In an interview with CNBC, Warren Buffett referred to Bitcoin as “Gambling Tokens” while talking about its valuation and ideology.
The crypto market is different from the markets for traditional assets like stocks, bonds or commodities. Many veteran investors in traditional assets have criticized cryptos. However, long-term financial investors fear missing out and speculate about its future trajectory.
Warren Buffett, the stock market mogul, has been staunchly critical of the crypto market. He stated that he wants to do nothing with cryptocurrency.
On Wednesday, March 6, Warren Buffett appeared in an interview with CNBC, where he continued to refer to Bitcoin and other crypto tokens as “gambling tokens.”
Buffett remains unconvinced about the fundamentals of Bitcoin and cryptocurrencies. He said Bitcoin has no intrinsic value, but people are not backing out. He further added that people want to play the roulette wheel, referring to gambling.
Warren Buffett’s Views on BTC
In May 2018, at the annual shareholder meeting of Berkshire Hathaway Inc., Buffett described Bitcoin as “probably rat poison squared.” This phrase refers to one person speculating on a price gain in crypto and buying it, then another person considers a higher value and buys it at a higher price and the cycle continues. Essentially, Buffett emphasized the role of speculation in the crypto market.
Per Buffett, the valuations for cryptos are achieved without clarity of business fundamentals and with no visible indicators. The price movement simply depends upon the temporary phases of speculative demand and supply, subject to the perceptions of users and investors.
These factors lead to a high magnitude of price fluctuations. In Buffett’s view, such high volatility does not qualify cryptocurrencies like Bitcoin as an asset class.
Buffett regularly advises against investing in Bitcoin and other virtual currencies. In October 2017, when Bitcoin was trading at around $19,000, he referred to it as a bubble.
Charlie Munger on Crypto
The late Charlie Munger was one of Buffett’s oldest friends. He was Vice Chairman at Berkshire Hathaway. Munger was more open and outspoken about his negative views on Bitcoin.
Munger and Buffett have jointly referred to Bitcoin as a gambling contract with a higher risk probability that entered the market and the country. In traditional markets, states used to regulate and control gambling contracts.
Munger once wrote in the opinion segment of the Wall Street Journal that “The U.S. should now enact a new federal law that prevents this from happening.” His above statement requests that the U.S. government regulate markets for trading and mining cryptocurrencies before it is too late.
Conclusion
Over the years, Bitcoin has gained significant popularity and valuation, as it recently marked a new all-time high after nearly 3 years. In all these years, cryptocurrencies, especially bitcoin, have experienced a tremendous rise in acceptance and usability.
Warren Buffett’s views on bitcoin and other cryptocurrencies have remained the same despite the rapid rise in adoption and valuation of cryptos. Buffett’s investment strategy is built around traditional assets and he avoids assets that he doesn’t understand, especially technology-based assets.
