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.”

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Cryptocurrencies Are Here to Stay as Libra Adds Legitimacy, Says Circle's Jeremy Allaire

Neil Dennis

The excitement and international scrutiny that surrounded Facebook's Libra announcement last month suggests that cryptoassets have come of age and are here to stay, said Jeremy Allaire, chief executive of Circle on Wednesday, July 3.

But shouldn't Bitcoin have fallen like a rock following Facebook's news that it was to launch its own cryptocurrency next year? A strong rival to Bitcoin's dominance of the cryptocurrency market should have had a negative impact on the BTC price.

Instead, June was the strongest month for Bitcoin since December 2017. 

Facebook Entering the Market

Allaire, who co-founded peer-to-peer payments technology company Circle in 2013, said on Wednesday's edition of Squawk Box on CNBC that he believes the addition of a rival from such a large player as Facebook, only adds legitimacy to digital assets and is endemic of their growth.

He said that the crypto industry - powered by blockchain technology - continues to grow and has already moved from just 10s of millions of users to 100s of millions of users in a decade.

I think the excitement around Libra is obviously - do we go from 10s or 100s of millions of users to billions of users? People will be asking: do I want something that's provided by a consortium led by Facebook or do I want something that's more open and free to use on the internet?

The interest that this debate is driving - with potential consumers, regulators, central bankers and treasury officials around the world - is what's been driving the price of Bitcoin and its peers during the past month, Allaire added.

Reaction From International Officialdom

And as for the policy attention surrounding Facebook's Libra launch: "I think it's outstanding that we finally have international scale focus on crypto," he said, as crypto has been an issue that has previously been on the sidelines and policymakers dismissive of it.

What's very clear now is that cryptocurrency is here to stay. It's going to be massive scale and will play a fundamental role in the transformation of the economic system as we build a digital-based economy.

And he had a message for those policymakers who continue to sit on the sidelines:

We need to listen and learn from the innovators because the technology is moving at an incredible pace. Now is the time for policymakers to learn, because this is a major breakthrough in the global economy.

Critics Corner

Crypto critics, of course, argue that Bitcoin and its rivals are yet to make the real breakthrough into being used as a substitute for fiat currency, as they are yet to prove themselves as efficient methods of exchange or reliable stores of value.

"When will I be able to pay my taxes with Bitcoin?" asked Kevin O'Leary, a venture capital investor and fellow panelist on CNBC.

Maybe sooner than you think if Facebook continues to build partnerships for its Libra project. But Allaire was unflustered, calling the rise of crypto-assets a "major cultural and infrastucture shift.

It's a megatrend that will be larger than the web and will ultimately be the foundation of pretty much every major financial transaction that's traded in the world.