Warren Buffett Says Crytpo “Doesn’t Produce Anything”

Key Takeaways

• Warren Buffett and Charlie Munger shared some harsh words about cryptocurrency at Saturday’s annual Berkshire Hathaway shareholder meeting
• Warren Buffet on crypto: “If you told me you own all of the bitcoin in the world and you offered it to me for $25, I wouldn’t take it because what would I do with it? I’d have to sell it back to you one way or another.”
• Bitcoin and Ethereum have both dropped 5% in the last week, likely due in part to the pair’s critique
• However, Berkshire Hathaway recently invested $1 billion in a Latin American neobank that’s openly crypto friendly

Legendary billionaire investor Warren Buffett has never been one to mince words on cryptocurrency.

Years ago, he noted that bitcoin is “probably rat poison squared” and an unproductive asset with “no unique value.”

In 2018, he commented that Berkshire Hathaway will “never have a position in [cryptocurrencies].”

And while he didn’t comment on crypto at last year’s Berkshire Hathaway shareholder meeting, vice chairman Charlie Munger didn’t hold back, calling crypto “disgusting and contrary to the interests of civilization.”

If last Saturday’s 2022 Berkshire Hathaway annual shareholder meeting is any indication, Buffett and Munger haven’t changed their minds. The pair had some harsh words that rocked the crypto world. Bitcoin slipped 1.4% Tuesday, bringing its weekly slump to over 5%, while Ethereum lost 1%, also totaling 5% losses in the last week.

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Heated opinions from powerful investors

When Buffett was asked about cryptocurrency at Berkshire Hathaway’s shareholder meeting Saturday, his answer was sure to be interesting. And the 91-year-old investor, whose personal net worth runs around $124 billion, delivered.

“Whether it goes up or down in the next year, or 5 or 10 years, I don’t know. But the one thing I’m pretty sure of is that it doesn’t multiply, it doesn’t produce anything,” he said. “It’s got a magic to it, and people have attached magic to lots of things.”

Buffett further illustrated that if he was offered a 1% stake in all the farmland or apartments in the United States for $25 billion, he’d write the check immediately. His logic? These assets both produce gains – rent from the apartments and food from the farms.

But Buffett said he wouldn’t do the same for Bitcoin, despite its current valuation of $38,000 per coin. He described his views as “the difference between productive assets and something that depends on the next guy paying you more than the last guy got.”

In other words, Buffett’s opposition has nothing to do with whether people can make money trading Bitcoin. Instead, it’s the product of his convictions: Assets that have no intrinsic value bring nothing to the table.

Vice chairman Charlie Munger also took a turn criticizing Bitcoin. “In my life, I try and avoid things that are stupid, evil and make me look bad in comparison to somebody else… and Bitcoin does all three,” he stated.

This statement reflects Munger’s past positions, including that bitcoin is stupid because it will likely hit zero. He also believes crypto is evil because it undermines the U.S. Federal Reserve and financial system and makes the U.S. look foolish “relative to the communist leader of China.” (China banned bitcoin in 2021.)

But Buffett’s outspoken stance against crypto hasn’t stopped him from making an intriguing investment. In June 2021, Berkshire Hathaway invested $500 million in “Bitcoin-friendly bank” Nubank in a Series G IPO funding round.

Founded in 2013, Nubank is a digital bank, or neobank, that operates primarily online. The bank offers bitcoin investing through Brazil’s first bitcoin exchange-traded fund (ETF) following its acquisition of brokerage firm Easynvest.

So far, Nubank has proved lucrative for Buffett, who reaped around $150 million in profits off his initial investment. In fact, the rewards were high enough that Buffett disclosed an SEC filing on 14 February that Berkshire Hathaway snapped up an additional $1 billion in Nubank shares. Meanwhile, the famous investor’s firm sold Visa shares worth $1.8 billion and Mastercard shares worth $1.3 billion.

What’s Buffett’s game?

Buffett’s primary concerns on Bitcoin include its lack of intrinsic value and inability to produce income on its own merits. Which begs the question: Why would such an outspoken critic invest in a company that claims to be “Bitcoin-friendly”? Is this a new investing strategy – or is he trying to bring down bBtcoin’s price to buy in cheap later?

While it’s impossible to be sure until it happens (or doesn’t), the answer appears to be Option C.

As a pair, Buffett and Munger share a mutual distaste for cryptocurrency. However, they’re also willing to bet on investments they believe will produce long-term profits. While their views on crypto are overwhelmingly negative, Nubank presents a different opportunity.

Neobanks like Nubank aren’t in it for the crypto, at least not exclusively. Instead, these digital banks aim to tap the massive market of people underserved and ignored by traditional banking systems.

Nubank cofounder Cristina Junqueira summed it up to Fortune last June: “There is so much opportunity in the [Latin America] region. The combination of a great population, horrible customer experiences and very high fees, it is unmatched. Worldwide, there is no place that is better suited in terms of having a great opportunity for fintech companies to tackle.”

In other words, Buffett and Munger likely aren’t interested in Nubank for the crypto, but the enormous market potential in Latin America. And this supposition tracks with Berkshire Hathaway’s investment strategy.

True, the investment firm holds a few companies with crypto exposure. But that’s not a change of heart for two of the most influential crypto critics in the world. Instead, it’s more likely a product of global investors clamoring for crypto exposure.

What does this mean for investors?

Quite simply, nothing – at least as far as your investment strategy goes.

Personally, we here at Q.ai aren’t fans of trading individual securities to seek your fortune. Statistically, you’re far more likely to lose money with such strategies than you are to turn a profit.

Instead, we prefer a strategy more in line with long-term plans: buying growth- and value-based investments and holding them long-term. (Though instead of buying individual stocks, we usually advocate for index funds, ETFs and our AI-backed Investment Kits.)

But if you are indeed interested in crypto—but want to play it a little safer, without the need for deeply understanding all of its nuances—Q.ai can also help you.

Our Crypto Kit allows you to get invested in a group of exchange traded trusts that hold major cryptocurrencies, like Bitcoin and Ethereum. The Kit also provides access to a diversified fund, Grayscale Digital Large Cap Fund (GDLC), which invests in both Bitcoin and Ethereum, as well as some smaller holdings, which are subject to change over time.

The Crypto Kit functions like the rest of our Kits, which means that our AI does the hard work for you, adjusting allocations between weekly. Learn more about the Crypto Kit.

Download Q.ai for iOS today for more great Q.ai content and access to over a dozen AI-powered investment strategies. Start with just $100. No fees or commissions.