Buying Bitcoin “Is Not Investing” Says Billionaire Investor Warren Buffett

Francisco Memoria
  • Billionaire investor Warren Buffett claims buying bitcoin isn't investing.
  • According to him, buying cryptocurrencies is speculating, as people just want others to buy at a higher price later on.

Berkshire Hathaway CEO and billionaire investor Warren Buffet has recently stated he believes buying cryptocurrencies like bitcoin “is not investing,” and laid out his thoughts on the crypto market during an interview with Yahoo Finance in Omaha.

According to the investor, there are two kinds of items people buy when they think they’re investing. He explained that “one really is investing, and the other isn’t.” Bitcoin, per Buffett, isn’t.

The CEO then compared investing in cryptocurrencies to other investments. He said:

“If you buy something like a farm, an apartment house, or an interest in a business… You can do that on a private basis… And it’s a perfectly satisfactory investment. You look at the investment itself to deliver the return to you. Now, if you buy something like bitcoin or some cryptocurrency, you don’t really have anything that has produced anything. You’re just hoping the next guy pays more.”

Warren Buffett

Buffet continued, adding that buying bitcoin and other cryptocurrencies isn’t investing, but speculating. Although he claimed there’s nothing wrong with speculating, he implied cryptocurrency users just buy so someone else buys at a higher price later on, which to him is a “kind of game.”

Per his words, if regulators stopped people from trading farms, apartments, or even equities, investors would still do fine. If the same happened to “some bitcoin which nobody knows exactly what it is,” people wouldn’t want to buy.

Notably, the billionaire has earlier this year poured contempt on the cryptocurrency industry, stating that he can say “almost with certainty” that cryptocurrencies would come to a bad ending.

During an interview on CNBC’s “Squawk Box,” Buffett was asked if he had considered opening a futures position to short the market. He revealed he wouldn’t do it, as he gets into enough trouble with things he knows something about, so asked “why in the world” should he take a short position in something he “knows nothing about.”

Nevertheless, he maintained cryptocurrencies would come to a bad ending, and added Berkshire Hathaway doesn’t own or short any cryptocurrencies, and “will never have a position in them.”

New Cryptocurrency-based ETF Filed with US SEC

The US Securities and Exchange Commission (SEC) has received another application for a cryptocurrency-based exchange-traded-fund (ETF). Submitted on May 9, 2019, the latest crypto ETF application was prepared by Crescent Crypto Index Services LLC, a subsidiary of Crescent Crypto Asset Management LLC.

Crescent Crypto Index Fund (“XBET”)

According to Crescent Crypto’s prospectus, the ETF will “track the performance of a market capitalization weighted portfolio of bitcoin (BTC) and ether (ETH).” Referred to as the USCF Crescent Crypto Index Fund (“XBET”), the ETF is supported by the US Commodity Funds LLC (USCF), which will reportedly invest XBET’s assets in both BTC and ETH (held in the investment portfolio).

According to the ETF application: “XBET is an exchange traded fund. This means that most investors who decide to buy or sell shares of XBET place their trade orders through their brokers and may incur customary brokerage commissions and charges.”

As noted in Crescent Crypto’s prospectus, shares of XBET are “expected to trade” on the New York Stock Exchange (NYSE) Arca under ticker symbol “XBET.” In a manner that is similar to how traditional ETFs are traded, the crypto-based ETF, if approved, will “be bought and sold throughout the trading day at bid and ask prices like other publicly traded securities.”

Founded in 2005 and headquartered in Oakland, California, the United States Commodity Funds LLC is “an issuer of exchange traded commodity products (ETPs).” Notably, the first fund it launched (in 2006) was United States Oil Fund, LP, which is reportedly “the first commodity ETF based on crude oil launched in the United States.”

Bitwise Asset Management, VanEck/SolidX ETFs Applications To Be Reviewed This Month

USCF is currently regulated by the US Commodity Futures Trading Commission (CFTC) and the National Futures Association - under the Commodity Exchange Act (CEA).

Currently, there are several ETFs that have been filed with the SEC, including one submitted by Bitwise Asset Management with NYSE Arca and one by VanEck/SolidX, which was filed through a partnership with Chicago Board of Options Exchange (Cboe).

In March 2019, the SEC postponed its decision on whether to approve ETF applications filed by both VanEck/SolidX and Bitwise Asset Management. The federal securities regulator is now expected to review both ETFs this month.

Cryptocurrency Volatility May Be Affected By ETF Decisions

To date, the SEC has not approved any cryptocurrency ETF applications, however several analysts have argued that one will be approved in the foreseeable future.

According to a recent report from SFOX, a “prime dealer of cryptoassets for sophisticated traders and institutional investors,” the volatility of cryptocurrencies may be affected by “Bitcoin exchange-traded-fund (ETF) decisions,” among other factors such as the expiration of crypto futures contracts, and the discussions during “major” crypto and blockchain conferences such as Consensus which is taking place mid-May