In the echelons of finance, few names evoke the same sense of reverence as Warren Buffett. Renowned as the ‘Oracle of Omaha,’ Buffett has garnered a legendary status through the art of value investing. But what does Warren Buffett think about Bitcoin, and should we actually care?
With his remarkable ability to sniff out undervalued companies and turn them into goldmines, he has managed to transmute Berkshire Hathaway into a mammoth global conglomerate.
Buffett’s investment prowess is indisputable. When it comes to the realm of Bitcoin, though, his navigation hasn’t been as steady. The Oracle has, more than once, articulated his skepticism (to say the least). He’s even likened Bitcoin to ‘rat poison’ and the pretty lights of a slot machine.
Now, wouldn’t it be juicy if the very man who has perennially dissed Bitcoin ended up investing in it?
The year 2022 saw Buffett dip his toes into the Bitcoin world, albeit not directly. He invested in a Brazilian fintech, NuBank, which incidentally offers Bitcoin to its customers.
This raised more than a few eyebrows in the Bitcoin community, sparking conversations about Buffett’s hypocritical stance on Bitcoin.
Leaping ahead to 2023, Buffett’s back in the ring, throwing punches at Bitcoin once again. This round, he’s drawing parallels between investing in Bitcoin and betting on a dicey gambling spree or a dodgy get-rich-quick scheme.
Cue the laughter track – it’s the same ‘risky bet’ that’s cozily nestled in the portfolio of a company in which he’s now a stakeholder.
The irony isn’t lost on Bitcoiners, leaving us bemused and speculating whether this could be the most grandiose tango of denial the financial world has ever beheld.
Shuffle into your front-row seats and break out the popcorn because we’re jumping head-first into the mind of a billionaire with a serious grudge against Bitcoin.
What Does Warren Buffett Think About Bitcoin?
From Rat Poison To A 1% Investment
Bitcoin Is Rat Poison
Buffett’s tryst with Bitcoin could well be a captivating Netflix drama rife with rants and contradictions.
Flashback to March 2014 – during an interview on CNBC’s Squawk Box, when Bitcoin was just an upstart disrupting financial norms – Buffett confidently dismissed it as a non-currency, predicting it may follow in the footsteps of the tulipmania of 1600s Holland.
“It’s not a currency. It does not meet the test of a currency. I wouldn’t be surprised if it’s not around in 10 or 20 years. … It is not a durable means of exchange. It’s not a store of value. … It’s been a speculative, a very speculative, kind of Buck Rogers-type thing, and people buy and sell them because they hope they go up or down just like they did with tulip bulbs a long time ago.”
His words haven’t aged well.
Fast forward to Berkshire Hathaway’s 2018 annual shareholder meeting, where he creatively echoed his partner Charlie Munger’s sentiments, labeling Bitcoin as “probably rat poison squared.”
A year later, in a 2019 CNBC interview, the Oracle painted Bitcoin as a useless entity. His logic?
“Bitcoin has no unique value at all, it doesn’t produce anything. You stare at it all day, and no little bitcoins come out or anything. It’s a delusion, basically. We’ve gone from rat poison squared to a delusion.”
Bitcoin Is A Gambling Device
By May 2019, Buffett was warming up to his role as Bitcoin’s critic-in-chief, stating:
“It’s a gambling device… there’s been a lot of frauds connected with it. There have been disappearances, so there’s a lot lost on it. Bitcoin hasn’t produced anything.”
February 2020 brought another classic Buffettism about Bitcoin. In an interview with CNBC’s Becky Quick, he reaffirmed his stance:
“They don’t produce … What you hope is that somebody else comes along and pays you more money for them later on, but then that person’s got the problem. In terms of value, zero.”
Buffet “Invests” In Bitcoin
Then came the plot twist in 2022. Buffett invested a whopping $1 Billion in Brazilian FinTech company NuBank, known for its Bitcoin-friendly stance, having committed 1% of its portfolio.
This was on the back of a $500 million investment in 2021. While not a Bitcoin endorsement per se, it gave a glimmer of hope to those watching the Oracle for signs of a Bitcoin thaw.
Despite this, during the 2022 Berkshire Hathaway shareholders meeting, Buffett once again had nothing nice to say about Bitcoin.
When asked again by reporters whether he had changed his views on Bitcoin, Buffett responded by stating if he was offered a 1% stake in all the farmland and apartments currently in the United States, he would write them a check on the spot.
When speaking specifically on Bitcoin, Buffet said:
“If you owned all of the bitcoin in the world and you offered it to me for $25, I wouldn’t take it … Because what would I do with it? I’ll have to sell it back to you one way or another. It isn’t going to do anything.”
