traded funds (ETFs) and, yes, even cryptocurrencies. There are no fees or commissions, and when you sign up, you will receive a free portion of the stock added to your account to help you get started.
Or you can buy from companies with just a change of reserve, using a different app that rounds your debit and credit card purchases to the nearest dollar and invests the remaining cents.
If you are interested, but intimidated, this is normal. Don’t be afraid to get expert advice before entering the stock market. Today, there are certified financial planners who will work with you online to create a personalized investment plan.