Warren Buffett’s Opinion about Bitcoin – Is He Right or Wrong?

Warren Buffett’s Opinion about Bitcoin – Is He Right or Wrong?

Bitcoin is the most significant cryptocurrency on the planet, but it is also a very volatile. Views are incredibly different on the prospects of Bitcoin.

Warren Buffett – a big skeptic

Some people believe that Bitcoin is the future, while others believe that it is a bubble ready to pop at any moment.

The most famous investor in the world Warren Buffett said that Bitcoin is a "real bubble." Buffett is not particularly impressive by the incredible growth rates and capitalization of the world's most popular cryptocurrency. Commenting on the situation with Bitcoin, he noted that the estimate of cryptocurrency is impossible because Bitcoin cannot be regarded as an asset that produces value. Besides, according to the billionaire, it is unrealistic to predict how high Bitcoin can rise. As for ICO, Warren Buffett is also skeptical. The investor believes that people are susceptible to the hype from large price movements, and the fact that Wall Street is adjusting to this, in the end, can go very wrong.

Here are his recent thoughts on the future of Bitcoin. Let's jump forward, and Bitcoin will hardly find the place in the portfolio of Berkshire Hathaway investment company.

A real bubble

Responding to the question about Bitcoin, Buffett said that nobody can estimate the fair value of Bitcoin as it is an asset with no intrinsic value. On the one hand, it is a real bubble. On the other – it is unclear how high cryptocurrency will climb.

An explanation followed it. Bitcoin is an effective and anonymous way of transferring money. The checks are also a way of transferring money, are they therefore so expensive?

Such scenario is hardly a surprise for Buffett’s supporters. There is the concept of "true value" of the instrument based on Buffett’s investment strategy.

According to the Buffett’s approach, as intrinsic value does not characterize Bitcoin, and it cannot be considered as an investment tool.

Buffett’s concept

Another concept of Buffett is "moat" - the unique investment benefits.

For example, for nearly 50 years, Berkshire owns a part in American Express. There are many bank cards on the market, but the AmEx product is of particular prestige. Another example is Coca-Cola, which is the "mother" of the industry of soft drinks.

As for Bitcoin, it was the undisputed leader in the stock market until now. Today the digital currency has about 2,000 types. The market share of Bitcoin is estimated at 56%, but the competition is growing.

Strong businesses at a reasonable price

Buffett is a representative of the old school. It is important for him to acquire strong businesses at a reasonable price. These investments should have strong fundamental characteristics.

Buffett has long avoided investments in the unknown world of high technology. Only in 2016, the legendary investor started buying shares of Apple. Thus, he missed the boom of the FANG (Facebook, Amazon, Netflix, and Google).

To understand the situation, from September 19, 2014, to September 15, 2017, the average increase of quotations of the combination NYSE FANG+ Index amounted to 28.44% per year, the Nasdaq 100 – 14,89% per year, S&P 500 9.86% per year.

As a result, Buffett’s opinion about Bitcoin can be wrong. Another thing is that cryptocurrencies are extremely volatile and risky.

On the one hand, it is a real bubble. On the other – it is unclear how high cryptocurrency will climb.