Fast-forward to April 2023, and Buffett was back with his Bitcoin analogies. This time, during another interview with CNBC Squawkbox, posted on Twitter where he likened it to gambling:
“Bitcoin is a gambling token, and it doesn’t have any intrinsic value. But that doesn’t stop people from wanting to play the roulette wheel.”
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Unraveling Buffett’s Bitcoin Beliefs
As spectators in the grand theater of finance, it’s easy to accept the musings of seasoned players like Warren Buffett at face value.
After all, his investment acumen has solidified his status as the “Oracle of Omaha.” However, even oracles aren’t infallible when venturing into uncharted territories, and in Buffett’s case, this frontier is Bitcoin.
From dismissing Bitcoin as a non-currency and speculative “Buck Rogers-type thing” to labeling it as “rat poison squared,” and more recently, as a “gambling token,” Buffett’s skepticism of this digital asset has been unambiguous.
But should his word be the gospel truth, or could there be a different side to this Bitcoin story? It’s time we dissect these comments and assess their validity.
Could the Oracle’s skepticism be rooted in reality, or is it a misunderstanding of the Bitcoin revolution? Let’s dive in and explore the truth behind Buffett’s Bitcoin assertions.
Is Bitcoin Currency?
Venturing into the tumultuous seas of the Bitcoin debate, one can’t help but remember Warren Buffett’s assertion was a phrase spoken nearly a decade ago. This was a time when the Bitcoin landscape was barely recognizable as what it is today.
Buffett, with all his financial clout, deemed Bitcoin unfit for the title of currency. But let’s remember, Bitcoin is not a one-trick pony. We must also unpack the multifaceted identity Bitcoin has assumed since its inception.
Is bitcoin a currency, an asset, an investment, a store of value, or indeed, money?
Perhaps the definition of Bitcoin is as dynamic as its market value, constantly morphing based on its user’s intentions. Is it so absurd to think that a financial instrument can be all things to all people?
Dive into the depths of the traditional definition of currency, and you’ll surface with three key attributes: a medium of exchange, a unit of account, and a store of value. The one other thing that old-timey investors such as Buffett just can’t let go of, is that it’s state issued, and actively managed to maintain a stable value.
Buffett, and investors of his ilk see bitcoin’s volatility and current low adoption levels as proof that it can’t be used as money. From a bitcoiner perspective, however, it is actively being used as a store of value and medium of exchange, and bitcoin investors expect that trend to continue. That is the bull case for bitcoin.
Of course bitcoin has low penetration right now. That’s what makes the upside potential so great. If bitcoin was globally used as a store of value and medium of exchange, then there would be little to get excited about in terms of price exposure.
Bitcoin Is Money. Not A Company.
And this is where we get into the fundamental discussion of what is money and why bitcoin has value.
In my opinion, bitcoin’s core value is derived from the fact that it makes global monetary transactions permissionless. Transferring “value” from one part to another through the internet does not require government ID, and it’s extremely difficult to censor payments.
Bitcoin cannot be valued like a company or real estate, because it is not either of those things. Bitcoin is not meant to produce anything. Bitcoin is meant to do something, and that’s exactly what it does.
Bitcoin As An Investment
With a fixed supply and a flag proudly bearing the emblem of decentralization, Bitcoin tempts investors as an inflation hedge and an alternative to traditional financial systems.
Sure, it’s been marred by high price swings, garnering the reputation of a speculative investment akin to gambling. But isn’t the hallmark of a ‘good investment’ subjectivity itself? Very often, the best investments are made when you have knowledge that other people haven’t become aware of yet.
Traversing into the realm of ‘digital gold,’ Bitcoin as a store of value has its proponents. Why does gold have value? Not because it’s pretty. Because it is divisible, portable, durable, fungible, and scarce.
Critics argue its volatility belies this notion, yet the digital asset has demonstrated a tenacious hold on value in the long term. In other worse, you can lose money in the short term, but long term (over 4-5 years, nobody has lost money).
Bitcoin Today, Versus Bitcoin In 20 Years
While Bitcoin’s stability and acceptance currently leave much to be desired, growing adoption and technological advances hint at a future where it could very well play a significant monetary role. And this is where I think Buffett really loses the plot. He sees bitcoin as it is, not how it will be. The best investors in history are able to see the value of the future, and make investments today based on those predictions.
This is where other billionaire investors like Mark Cuban and Richard Branson different from Buffett in their investment strategy. While Cuban and Branson look to what will change in the future and invest accordingly, Buffet takes the stance of looking at what will not change.
Is it delusional to think that out of our current broken monetary system a competitor with certain advantages would emerge? Is it crazy to think that bitcoin in 20 years will be more widely held, more widely accepted, easier to use, and more accessible?
The Bitcoin Delusion
Let’s take a deep dive into Buffett’s claim that Bitcoin is merely a ‘delusion’ and void of any unique value.
