Warren Buffet: Cryptocurrencies doomed

The world’s most famous investor Warren Buffet has issued a warning on the rapidly growing interest for cryptocurrencies as an investment class among retail investors.

“Cryptocurrencies will come to a bad ending,” Buffet said Saturday.

Speaking to an audience gathered for Berkshire Hathaway’s, the firm he founded and is still CEO of, annual meeting Buffett sounded off on the rise of Bitcoin and other cryptocurrencies.  He said that investors would likely see losses eventually by speculating on them as they are not backed by anything nor do they produce any sort of income, yield or dividend. 

Buffet’s investment strategy has delivered stellar returns for investors over the longer term thanks to a buy and hold discipline focused on dividend growth. He has not always got it right of course, buying a huge stake in Tesco just before it tanked and holding off investing in Apple until very recently. That being said much of his investment flair has been demonstrated by staying away from what proved to be financial bubbles such as that which destroyed the tech boom of the 2000s era as well as spotting long term winners.

Buffet was speaking to his own devotees as well as investors at “the Woodstock of Capitalism" – as some call Berkshire Hathaway’s annual meeting – and did not hold back calling Bitcoin “rat poison” in an earlier interview with CNBC.

His criticism brought a snap back rally in Bitcoin – from its crash at the start of the year – back down to earth with the cryptocurrency failing to hit the $10,000 level. It had not breached the price since February.

Nigel Green, founder and CEO of the deVere Group, the IFA group that recently added cryptocurrencies to its investment proposition, says Buffett’s comments highlight that he needs to be “educated on the future of money”.

 “It comes as little surprise that Mr Buffett and his 94-year-old business partner, Charlie Munger, criticised cryptocurrencies at their annual meeting. They have done so consistently.”

“But what I do find monumentally baffling is that two of the world’s most successful investors cannot see the intrinsic value of some form of cryptocurrency. Do they honestly believe that there is no place for, and no value of, digital, global currencies in an increasingly digitalised and globalised world?”

Green says Buffet’s comments on cryptocurrencies illustrate a lack of understanding.

“Financial traditionalists, like Mr Buffett and others, appear to exclusively believe in and be motivated by the old, centralized system of money. I would suggest that they need to also be open to a new, decentralised, digital, global currency.