Warren Buffett Bitcoin criticism: Gambling, not investing.

Why Warren Buffett hates Bitcoin

When it comes to investing, Warren Buffett and Charlie Munger, the legendary leaders of Berkshire Hathaway, are household names. Their success stems from decades of disciplined value investing, emphasising businesses with tangible assets and predictable cash flows. However, their disdain for Bitcoin—a revolutionary digital currency and store of value—has been loud and clear. Let’s explore their critiques, examine their reasoning, and compare Bitcoin’s performance with Berkshire Hathaway’s.

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Buffett and Munger on Bitcoin: Strong words, stronger opinions

Warren Buffett has famously called Bitcoin “rat poison squared”, arguing that it lacks intrinsic value. During a 2018 Berkshire Hathaway annual meeting, he elaborated:

“Bitcoin is ingenious, and blockchain technology is important, but Bitcoin itself has no unique value at all. It doesn’t produce anything. It’s like a seashell or something—and that’s not an investment to me.”

Charlie Munger’s opinions are even more scathing. In a 2021 interview, he described Bitcoin as:

“Disgusting and contrary to the interests of civilisation.”

Their arguments stem from key philosophical differences about what constitutes a good investment.

Why Buffett and Munger hate Bitcoin

1. No tangible cash flow or utility

Buffett and Munger focus on businesses that generate cash flow. For them, value comes from a company’s ability to produce goods or services that people need and are willing to pay for. Bitcoin, in their view, is speculative:

“You’re just hoping the next person pays more,” Buffett said in 2020. “That’s not investing; that’s gambling.”

Bitcoin does not generate dividends or earnings, making it a poor candidate for traditional valuation models.

2. Speculation vs investment

Buffett has long warned against speculative bubbles, likening Bitcoin to the dot-com and housing bubbles. Munger added:

“I don’t welcome a currency that’s so useful to kidnappers and extortionists.”

The volatility and speculative nature of Bitcoin’s market contradict their principle of long-term, steady investment.

3. Concerns over fraud and regulation

Both investors are cautious about Bitcoin’s association with scams, fraud, and money laundering. Munger has also criticised the lack of government control:

“The world doesn’t need a currency that’s good for tax evasion.”

Comparing Bitcoin and Berkshire Hathaway’s performance

1. Market performance

Bitcoin and Berkshire Hathaway have delivered strikingly different returns over the past decade.

Bitcoin: Since its inception in 2009, Bitcoin has delivered astronomical gains, rising from under US$1 to over US$97,847.94 at the time of this article. Even with its extreme volatility, Bitcoin has outperformed most asset classes in terms of total returns.

Berkshire Hathaway: The conglomerate has consistently grown its book value at around 20% annually over the last 50 years, a remarkable achievement in traditional markets.

2. Volatility and risk

Bitcoin: Highly volatile, with daily swings exceeding 10% in some cases. While it offers high reward potential, the risk of losses is equally significant.

Berkshire Hathaway: A pillar of stability, its stock price has grown steadily, reflecting the performance of its underlying businesses.

3. Philosophical differences in ownership

Bitcoin: Represents decentralised, digital ownership, appealing to those who distrust centralised financial systems.

Berkshire Hathaway: Represents ownership in traditional, well-managed companies with real-world products and services.

Bridging the gap: Could they be wrong about Bitcoin?

While Buffett and Munger are unequivocal in their disdain, Bitcoin’s adoption has grown. Corporations like Tesla, Square, and MicroStrategy have added Bitcoin to their balance sheets. Institutional investors see it as “digital gold”, a hedge against inflation and economic uncertainty.

Critics of Buffett and Munger’s stance argue that their age and focus on traditional investments may limit their understanding of the digital economy. Furthermore, Bitcoin has shown resilience, surviving multiple crashes while expanding its user base and utility.

Final thoughts

The clash between Bitcoin and Berkshire Hathaway reflects a broader debate about the future of money and investments. Warren Buffett and Charlie Munger emphasise intrinsic value, steady growth, and tangible assets, while Bitcoin represents a decentralised, speculative revolution challenging traditional finance.

For investors, the choice between the two depends on individual risk tolerance, financial goals, and belief in Bitcoin’s long-term viability. Will Bitcoin prove Buffett and Munger wrong? Only time will tell.

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