This year was an important one for Bitcoin – and for Cryptocurrencies in general. Not only did the price of Bitcoin hit an all-time high of over $ 63,000 in April, but it has also made some big strides towards mainstream adoption. These include PayPal acceptance and the first 100% crypto Visa transaction.
While the price has fallen significantly over the past few months, Bitcoin is still up over 300% from that time last year. That said, Bitcoin still has some of the greatest high profile reviewer – including investment guru Warren Buffett.
In 2018, Buffett described Bitcoin as “likely squared rat poison”. Here are some of the reasons why.
1. It has no intrinsic value
Warren Buffett likes companies and assets that add value in and of themselves. For example, if you invest in a farm, what that farm produces each year is valuable – even if the stock itself has no appreciation.
“If you buy something like Bitcoin or a cryptocurrency, you don’t have anything that produces anything,” Buffett said a few years ago. He said Yahoo Finance“You just hope the next guy pays more. And you just feel like you’ll find the next guy who pays more if he thinks he’ll find someone who pays more.”
This is the same reason Buffett doesn’t like gold.
2. He only invests in things he understands
One of the reasons for concern about a cryptocurrency bubble is that many people are buying cryptocurrencies without fully understanding the technology behind it. With over 10,000 different cryptocurrencies currently on the market, a large number of these coins are likely to fail. And as an investor, an understanding of what blockchain can do And how it works is one way of picking the wheat from the chaff.
Buffett told CNBC in 2018, “I get into enough trouble with things that I think I know about. Why in the world should I take a long or short position in something I don’t know about? “
Buffett originally didn’t get into technology stocks for the same reason that Apple, Facebook, or Microsoft did. This does not mean that these stocks were bad investments, but that his proven investment strategy led him in a different direction.
Cryptocurrencies are just one of the many ways you can invest your money, each with varying degrees of risk. It is important that you set your own goals and work out the best strategy for you.
3. He doesn’t think it works as a currency
When Bitcoin first launched in 2009, it promised to be the world’s first decentralized digital currency. It paved the way for you to transfer money to someone else without the need for a bank or government to assist with the transaction.
Buffett told CNBC that it will never work as a currency. “It’s not a permanent medium of exchange, it’s not a store of value,” he said.
It’s an understandable perspective. In fact, one of the reasons Bitcoin spawned so many other cryptocurrencies is that it isn’t a great digital currency. Even the billionaire investor Mark Cuban, who is holding 60% of its crypto portfolio in Bitcoin, says it’s too slow and cumbersome to function as a currency. However, he sees Value in bitcoin as a store of value.
Follow your own investment strategy
Buffett hasn’t gone quite as far as his right-hand man, the vice chairman of Berkshire Hathaway Charlie Munger. In fact, Buffett has shied away from criticizing Bitcoin lately for not wanting to piss off tens of thousands of Bitcoin investors.
Munger has no such qualms. At the company’s annual meeting this year, he said he was not interested in a currency that would be so useful to kidnappers and blackmailers. He declared that “the whole damned development is disgusting and contrary to the interests of civilization.”
Whether you agree with Buffett and Munger depends on your own situation. Perhaps you understand blockchain technology and are confident about the future of Bitcoin. Perhaps you are comfortable with the idea of buying an unproductive asset. Or maybe you want to diversify a small part of your portfolio into cryptocurrencies. Only you can decide what is right for you.
One lesson from Buffett that is worth taking to heart is only investing for the long term. That is, if you do Buy bitcoin, you should do this because you believe it has long-term value. This year alone has shown us how volatile the price can be. There’s no point in hoping for short-term gains – you might as well lose it all.
However, if you believe that Bitcoin will do well in the next five to 10 years and you are comfortable with the dips as well, go for one of them Top cryptocurrency exchanges and set up an account.