‘Stay Away from Bitcoin. It’s a Mirage,’ Says Warren Buffett

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by Andy Watson · 2 min read
‘Stay Away from Bitcoin. It’s a Mirage,’ Says Warren Buffett
Warren Edward Buffett is an American business magnate, investor, and philanthropist. He is widely considered the most successful investor of the 20th century. Buffett is the chairman, CEO and largest shareholder of Berkshire Hathaway and consistently ranked among the world's wealthiest people. Photo: Serba Sembilan/Flickr

Warren Buffett, who earlier this month said he wouldn’t own bitcoin because he doesn’t consider it a store of value or reliable means of exchange, again dismissed bitcoin on Friday.

Warren Buffett, investor and Berkshire Hathaway CEO, made an interview with CNBC on 14th March 2014. He warned investors to stay away from Bitcoin and other digital currencies “It is a mirage basically”, he insisted.

That is pretty obvious that Warren doesn’t believe in Bitcoin long-term potential. He also maintained that cryptocurrencies have a lack of intrinsic value, though he conceded that they are an efficient way to transfer dollars.

This position is similar to Goldman Sachs analysts’ recent report. In this report they demonstrated their concern on volatility of Bitcoin and doubted on the viability of widespread adoption of Bitcoin.

On the other hand Buffet highly evaluated the Bitcoin technology as a payments network and compared it to old-fashioned checks and money orders. “It’s a very fast money order”, he added.

The advice to keep away from bitcoin isn’t totally senseless, but this metaphor is a little bit exaggerated: comparison of Bitcoin to a check or money order or other method of transmitting money is the same as lumping Bitcoin in with the likes of PayPal.

For the last year Bitcoin had been under the supervision as a volatile commodity that has encouraged rampant speculation. So it is better to compare it to gold, than paper checks, because they do not have an intrinsic value in and of itself. In other respect, Bitcoin has a high degree of liquidity and can be easily transferred into other currency, especially among some number of companies.

However, it is unclear at the moment, whether Buffet had made a deep influence on financial community or not. And how did he assess Bitcoin and its technology. His impact can be best summed up by Investopedia profile authored by Richard Loth. To his mind: “Buffett has yet to write a single book, but among investment professionals and the investing public, there is no more respected voice.”

The biggest obstacle for bitcoin is in its not very good rates history, because predictable earnings are usually in favor of investors as Warren Buffet. But this approach doesn’t work really well. For example, Buffet is famous for avoiding tech stocks, even those as promising as Facebook. So sometimes new and provocative ideas are the shortest way to financial success and may be it is too early to write Bitcoin off.

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