Is Warren Buffett Wrong About Bitcoin?

The future of the cryptocurrency industry is still clouded with doubt since Warren Buffett (TradesPortfolio) has been one of the biggest critics of the market. Bitcoin is, by far, the leading unit in the cryptocurrency market and based on Buffett's comments over time, it is fair to say the legendary investor does not value it at all, let alone imagine a bright future ahead.

In 2014, just after bitcoin hit an all-time high, Buffett warned investors to stay away from it, saying it was nothing more than a mirage. In response to a question regarding cryptocurrency by Dan Gilbert, the Quicken Loans founder, he said:

"It's a method of transmitting money. It's a very effective way of transmitting money and you can do it anonymously and all that. A check is a way of transmitting money, too. Are checks worth a whole lot of money just because they can transmit money? Are money orders? You can transmit money by money orders. People do it. I hope bitcoin becomes a better way of doing it, but you can replicate it a bunch of different ways and it will be. The idea that it has some huge intrinsic value is just a joke in my view."

When asked about bitcoin's future on CNBC's Squawk Box, Buffett said, "Stay away from it. It's a mirage, basically."

True to his word, bitcoin lost more than 80% of its value within the following year (falling from more than $1,000 a coin in December 2013 to about $200 in January 2015). After a 12-month hiatus in 2015 however, bitcoin has since recovered to rally close to the $1,000 level.

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As demonstrated in the chart above, bitcoin's price appears to have picked up momentum over the last 12 months in a trend that took it to above $1,000 at the start of the year. Unlike the previous rally that took the price to an all-time high, this time around the trend has been more stable, with significant trackbacks and rebounds.


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