Ever since Bitcoin surged onto the scene in 2009, it has been a source of wonder and speculation. While some people have become millionaires investing in cryptocurrency, Warren Buffett believes that crypto is headed for trouble. "They will come to a very bad ending," Warren Buffett warned CNBC in 2018. Here's a closer look.
Cryptocurrency investing can be incredibly lucrative when done correctly, but it can also be risky and unpredictable. There are pros and cons to investing in cryptocurrency that need to be taken into consideration before making any decisions about whether or not to invest your money into these assets. On the positive side, cryptocurrencies have seen an impressive rally this year—up nearly 40% from its all-time peak in 2021, where it was generating about $69,000 per unit. On the negative side, cryptocurrencies can be incredibly volatile and eventually worthless.
When it comes to Bitcoin, Warren Buffett isn't pulling any punches and has made his stance on the subject extremely clear. He's called it a "mirage," "not a currency," and "will come to a bad ending." To start, the billionaire doesn't think Bitcoin has any unique value. Unlike fiat money, which is backed by governments and central banks, Bitcoin isn't backed by anything. It isn't even particularly useful as a payment system since it's slow and expensive to use. Second, Buffett doesn't believe that cryptocurrencies count as money. Money needs to be a reliable store of value, a unit of account, and a medium of exchange. Bitcoin fails on all three counts. It's incredibly volatile, so it's not a good store of value. It isn't used widely enough to be a unit of account, and because it's so slow and expensive, it's not very practical as a medium of exchange. "I don't have any Bitcoin. I don't own any cryptocurrency, I never will," he told CNBC back in 2020.
And lastly, the businessman simply doesn't understand the concept. He's admitted that he doesn't know how they work or what gives them value. And that lack of understanding is enough for him to stay away from them entirely. In the wise words of one of the wealthiest human beings on the planet, "I get in enough trouble with things I think I know something about. Why in the world should I take a long or short position in something I don't know anything about?" True! Obviously, his tactics in investing have worked until now, so why change them?