If you picture yourself as a billionaire, enveloped in the privilege that wealth brings, it might be challenging to fathom why anyone would see value in the bitcoin. To a billionaire, if you need a bank account, you just get one. If you need to send money to family, you just send it. You store value in stocks, and you sell them when you need cash. Easy peasy. For a billionaire.
Let’s expand our horizons for a second. Imagine we’re living in a war-torn country or in a place cut off from the world’s financial systems. That’s when Bitcoin truly shines – it’s like the emergency flare, piercing the oppressive darkness, ushering in economic participation.
Bitcoin isn’t just a digital coin to countries under economic sanctions or those estranged from global financial infrastructures like the SWIFT network. In nations like Somalia, Venezuela, Iran, Russia, and countless others, Bitcoin is a lifeline.
Ask these people whether or not Bitcoin has unique value, and you’ll likely be met with a chorus of resounding affirmation.
Even if we dial things back a notch, away from war and poverty, we can even look at the value bitcoin creates for people in developed nations. Being able to store value in digital form without trusting the bank to properly custody your money is an under-appreciated concept. Imagine that you had more than $250,000 in cash in SVB during the bank collapse. Suddenly, bitcoin ownership would look pretty attractive.
So is it delusional to see that bitcoin provides value to the poorest AND the richest across the globe?
Bitcoin Is Permissionless
At its core, Bitcoin operates on a technology called blockchain – a decentralized, peer-to-peer network where all transactions are transparent and secure. In essence, it takes away the need for a middleman in financial transactions, like private banks or government institutions.
Anyone with a smartphone and an internet connection can create a Bitcoin wallet. To transfer Bitcoin, all one needs is the recipient’s wallet address, a unique string of numbers, and letters. Some types bitcoin transfers can even be done via email address.
This transaction is then broadcasted to the Bitcoin network and added to the blockchain, cementing the transaction’s legitimacy. It’s a process that’s as unbiased as it’s efficient. The bitcoin blockchain doesn’t care which country you live in, how much money you earn, or what your credit score is. If you can run the code, you can use bitcoin.
The beauty of it all? This entire process can happen in minutes, irrespective of the amount being sent or the physical distance between sender and receiver. Add to that the fact that transaction fees are often significantly lower than traditional banking methods, and we’ve got a winning formula for monetary inclusion.
The Currency Revolution
It’s potentially tricky for billionaires to comprehend that not everyone sees money as a means to a yacht or a private island. For some, the value lies in a currency revolution, a silent protest against a flawed system. And to these pioneers, Bitcoin isn’t just ‘valuable’; it’s a cherished beacon of change.
But hey, let’s really spill some tea. For our billionaire friends like Buffett, Bitcoin suddenly morphs into an acceptable form of investment and value when it fits their narrative.
They’re happy to write it off publicly as a perilous adventure while they dip their toes into the Bitcoin pool behind velvet curtains. This can be all over the investing world, but is very relevant to BlackRock’s recent application to file for a spot bitcoin ETF, despite saying for years that there was no interest from their clients in bitcoin.
When there’s money to be made, investors change their tune real quick.
Buffett’s Bitcoin Blindspot
Buffett’s assertion that he would prefer the entirety of U.S. farmland and apartments over Bitcoin paints a vivid picture of his investment philosophy – one rooted firmly in tangible assets. It also betrays his ignorance.
What could Buffett do with all the Bitcoin in the world? Absolutely nothing. If one single person owned all the bitcoin, its network effects would be ineffective. As with any network, the value of the network increases exponentially with new participants.
He could promote it as a valuable asset, but if he was successful in his promotion, he’d still have to actually sell it or trade it to prove its value prop. It’s price would move accordingly with demand. Of course, there would be periods of volatile price action as the single owner of a asset changed hands into many millions of owners, but with each new trade, Buffett would have less bitcoin and bitcoin would become more valuable.
So yes, if Warren Buffett held all the bitcoin and never gave it to anyone, it would exist in a black box and hold no value. But if I painted a piece of art and never showed it to anyone, it would have no value either. If I created a product service and never attempted to sell it would be worth nothing.
Buffett’s argument that bitcoin doesn’t have value because it does nothing is meritless, and his arguments are either straw men or not founded in truth.
Static vs. Dynamic
On Buffett’s skepticism about Bitcoin’s longevity, it’s essential to remember that Bitcoin continuously evolves. It’s a decentralized and open-source project.
Bitcoin adapts to technological advancements and market needs. Bitcoin’s underlying technology’s wider application across various industries further reinforces its staying power.
This isn’t to say that Bitcoin doesn’t face challenges. It does, from scalability issues to regulatory uncertainties.
