The year 2020 marks a turning point in the history of Bitcoin (BTC). The coronavirus pandemic has triggered an economic crisis of greater magnitude for decades. Actions taken by central banks and governments triggered great monetary inflation which accelerated the shift in mindset regarding Bitcoin. Bitcoin is becoming trending, and many former naysayers are embracing it. The ultimate stage would be to see Warren Buffett buy Bitcoin. In my eyes, however, this will never happen for 5 reasons that I share with you in this article.
Some like Warren Buffett, others don’t like it. However, the Oracle of Omaha leaves no one indifferent. It is characteristic of exceptional men. If the methods and strategies of Warren Buffett no longer really achieve consensus, he is still considered one of the greatest investors of all time.
The success of Warren Buffett is all the more impressive as’It has been going on for over 60 years.
Its success is a praise of patience. Warren Buffett Often Explains That Anyone Can Get Rich in the equity market by following his investment philosophy, but very few succeed due to lack of patience.
While long-term vision is essential for success in the investment world, Warren Buffett seems to miss it completely when it comes to Bitcoin.
Bitcoin’s fiercest opponents all end up dubbing it
Yet more and more opponents of Bitcoin are opening their eyes to the revolution that is slowly changing the face of the world when it comes to money. Many are taking the plunge and now come to buy Bitcoin.
Macro investor Paul Tudor Jones initiated this movement in May 2020. It has been joined by a number of institutional investors since, as confirmed by the voracious appetite for Bitcoin of Grayscale investments clients.
US banks have received authorization from the US banking regulator to buy and hold Bitcoin for their customers. Large companies are making Bitcoin their primary cash reserve asset like MicroStrategy whose CEO Michael J. Saylor is now a true Bitcoin Maximalist.
Jack Dorsey convinced Square’s board to invest 1% of this emerging tech giant’s assets in Bitcoin. PayPal has finally officially announced that the platform will offer the buy / sell of Bitcoin to all of its 346 million customers from the start of 2021.
Euphoria has gripped the Bitcoin market, and some would no longer even be surprised if Warren Buffett were to publicly announce that he was wrong about Bitcoin. In the wake, Berkshire Hathaway would even announce a record purchase in Bitcoin.
However, this scenario will never materialize in my opinion. In what follows, I will detail you the five big reasons Warren Buffett will never be able to open his eyes to Bitcoin, and therefore buy it.
# 1: Warren Buffett doesn’t invest in what he don’t understand
Warren Buffett has fairly straightforward investing principles. The key to being able to replicate Warren Buffett’s strategy is above all to know how to be patient.
Warren Buffett is able to be patient because he has complete confidence in the investment choices he makes.
In order to achieve this level of trust, Warren Buffett only invests in companies that he understands how they work. This explains why Warren Buffett missed the wave of Internet giants in the early 2000s.
He did not understand the functioning, and de facto the potential, of Google or Facebook for example.
Investing in something that you don’t understand is therefore too much of a risk for Warren Buffett:
“The risk comes from not knowing what you’re doing.”
This golden rule of Warren Buffett is not bad in itself, but it requires you to constantly deepen your knowledge to stay up to date with new technologies that appear.
However, Warren Buffett has never been able to do this since the early 2000s. By breaking this golden rule, Warren Buffett finds himself totally overwhelmed in the stock market where he has missed out on Tesla or even more recently Netflix.
With Bitcoin, Warren Buffett makes the same mistake. He is not able to question his thought patterns to understand Bitcoin. This prevents him from understanding why Bitcoin is the future of the world when it comes to money.
Unable to understand the bright future that awaits Bitcoin, Warren Buffett will not break his golden rule and therefore never buy any.
# 2: Warren Buffett only buys productive assets
Simplistically, the general public often thinks of Bitcoin as a digital version of gold. It’s something very reductive as the potential of Bitcoin is much greater than that of gold.
However, to understand this second point, the comparison must be put forward.
Gold has been a recognized reserve value for centuries. Unlike a company’s stock, gold will not pay dividends. Warren Buffett therefore never considered gold as a relevant investment solution for Berkshire Hathaway:
“Gold is mined from the ground in Africa… Then we melt it, dig another hole, bury it again and pay people to keep it. It has no use. Anyone watching from Mars would be scratching their head. ”
The sharp rise in the price of gold we saw in 2020 proved that Warren Buffett’s strategy of never investing in non-performing assets was ultimately not as relevant as it sounds.
Instead, look at how the price of gold has changed compared to the price of a class A share of Berkshire Hathaway since the start of 2000:
You can see that the price of an ounce of gold has beaten the price of the Berkshire Hathaway Class A stock.
Despite this, Warren Buffett continues to denigrate gold. The only compromise he made was to invest in the summer of 2020 in a Canadian gold mining company: Barrick Gold. This is an indirect way of benefiting from the sharp increase in the price of an ounce of gold while receiving the famous dividends he loves so much.
