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Author Topic: Warren Buffett on buying bitcoin: 'That is not investing'  (Read 353 times)
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April 28, 2018, 11:48:16 PM
 #1

This latest comment on bitcoin and what we should be thinking of it when we buy is fair I reckon. He comes from the old world of investing, and it is very understandable that when he sees bitcoin as an investment, he says what?

Also, he is telling us what we are really doing. We are not investing, we are speculating. But I like to view it as a store of value. In short, saving.



Buffett laid out his latest thinking on cryptocurrency investing.

“There’s two kinds of items that people buy and think they’re investing,” he says. “One really is investing and the other isn’t.” Bitcoin, he says, isn’t.

“If you buy something like a farm, an apartment house, or an interest in a business… You can do that on a private basis… And it’s a perfectly satisfactory investment. You look at the investment itself to deliver the return to you. Now, if you buy something like bitcoin or some cryptocurrency, you don’t really have anything that has produced anything. You’re just hoping the next guy pays more.”

When you buy cryptocurrency, Buffett continues, “You aren’t investing when you do that. You’re speculating. There’s nothing wrong with it. If you wanna gamble somebody else will come along and pay more money tomorrow, that’s one kind of game. That is not investing.”


Read in full https://finance.yahoo.com/news/warren-buffett-buying-bitcoin-not-investing-110702015.html?guccounter=1

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April 29, 2018, 02:25:32 AM
 #2

Technically, bitcoin is considered as an asset wherein people would acquire it hoping that its price would skyrocket in a given amount of time. Some countries (like the Philippines) even considered it as a property and not legal tender!
Compared to other investment mechanisms, acquiring bitcoin has the highest total yield of interest in a short amount of time. But what makes bitcoin different is its nature and regulation. It is intangible, volatile (which is subject to country prohibitions, etc.), unpredictable and decentralized.

I do understand where he is coming from as most famous investors are inclined into the traditional way of investing but everything has to start from somewhere. Bitcoin can be regarded as the next type of investment in the digital age where it has the potential of becoming a standard currency in the future.
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April 29, 2018, 03:08:51 AM
 #3

I consider an investment something that i purchase and I hope when I sell it I make a profit. Could be stocks, could be p2p loans, could be gold, could be real estate, could be cryptos, could be some other sort of thing.

Buffett is is saying he doesn't consider buying something to sell it later as an investment, thats speculating. Which okay I guess that is technically correct, though to me using the word speculating or investing doesn't matter to me, the point is to make money by buying something that has value and getting more out of it than what you paid. And he only believes in investing in things, which is where the actual thing you bought makes you money while you own it, and not just when you sell it - like dividends or renting out some real estate you bought or I guess buying a house to live in would work to since that purchase is basically paying your rent each month.

So that would mean not all stocks are investments, only the ones that pay dividends. Real estate is only an investment if you are actively renting it out or actively living in it. And I guess perhaps p2p loans would be an investment since you get the interest every period. But doing futures and whatever other crazy stuff is done on Wall St are not investments, buying stuff like gold and silver is not, cryptos are not, stocks that don't offer dividends are not.

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April 29, 2018, 03:14:42 AM
 #4

He is not completely wrong, but we could say the same about gold for example.

His vision about investment is like "whatever generate cash flows", and bitcoin obviously does not have any cash flow, but it do have a worth based on asks and bids. So it is gold and silver.

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April 29, 2018, 03:24:39 AM
 #5

He is not completely wrong, but we could say the same about gold for example.

His vision about investment is like "whatever generate cash flows", and bitcoin obviously does not have any cash flow, but it do have a worth based on asks and bids. So it is gold and silver.

yeah exactly that is a succinct way to put it. Investments according to him generate a cash flow for the owner. Which is why he only believes in buying something to hold for a very long term, because he doesn't believe in speculating. So he cares about dividends and not about the future price of thing, which means he doesn't care how many billions of dollars he is worth, he cares about how much cash it generates in regular dividends to him.

Though this means that proof of stake coins are investments. Because if you stake all your coins it generates income for you.
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April 29, 2018, 04:05:12 AM
 #6

this is mostly playing with words!
if you start thinking like that then when you buy a farm, house, business,... you are also speculating. that is not a satisfactory investment either because you are wishing that the next guy pays more for your house, farm, business if you wanted to sell and also wish that your farm, business,... don't go under and stay productive.

and when you buy Berkshire-Hathaway stocks which belongs to Warren himself you are wishing that Warren pumps it more so you are not investing there either.

