Billionaire Investor Warren Buffett Predicts a “Bad Ending” for Cryptocurrencies

Berkshire Hathaway CEO Warren Buffet paints a gloomy picture of the future of Bitcoin and cryptocurrencies |His longtime partner Charlie Munger echoes Buffett’s take on the subject

Billionaire Investor Warren Buffett Predicts a “Bad Ending” for Cryptocurrencies

During a Wednesday interview on CNBC’s “Squawk Box,” chairman and CEO of Berkshire Hathaway Inc. Warren Buffett, 87, said that he was almost certain that cryptocurrencies were headed towards a “bad ending,” without really giving a timeframe, or even how the so-called “bad ending” would come about.

“In terms of cryptocurrencies, generally, I can say almost with certainty that they will come to a bad ending,” said the third richest man on the planet, speaking from Omaha, Nebraska.

“When it happens or how or anything else, I don’t know,” the octogenarian billionaire said, adding, “If I can buy long-term puts, I could buy a five-year put on every one of the cryptocurrencies, I would be glad to do it, but I would never short a dime’s worth.”

Buffet’s longtime partner and Vice Chairman of Berkshire Hathaway Charlie Munger, 94, echoed his chief’s sentiments calling, not for the first time, Bitcoin and other cryptocurrencies “bubbles.”

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Munger said that young investors are “excited because things are going up at the moment and it sounds vaguely modern and I think I’m sure the computer science involved is difficult and interesting. So you can understand where they get excited. But I’m not excited.”

When asked if he had thought about “trading the futures to take a negative position of Bitcoin,” Buffett answered with an emphatic “No.”

“I get into enough trouble with things I think I know something about. Why in the world should I take a long or short position of something I don’t know anything about!” Buffett said.

Both Buffett and Munger are known critics of Bitcoin and cryptocurrencies for some time, now, and have always been skeptical in their comments about digital currencies.

Back in 2014, Buffet had used the analogy of a “mirage” to describe the digital currency.

“It’s a mirage, basically. I mean it’s a method of transmitting money. The idea that it has some huge intrinsic value is just a joke in my view,” he had said.

Answering a question about the soaring value of cryptocurrencies last year, Munger had called it “total insanity.”

Addressing an audience at the University of Michigan’s Ross School of Business, Munger had said, “I think it is perfectly asinine to even pause to think about them. It’s bad people, crazy bubble, bad idea, luring people into the concept of easy wealth without much insight or work.”

Another known detractor of Bitcoin is the CEO of JPMorgan Chase Jamie Dimon who said in September that Bitcoin was a “fraud.”

“It’s just not a real thing, eventually it will be closed,” Dimon had said at the Delivering Alpha conference presented by CNBC and Institutional Investor.

“I’m not saying ‘go short bitcoin and sell $100,000 of bitcoin before it goes down,” he said. “This is not advice of what to do. My daughter bought bitcoin, it went up and now she thinks she’s a genius,” he joked.

Jamie Dimen - JPMorgan Chase CEO
Jamie Dimen – JPMorgan Chase CEO

In another appearance at a banking industry conference organized by Barclays earlier that same day, Dimon had compared the Bitcoin obsession to that of the tulip bulb mania of the 17th century.

“It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed,” he had said. “Currencies have legal support. It will blow up.”

He had also, reportedly, said that he would “fire in a second” any JPMorgan trader found trading in Bitcoin for being “stupid” and also because it was against the company rules. “It’s against our rules and they are stupid,” he said.

Again, in October, responding to a question at the Institute of International Finance conference he had said there would be a price to pay by anybody who was foolish enough to buy the cryptocurrency. “If you’re stupid enough to buy it, you’ll pay the price for it one day.”

Responding to Dimon’s “fraud” critique of Bitcoin in September, Viktor Shvets, head of global and Asia-Pacific equity strategy for the Macquarie Group, had written at the time that the cryptocurrency relied on a “durable technology that is likely to continue to evolve and strengthen,” despite any “extreme speculation.”

“If one describes Bitcoin as a fraud, how would one describe a ‘financial cloud’ that is at least 4x-5x larger than the underlying economies?” Shvetz had questioned.

“It is unlikely that US$400 trillion+ of financial instruments circulating around the world would ever be repaid and most are now backed by assets that are already either worthless or are diminishing in value. How does one describe rates and the yield curve that are either directly determined by CBs (BoJ or PBoC) or heavily influenced by them (Fed or ECB)? People living in glass houses should not throw stones,” wrote Shvetz.

While Dimon continues to remain an ardent critic of Bitcoin, and cryptocurrencies in general, he has softened up his stance a bit saying that he “regrets” calling the digital currency a “fraud” back in September.

“The bitcoin to me was always what the governments are gonna feel about bitcoin as it gets really big, and I just have a different opinion than other people”, he told Fox Business’ Maria Bartiromo during an interview on Wednesday, calling the blockchain technology “real.”

“I’m not interested that much in the subject at all,” he added.

Like Shvetz, there are others who also do not believe that the Bitcoin “bubble” is going to burst anytime soon, if ever at all.

Kodak’s Tuesday announcement that it is launching its own digital currency, KODAKCoin, doubled the company’s share value, somewhat revitalizing the company’s sinking fortunes.

“The KODAKOne image rights management platform will create an encrypted, digital ledger of rights ownership for photographers to register both new and archive work that they can then license within the platform. KODAKCoin allows participating photographers to take part in a new economy for photography, receive payment for licensing their work immediately upon sale, and sell their work confidently on a secure blockchain platform,” says the company’s website.

Another supporter who does not consider Bitcoin as “just a fad” is Morgan Stanley CEO James P Gorman, who said during a Wall Street Journal event in September last year that the cryptocurrency was “certainly something more than just a fad,” adding that “the concept of anonymous currency is a very interesting concept – interesting for the privacy protections it gives people; interesting because what it says to the central banking system about controlling that.”

Eric Schmidt, executive chairman of Google’s parent company Alphabet, had called Bitcoin a “remarkable cryptographic achievement” while speaking at the Computer History Museum in March 2014. He said that “the ability to create something that is not duplicable in the digital world has enormous value.”

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