Would Warren Buffett buy Bitcoin?
The Oracle of Omaha, Warren Buffett is known for his investment prowess. Over the past six decades, he has made billions buying out-of-favour assets, and sitting on them as they grow.
Buffett started investing in his teens so, at nearly 90 years of age, he has over seven decades of experience investing in stocks and making him the most experienced investor ever to have lived.
With this experience behind him, Buffett is immune to criticism. His knowledge in the investment world is unrivalled (although I'd be willing to bet his partner and long-term friend Charlie Munger would give him a run for his money). So when he speaks on a particular investment topic, you can be sure Buffett's conclusion is backed by a wealth of information.
But what does the billionaire Chairman and CEO of Berkshire Hathaway think of Bitcoin?
Warren Buffett on Bitcoin
Even though he's been known to avoid the tech sector in the past, Bitcoin mania has not escaped Buffett, and he's already expressed his thoughts on the topic.
In fact, Buffett was cautioning investors to stay well away from the cryptocurrency as early as 2014. In a 2014 CNBC interview, he said "Stay away from it. It's a mirage, basically...The idea that it has some huge intrinsic value is a joke in my view."
In another interview, Buffett reiterated his stance on Bitcoin saying: " It doesn't make sense. This thing is not regulated. It's not under control. It's not under the supervision [of] any...United States Federal Reserve or any other central bank. I don't believe in this whole thing at all. I think it's going to implode."
These are some valid concerns. Throughout his 76 years in the markets, Buffett has watched investment fads come and go, but he's always stuck to his guns. If there's something he can't value, or does not understand, Buffett does not want to be involved.
Looking for the underlying value
You might think that this strategy is boring, or overly cautious but there's a good reason why today, Buffett is the world's third richest man with a fortune of over $80bn.
As well as the lack of regulation, the Chairman of Berkshire is avoiding Bitcoin because "it's not a value-producing asset." Much like gold (which he also avoids), Bitcoin is only worth as much as someone else is willing to pay for it. It has no underlying value, unlike a company such as Unilever for example. Even if no one wanted to buy shares in Unilever and they dropped to zero, the underlying business would still be functioning and producing cash flows.
So, to answer the question 'Would Warren Buffett buy Bitcoin?' The answer appears to be no and the reason why is because the cryptocurrency has no underlying value. That's not to say that you shouldn't hold Bitcoin in your portfolio, although it's worth keeping in mind Buffett's advice on the topic.
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Rupert Hargreaves does not own any share mentioned. The Motley Fool UK owns shares of and has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.