In this article, we will discuss why don't Warren Buffett buy Bitcoin. The price of Bitcoin has increased recently. It is a good news for the crypto investors. For Warren Buffett, however, it's completely irrelevant. Buffett has called Bitcoin, among other names, “rat poison squared” and has said he won' t ever buy the cryptocurrency.
Why Don't Warren Buffett Buy Bitcoin?
Here are 3 reasons why Buffett will never own Bitcoin, no matter how high the price of Bitcoin soars:
- Bitcoin has no underlying value
Buffett believes that Bitcoin has no underlying value. As a value investor, Buffett invests in companies that are undervalued, produce stable and recurring cash flow and have the ability to increase in book value. To Buffett, Bitcoin doesn't produce earnings or dividends.
Rather, the value of Bitcoin is simply what one person is willing to pay for it. In this regard, Bitcoin is no different than the tulip craze of 1637. Therefore, Buffett believes that Bitcoin has no inherent value.
- Buffett only invests in things he understands
This may sound obvious to some: only invest in things you understand. However, too many investors, especially retail investors, chase investments based on headlines and stock tips from friends. They don't do their research or conduct due diligence before investing. Rather , they hear about this “hot technology” and simply buy the stock. Or, they hear about that stock that soared 20% and automatically conclude it will jump another 20%. Sometimes, stocks go up for all kinds of reasons, and this “ strategy” may work.
Over time, and across an entire investment portfolio, however, it won't work. In contrast, Buffett has a set of investment principles that he follows. He prefers to invest in stable consumer goods companies like Coca-Cola and financial services companies like American ExpressAXP. If a potential investment falls outside his area of expertise, he rarely, if ever, buys it. Sometimes, there are exceptions, but mostly Buffett invests only in sectors and business models that he understands.
- Bitcoin is a highly speculative investment
For some, Bitcoin is the single greatest investment in their lifetime. For others, it's a speculative bubble that will crash to zero. Buffett doesn't play in this sandbox. Why? Buffett isn't a speculative investor; companies that have a wide economic moat.
While all investing involves some degree of speculation, Buffettt's background is in insurance and risk mitigation. Buffett doesn't invest in “high fliers”—that's not his game. His game is “buy and hold”—forever. He invests in companies that grow over time, steadily and consistently.
Who is Warren Buffett?
Warren Edward Buffett, the legendary value investor, turned an ailing textile mill into a financial engine that powered what would become the world's most successful holding company.
Known as the Oracle of Omaha for his investment prowess, Buffett has amassed a personal fortune in excess of $100 billion, according to Forbes.
He inspires legions of loyal fans to make a yearly trek to Omaha, Nebraska, for an opportunity to hear him speak at Berkshire's annual meeting, an event ironically dubbed the Woodstock of Capitalism.
Bottom Line
Notorious investor, Warren Buffett, reaffirmed during the Berkshire Hathaway Annual Shareholder meeting that he would not even pay $25 for all the Bitcoin in the world. This article is about why don't Warren Buffett buy Bitcoin.
