Monday, December 5, 2022

Here We Go Again: Warren Buffett Says Bitcoin ‘Not Investing’

Here We Go Again: Warren Buffett Says Bitcoin ‘Not Investing’

As the cryptoeconomy seemingly recovers, so too are high-profile naysayers once again coming out of the woodwork. The latest de-legitimizing swipe comes from powerhouse investor Warren Buffett, who in new comments to the press has argued that bitcoin is all about “just hoping the next guy pays more.”

Also see: St. Louis Federal Reserve Bank Says Bitcoin Is Like Fiat Money

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Buffett Says BTC Is Speculation, Not Investing

The phrase “cryptocurrency investing” is nothing short of an oxymoron to Warren Buffett, who recently declared in a sit-down interview with Yahoo Finance that buying cryptocurrencies like bitcoin is not investing at all:

“There’s two kinds of items that people buy and think they’re investing. One really is investing and the other isn’t. If you buy something like a farm, an apartment house, or an interest in a business […] 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.”

Adding to that, Buffett commented:

“If you wanna gamble somebody else will come along and pay more money tomorrow, that’s one kind of game. That is not investing.”

Needless to say, the long-time investment wiz clearly won’t be adding any digital currencies to his personal portfolio … ever.

Breaking It Down

In comparing investing to speculating, it all comes down to risk: investments are considered solid, low-risk gainers, whereas speculative plays are high-risk and, for that reason, commonly equated with gambling.

To that end, the fledgling cryptoverse is indeed rife with speculation — hundreds of projects having blossomed in their market caps without having the fundamentals to back such rises up. But is it fair to say there are no low-risk investment possibilities in the space?

Exhibit A seems to be bitcoin’s price performance over the past several years. If you look at the average daily value change for BTC since 2010, the math suggests bitcoin has been fairly stable and predictable in its growth.

Now, this isn’t me saying to go out and throw every last penny you have at bitcoin. But it is me contesting Buffett’s suggestion that BTC can be so clearly disregarded as an investment. Maybe he’s right — but I certainly don’t think the discussion’s as black and white as he contends.

Is the OG cryptocurrency’s price volatile in the short-term? Sure. But it’s also been logarithmic over its lifespan to date:

The past is not indicative of future performance. But I do think in the very least it is literally possible to invest in — and not simply speculate on — heavyweights like bitcoin and ether.

The Forex Perspective

It just takes some nuance. Will most traders speculate on cryptos? Yes. But it is possible to “invest” in bitcoin just like its possible to “invest” when conducting forex trades, a mainly speculative market.

It takes a big-picture, long-term outlook. It takes discipline, and a deep understanding of fundamentals and market analysis. And it takes understandings of economics and world politics so that reasonable projections can be made.

Then, if bitcoin meets your investment criteria and you set targets, you’d invest in it with a currency that you project to get weaker over the coming years, a la the dollar or the euro. That’s investing, plain and simple.

Reasonable people can disagree on what currencies will weaken and what currencies will strengthen, but with Twitter CEO Jack Dorsey projecting bitcoin to be the main world currency in a decade’s time, it’s naive and disingenuous to say you can’t apply investment practices to bitcoin at all (as Buffet says), much less in a responsible, traditional fashion.

What’s your take? Do you think Buffet has given crypto a fair shake? Sound off in the comments below. 

Images via CNBC, FXCM

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