Bitcoin is “probably rat poison.”
According to CNBC, billionaire investor and “Oracle of Omaha” Warren Buffett described the digital currency during the annual shareholder meeting for his multinational holding company Berkshire Hathaway in 2018.
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This was an unusually strong condemnation from Buffett, given that the Berkshire Hathaway CEO is known more for his measured, careful behavior and investment strategies than for fiery rhetoric or harsh condemnations. In fact, it’s safe to say that, in a calm and peaceful environment, this may be Buffett’s hottest experience in a lifetime.
Also see Five Ways to Adopt Buffett’s Long-Term Approach to Investing.
Why does Buffett hate Bitcoin?
Buffett’s nickname, the Oracle of Omaha, comes from his amazing ability to assess the potential value of stocks and companies to invest in, and by doing so he has amassed a fortune of approximately $150 billion – making him one of the richest men in the world. So at least it’s worth listening to him on Bitcoin.
Their primary objection? “Cryptocurrencies basically have no value and they produce nothing,” he told CNBC in 2020. “In terms of value: zero.”
Buffett’s great financial success came from “value investing”, a strategy in which an investor identifies a stock, company or security with high intrinsic value that the market has not yet recognized as high – that is, a stock that is trading below its value and thus can be bought at a lower price and later sold at a higher price.
Much of Buffett’s dislike of Bitcoin probably stems from the premium he placed on intrinsic value over his professional lifetime, something digital currencies do not have. Some people have made a lot of money from crypto, yet Bitcoin’s entire existence runs contrary to Buffett’s hugely successful financial philosophy.
Additionally, Bitcoin neither generates services nor does it create products itself. It has no stable, long-term history that can be studied yet (something else Buffett likes).
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Is Buffett right or wrong?
As it stands, Bitcoin’s longevity as a reliable currency is unknown (which is probably another reason to dislike Buffett – Bitcoin’s future is inherently uncertain). Despite being introduced in 2009, it has still not become the defining way for most people to manage their currency. It is certainly popular among some speculators, but there are still doubts about what will happen with cryptocurrencies in the next 10 years.
It’s this uncertainty – and the higher risk that comes with it – that makes Buffett’s extreme caution all the more justified when it comes to digital currencies. Is he 100% correct that Bitcoin is “rat poison”? At the moment, no (because there’s too much money to be made from it), but he’s not 100% wrong either.
Bitcoin is a risk, and it has yet to fully prove itself. Only time will tell if Buffett’s hot take was actually quite good and sensible.
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This article originally appeared on GOBankingRates.com: Warren Buffett’s Hottest Take on Investing – Is He Right?
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