Bitcoin (BTC 2.44%), the world's largest cryptocurrency, might be gaining acceptance from more and more players in the traditional financial system, but legendary investor Warren Buffett is still not a fan.
This attitude is nothing new from the CEO of Berkshire Hathaway, who has said on numerous occasions that he doesn't see anything special in the digital asset. At Berkshire's annual investor day on April 30, the Oracle of Omaha even said that if he were offered all the Bitcoin in the world for $25, he wouldn't take it. Here are three reasons Buffett feels this way.
1. Bitcoin doesn't produce anything tangible
One of the big reasons that Buffett told Berkshire's annual meeting that he wouldn't buy all of the Bitcoin in the world for $25 is, "What would I do with it?" He added:
Whether it goes up or down in the next year, or five or 10 years, I don't know. But the one thing I'm pretty sure of is that it doesn't produce anything. ... It's got a magic to it, and people have attached magic to lots of things.
Buffett acknowledged that there are plenty of assets that don't necessarily produce anything tangible, like artwork. But if there is a piece of art that is created by an artist with a strong reputation and it's around long enough, somebody will likely find it interesting enough to purchase. He doesn't see Bitcoin as drawing that same interest. "Assets, to have value, have to deliver something to somebody," he said.
Image source: Motley Fool.
2. It's not currency
Buffett doesn't believe Bitcoin is a currency. He said there is only one currency that is accepted in the U.S., which is the dollar. You can try to create any currency you want, Buffett said, but "there's no reason in the world" that the U.S. government would let any currency replace the dollar.
While I do believe Bitcoin and other digital currencies are likely here to stay in some capacity, I would agree with him that right now, Bitcoin is not really a currency, and I can't recall a time I've ever used it in a retail transaction.
But that doesn't mean Bitcoin or another cryptocurrency won't be used for retail purchases in the future. A study conducted by the website PYMNTS in May of 2021 found that 18% of the U.S. adult population (roughly 46 million people) said they would consider using cryptocurrencies for retail purchases.
Now, that could mean a wide variety of cryptocurrencies outside of Bitcoin that are better suited for payments, or even stablecoins, which are digital assets pegged to a commodity or a currency. But there are more companies popping up every day that are encouraging people to use cryptocurrencies for everyday purchases, so I think it's possible that it will become more common.
3. He doesn't understand it
All of Buffett's comments continue to point to another reason he has cited in the past for his lack of enthusiasm for Bitcoin: He doesn't understand it.
This criticism ties back to a core Buffett investing theme: Never invest in a business you cannot understand. He isn't saying that you can't become an expert on a new business, but you have to be able to value the company or asset you are thinking about investing in -- and many, many investors have struggled to figure out how cryptocurrency works so they can value Bitcoin and other cryptocurrencies. These digital assets can be complicated in the eyes of a beginner -- and many seasoned financial pros, as well.