Bitcoin will never pay dividends directly. Warren Buffett is therefore not going to buy any. On the other hand, he might one day invest in an exchange like Coinbase if it were to do its IPO. Another indirect way to benefit from Bitcoin without admitting to having been wrong publicly.
# 3: Warren Buffett considers buying Bitcoin not to be an investment, but just a game silver
Unable to understand why Bitcoin is a real currency revolution, Warren Buffett has repeatedly said that Bitcoin is “Rat poison squared”.
Warren Buffett then clarified that Bitcoin could not be considered an investment. For him, buying Bitcoin is similar to going to the casino to play gambling games:
“If you want to bet, someone else will come and pay more money tomorrow, that’s kind of a game. Bitcoin is not an investment.”
This way of looking at it shows that Warren Buffett never sought to delve into the subject of Bitcoin. He stopped at the clichés put forward by his opponents, whether they were politicians, bankers, or economists.
Since he considers buying Bitcoin to be similar to going to the casino to gamble his money, he has no reason to endanger Berkshire Hathaway’s reputation by buying Bitcoin. It misses the Bitcoin revolution for lack of personal research in my opinion.
# 4: Warren Buffett thinks Bitcoin is only used by criminals
Warren Buffett’s criticisms of Bitcoin are so crass that it’s easy to understand that he has never done any research to try to understand why Bitcoin is a revolution.
Warren Buffett has joined politicians and bankers in telling anyone who wants to hear that Bitcoin is only used by criminals.
However, it has already been proven by different studies that using Bitcoin for criminal activities was much harder than using the US dollar for example. But this, Warren Buffett refuses to see.
He will therefore never take the risk of endangering the reputation of Berkshire Hathaway which is his lifelong work. If he considers losing money to be something that can happen, he considers it inconceivable to make a mistake which would discredit Berkshire Hathaway in the eyes of investors :
“Lose money for the business, and I’ll be sympathetic. Lose an ounce of reputation for the company, and I’ll be ruthless. “
Rest assured, Bitcoin is not just used for illegal activities, millions of people in emerging countries use it on a daily basis for everyday payments.
In Venezuela, Argentina, Nigeria, or even Lebanon, Bitcoin is already a plan A. The hyperinflation ravaging Iran has shown in 2020 why Bitcoin is already essential for the people.
# 5: Warren Buffett is now unable to move on and admit his mistakes
A man cannot be successful like Warren Buffett did if he does not have a huge ego. This implies thinking that you are always right. Warren Buffett is no different.
Warren Buffett thinks his value-based investing strategy is the only worthwhile one.
90 years old, Warren Buffett has reached an age where the capacities of questioning are non-existent. Since the early 2000s, Warren Buffett has shown himself unable to evolve to understand what the new rules in the stock market are.
Its strategy is outdated today. Besides, he seems unable to admit that he was wrong. Until the end, Warren Buffett will continue with his course. To admit that he was wrong about Bitcoin would be a proof of intelligence, however. But he must pass that it would be an admission of weakness.
While I don’t think he’ll buy Bitcoin someday, many saw a silver lining for him when Warren Buffett decided to participate in Snowflake’s September 2020 IPO with Berkshire Hathaway. As a reminder, Snowflake is an involved tech startup whose business is focused on the Cloud.
Warren Buffett may have changed his mind about tech companies after all. From there to doing the same on Bitcoin, however, there is still a world to be crossed.
Warren Buffett is one of the greatest investors of all time. At the age of 90, Warren Buffett has an estimated fortune of over $ 80 billion. Warren Buffett has made the most of the injustice of the current monetary and financial system throughout his life.
Under these conditions, Warren Buffett has no real reason to buy Bitcoin. It would be like shooting yourself in the foot of sorts.
If Warren Buffett can afford to miss the unique opportunity that Bitcoin is, the shareholders of his company Berkshire Hathaway who will be around long after his death could have benefited from a greater openness on his part. Warren Buffett is not forever, and his investors will regret in the future that the Oracle of Omaha has not been able to seize for them this incredible opportunity that is Bitcoin.
A developer by training, I discovered Bitcoin in 2014 but did not immediately grasp the importance it could have for the world of tomorrow. I took a more in-depth look at it from the start of 2017 and I haven’t let go of it since.
Passionate about Bitcoin and the new system it is trying to build for the future, I decided to participate in its evangelization at my modest level by writing about Bitcoin, Blockchain and cryptocurrencies in different media.
It is with pleasure that I publish some of my texts in French on The Coin Tribune.
I also write quite a bit about personal development and self-improvement.
Please feel free to connect with me via social media or in comments on my articles if you have any questions regarding my articles.