Should You Invest in Crypto? Here's What Warren Buffett Thinks

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Read this before you put your money at risk by investing in cryptocurrency.

Key points

  • Cryptocurrency is a newer asset class and there's growing interest in investing in virtual currencies.
  • Warren Buffett, one of the world's best investors, has indicated he's not a fan of cryptocurrencies.
  • Buffett has referred to Bitcoin as rat poison.

Warren Buffett is extremely well known for making billions of dollars through investing. Following his advice about how to invest your own funds can be a smart move, especially since the Oracle of Omaha has a proven track record of success and he has shared a lot of wisdom over the years.

If you're thinking of investing in cryptocurrency, you may want to read about what Buffett thinks of buying this asset class.

Heeding his words can help you make a more informed choice about whether virtual currencies should have a place in your portfolio.

What Warren Buffett thinks of cryptocurrency investing

If you were hoping the Oracle of Omaha would be an enthusiastic supporter of cryptocurrencies, you're probably going to be disappointed.

Buffett once referred to Bitcoin as "rat poison squared." He made this statement even though this established virtual currency is favored by many other prominent investors, and is widely viewed to be one of the safer cryptocurrencies to invest in because it is accepted by more merchants than many others.

Buffett has also made clear his reasons for not liking cryptocurrencies. In the past, he's stated that cryptocurrencies aren't viable payment methods, don't actually do anything, and are nothing more than a "mirage" since they don't "meet the test of a currency."

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His concern is that without any underlying utility of their own, the investment can only increase in value if someone else happens to believe it's worth more. “They don't reproduce, they can't mail you a check, they can't do anything, and what you hope is that somebody else comes along and pays you more money for them later on, but then that person's got the problem.”

Buffett has also indicated he personally doesn't like cryptocurrency because the investments are difficult to understand. Now, this may not be a problem for some tech-savvy crypto investors, but for those investing because of social media influencers rather than because they're guided by a deep knowledge of the technology behind Bitcoin or other currencies, this could be an issue as well.

Should you invest in crypto according to Buffett?

While there has been some speculation that Buffett's recent position on cryptocurrency has changed because his fund, Berkshire Hathaway, invested in a crypto-friendly bank, this is likely not the case.

The reality is that Berkshire's recent investment in Nubank is just a small part of its overall portfolio. Further, the bank doesn't have that much crypto exposure and it's become more difficult to find banks to invest in that don't have some digital assets on the books. The investment may not have been made because Nubank is crypto-friendly, but rather despite that fact.

With little indication the Oracle of Omaha has actually altered his stance on crypto assets, it's likely that Buffett's firm position that cryptocurrencies have little actual utility remains unchanged and serves as solid justification for avoiding this asset class.

For those who want to invest like Buffett, it's best to purchase investments that have a proven track record, that you'd be happy to hold for decades, and that you understand deeply. For the average investor, Buffett actually recommends putting most of your money into an S&P 500 index fund, which is a much safer bet than Bitcoin or any of its counterparts.

While you won't earn the returns crypto could potentially produce if you choose an S&P fund instead, you'll be taking much less risk. You'll need to decide on how much of a chance you're willing to take with your hard-earned money. Buffett's reluctance to embrace virtual currencies should certainly give you pause before you put your funds on the line.

Our Research Expert