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April 29, 2018, 06:39:18 AM
 #7

it has been some time that I have been waiting for this news to come out and we finally see the wallet addresses that belong to Warren Buffet which hold at least 1000 bitcoin and  counting. and we will finally see that he has been investing in bitcoin silently while telling everyone else not to do it because he wanted a lower price for his purchases throughout the years as he slowly parks a large amount of money in bitcoin.

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April 29, 2018, 08:17:17 AM
 #8

He doesn't understand technologies. He did not get the internet. Nor has he invested in any tech companies for a very long time. Apple is the first one he invested in now.
He is a dinosaur in a pretty fast changing world and society. The shift from the industrial age into post industrial and the digitized age is happening faster and faster with every day passing by.
I don't get it why people are still listening to what he has to say. I don't care what his definition of investing is.
That will not change my opinion that Bitcoin is a once in a lifetime opportunity. And now is the time where you can still afford it to buy for a cheap price.
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April 29, 2018, 09:00:21 AM
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 #9

this is mostly playing with words!
if you start thinking like that then when you buy a farm, house, business,... you are also speculating. that is not a satisfactory investment either because you are wishing that the next guy pays more for your house, farm, business if you wanted to sell

You're talking about flipping assets. That's just speculation. He's talking about buying assets that generate a return.

and when you buy Berkshire-Hathaway stocks which belongs to Warren himself you are wishing that Warren pumps it more so you are not investing there either.

Any asset can be speculated on, BTC or stocks or anything else. But the value of Berkshire Hathaway is definitely directly tied to its lucrative insurance businesses/balance sheet and the companies it holds. It's not valued purely on faith or anything.
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April 29, 2018, 09:14:55 AM
 #10

This is all about definitions. Doesn't prove anything. If he says that investing is only when the asset you acquire produces returns on top of capital gains, then yeah. Bitcoin doesn't produce any sort of dividends. But is it really fair to classify "investments" as only things that produce you dividends? I don't think it is.

By his standards, gold isn't an investment, even though it's a long term proven store of value, much like bitcoin will become. Yet, something as illogical as putting your money into the bank for the long run, is.

Honestly, who cares what the definitions are. We know what bitcoin is, what bitcoin is useful for. And that's honestly enough.

I definitely feel like it's a bit of a stretch to say that bitcoin isn't an investment, when a ton of people are using it as a store of value and hedge against the fiat currencies.

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April 29, 2018, 10:19:22 AM
 #11

I completely respect the opinion of Warren Buffet, he is basically the man who became a billionaire just by investing in assets such as stocks and real estate. One thing is for sure is that he knows more about investing compared to what we all know. All through out the existence of Bitcoin he kept his opinion at neutral siding with know one but his beliefs on what investments are. His statements always revolves around Bitcoin having no fair market value or it simply hard to put a price on it. Warren Buffet as an investor simply uses fundamental analysis on his buy and sell decisions which he can barely do on whether Bitcoin is a good buy or not because all we have are just news and its historical price charts in order to make a buy and sell decision to Bitcoin which is really in a semi-speculative manner as technical analysis is also involve.

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April 29, 2018, 10:30:49 AM
 #12

well it is hard to take the words of this guy seriously when all he has been saying so far about bitcoin was that it is going to "end badly"; but so far bitcoin only got stronger and stronger. in fact it was even adopted by multiple countries as a real currency and now millions of merchants are accepting it.

the price is not rising based on faith or whatever else you want to call it. it is rising based on this usability of bitcoin as a currency and the demand for that.














 

 

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April 29, 2018, 11:57:28 AM
 #13

the price is not rising based on faith or whatever else you want to call it. it is rising based on this usability of bitcoin as a currency and the demand for that.
Bitcoin's usability as currency is as low as it has always been. No matter how much I like Bitcoin, I am realistic about how things are, and the reality of the day is that Bitcoin and other cryptos are speculative assets.

Barely anyone is interested in using Bitcoin as currency, because that has been proven to be a guaranteed way to lose out in the long term. What you spent last month at $1000 for example, is likely worth $1500 next month.