Here’s the catch though: every revolutionary idea, every paradigm-shifting technology, faces hurdles. The Internet, now an integral part of our lives, wasn’t exempt from this rule. Yet, it persevered, evolved, and transformed our world. The same could be said for things we take for granted like electricity, cars, or even the printing press.
Could Bitcoin not potentially follow a similar trajectory? Spoiler – it already has.
When we view Bitcoin as not merely a currency or a store of value but as an emblem of a broader financial and technological revolution, Buffett’s refusal to see its potential seems to be a case of looking at the world through yesterday’s glasses.
Bitcoiners On Buffett
As we delve into the world of reactions to Buffett’s Bitcoin comments, it becomes clear that his words have sparked much debate. Several players in the financial and tech sectors weighed in with their thoughts.
@bitcoinagile, a Twitter user, succinctly captured the sentiments of many Bitcoin enthusiasts with his tweet:
“What a fool! How many times can one be wrong about Bitcoin? It potentially could have been his biggest investment ever, and he is missing out. He always speaks out when Bitcoin spikes, which tells a lot about how humiliating it is.”
This comment underscores the perspective that Buffett might be missing out on a significant investment opportunity by overlooking Bitcoin.
Buffett Has Been Wrong About Bitcoin For Many Years
Chris Katju from Benzinga provides a data-driven response to Buffett’s reluctance towards Bitcoin.
“Investing $1,000 in Bitcoin: While Buffett said he wouldn’t invest in Bitcoin even if it hit $25, some investors have chosen to allocate a portion of their investments or holdings.”
“Bitcoin traded between $9,695.12 and $9,964.50 on May 5, 2018, the day of Buffett’s “rat poison squared” comment.”
“An investor could have purchased 0.1004 BTC at the coin’s high price of the day.”
“The $1,000 investment would be worth $2,839.73 today based on a price of $28,284.20 for Bitcoin at the time of writing.”
“This represents a return of 184% since Buffett’s comments.”
Geekgirl from LeoFinance raises a crucial point, suggesting that Buffett’s skepticism towards Bitcoin could be rooted in his vested interests. She notes:
“These opinions may perhaps be due to the interest Buffett has and needs to defend. He has a good investment strategy that has worked for many years. Why fix something that is not broken.”
“While USD continues to lose its purchasing power over time and Bitcoin keeps gaining purchasing power over time, this might be against Buffett and Berkshires’ financial interests.”
Bitcoiner Yashu Gola from Cointelegraph, highlights the performance potential of Bitcoin:
“Since 2014, allocating only 2.5% Bitcoin yearly to the rat poison portfolio increases returns by nearly 20% with reduced risks, according to independent market analyst Alpha Zeta. For now, the portfolio’s returns stand around 16%.”
“Bitcoin has outperformed Berkshire Hathaway by 320,000%”
This point is reinforced by @X___GC___X on Twitter, who shared Yasha’s sentiment with a witty comment:
“A dinosaur interviewed about asteroids.”
We’re Still Talking About Bitcoin Because Bitcoin Still Works
Even tech billionaire Elon Musk chimed in on the commentary with a light-hearted tweet:
“Haha he says Bitcoin so many times.”
And of course, Michael Saylor makes a great point, “Everyone can’t stop talking about #Bitcoin.“
If the critics were right, bitcoin would simply go away and they’d be able to stop talking about it. Of course, bitcoin is still here, and people are still talking about it.
There’s a clear ideological split between conventional finance stalwarts like Buffett and the new wave of tech-savvy investors who embrace Bitcoin.
Bitcoin challenges traditional finance, a domain where many like Buffett have earned their stripes, stirs potent reactions.
As the world continues to evolve and new technologies permeate the financial sector, it’ll be interesting to see if perspectives like Buffett’s also shift to accommodate these innovations. I’m betting the answer is no.
My Thoughts About Warren Buffet And Bitcoin
I think given the opportunity, Warren Buffett would not even talk about bitcoin. It’s something he hasn’t researched, and doesn’t care about. It’s not in his wheelhouse of person interests, and it’s not something his company would be able to invest in directly. There’s no reason for Warren Buffett to understand bitcoin.
He has never claimed to care about technology or payment systems. His investment strategy has always been commonplace things like Proctor & Gamble or Coca Cola. He’s more concerned with plastic shavers than he is how to make non-custodial lightning payments.
Financial media just keep asking him and Charlie Munger for their opinions, on bitcoin and they are giving their genuine, ignorant opinion on the topic. We can’t expect these 100-year old investors to have insight into technology that even the some of the most savvy technologists of our age are still skeptical of.
Don’t fall into the trap of appealing to authority. Warren Buffett is an investor who knows his niche, and excels at it. But he doesn’t know shit about bitcoin, so do your own research and don’t worry about what Warren Buffett thinks.
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