That's exactly what holds people back from using Bitcoin as currency. That of course doesn't mean people aren't using it as such, but those who do are a very small minority. Bitcoin needs stability and off-chain layers.

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April 29, 2018, 01:38:50 PM
 #14

the price is not rising based on faith or whatever else you want to call it. it is rising based on this usability of bitcoin as a currency and the demand for that.
Bitcoin's usability as currency is as low as it has always been. No matter how much I like Bitcoin, I am realistic about how things are, and the reality of the day is that Bitcoin and other cryptos are speculative assets.

Barely anyone is interested in using Bitcoin as currency, because that has been proven to be a guaranteed way to lose out in the long term. What you spent last month at $1000 for example, is likely worth $1500 next month.

That's exactly what holds people back from using Bitcoin as currency. That of course doesn't mean people aren't using it as such, but those who do are a very small minority. Bitcoin needs stability and off-chain layers.

But if that is true, if it continues to not be used as a currency precisely because the price keeps going up, then that doesn't matter because that means the price continues to rise even without it being used as a currency, so its usage as a currency doesn't matter you are saying as it's price will continue to go up and it will always be a good investment. Just showing how your logic doesn't make sense if you say a rising price means it won't be used as a currency, because that says if the price doesn't rise then people would be interested in using it as a currency, which would then also raise its price.
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April 29, 2018, 01:41:24 PM
 #15

Ok to add a wrinkle to what Buffett says....his OWN company doesn't pay dividends!!!

So by his own definition buying stock of his own company is not an investment but rather pure speculation just like Bitcoin. So if everyone followed his own investment advice the stock of his company would go to zero.
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April 29, 2018, 04:59:05 PM
 #16

I think this isn't completely true. Bitcoin basically has mechanism that proves its price called proof of work. Basically yeah we all are speculating above it but even at dip it doesn't worth "nothing". It worths more than electricity consumption and compare it with fixed supply.

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April 29, 2018, 05:47:20 PM
 #17

He is right we are not investing we are speculating and making a profit when the price increases.

The real investment that you can invest and make a profit. Like buying a hardware for mining because the price of bitcoin is not stable because any time you can be lost in investing in bitcoin that you don't know if the price will inrease or not.

Bitcoin holders are treating bitcoin as an investment, but the fact as a trader they are speculating and making a profit when the price increased.


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April 29, 2018, 06:07:38 PM
 #18

But if that is true, if it continues to not be used as a currency precisely because the price keeps going up, then that doesn't matter because that means the price continues to rise even without it being used as a currency, so its usage as a currency doesn't matter
It doesn't matter whether Bitcoin will ever be used as currency or not, the whole point is that it will very likely end up being similar to what Gold is right now. Gold was and in some cases is still being seen as currency, but no one uses it as such. Did it affect its value? Nope. People tend to put the focus too much on the currency aspect, while there are much more ways of using Bitcoin than that.

Just showing how your logic doesn't make sense if you say a rising price means it won't be used as a currency, because that says if the price doesn't rise then people would be interested in using it as a currency, which would then also raise its price.
I think you should learn to read and acknowledge what someone is saying. He's referring to the fact that Bitcoin is a speculative asset (ie, investment tool) and not a currency. In that regard, the price going up and down doesn't matter. Lower price means people enter the market, and a higher price means they exit the market, and this cycle will repeat itself endlessly. Only stability will make people use Bitcoin as currency.

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April 29, 2018, 07:24:30 PM
 #19

It depends on how you intend to invest though. Most people /investors simply trade and still call it invest. And besides, there are only three ways to acquire bitcoin. The first is through faucet or sites which promise you free bitcoin but at the end its all full of shit and time waster. The second is to mine bitcoin which praticaly not everyone that owns the money to buy the mining machine. So people ends up buying bitcoin to invest.
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April 29, 2018, 08:08:40 PM
 #20

I can understand where he comes from. He became insanely wealthy by doing what he considers to be the best possible way to generate steady returns, and it worked out more than well for him. We can't expect him (or basically any similar old school investor) to be in favor of something like Bitcoin. On top of that, being an individual with his status and wealth, he already has reached what we can only dream of. It's all about different perspectives on what life has to offer. It's the old elite versus now the potentially new crypto elite. I used to go hard against Warren Buffett and others, but it's pointless to do so if you think about how much of a different group we are. I respect him for being what he is and how consistent his wealth kept growing throughout the years.
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