Warren Buffett calls bitcoin worthless amid interest rate rise, Elon Musk responds

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One of the world’s most famous investors, War­ren Buf­fett, has char­ac­terised bit­coin as essen­tial­ly worth­less, despite its mas­sive capitalisation.

One of the rich­est men in the world has made a bru­tal call about bitcoin.

War­ren Buf­fett has sav­aged the cryp­tocur­ren­cy, say­ing he wouldn’t buy “all of the bit­coin in the world” for $US25.

The mul­ti-bil­lion­aire has a very low opin­ion of bit­coin – that it’s basi­cal­ly worthless.

This is despite bit­coin hav­ing a mar­ket cap­i­tal­i­sa­tion of $US732.4 bil­lion ($A1.03 tril­lion – as at 7.30am AEST), with the price of a sin­gle bit­coin sit­ting at $US38,651 ($A54,572).

At the annu­al share­hold­er meet­ing for his com­pa­ny Berk­shire Hath­away, Mr Buf­fett, whose net worth is $175 mil­lion, said: “Whether it [bit­coin] goes up or down in the next year, or five or 10 years, I don’t know. But the one thing I’m pret­ty sure of is that it doesn’t pro­duce any­thing,” CNBC reports.

He did how­ev­er note: “It’s got a mag­ic to it and peo­ple have attached mag­ic to lots of things.”

The famed investor explained why he believes bit­coin is intrin­si­cal­ly worthless.

“If you said … for a 1 per cent inter­est in all the farm­land in the Unit­ed States, pay our group $25 bil­lion, I’ll write you a cheque this after­noon,” he said.

“[For] $25 bil­lion I now own 1 per cent of the farm­land. [If] you offer me 1 per cent of all the apart­ment hous­es in the coun­try and you want anoth­er $25 bil­lion ($A35 bil­lion), I’ll write you a cheque, it’s very sim­ple. Now if you told me you own all of the bit­coin in the world and you offered it to me for $25 ($A35) I wouldn’t take it because what would I do with it? I’d have to sell it back to you one way or anoth­er. It isn’t going to do any­thing. The apart­ments are going to pro­duce rent and the farms are going to pro­duce food.”

Mr Buffett’s right-hand man, Berk­shire Hathaway’s vice chair­man Char­lie Munger, pre­vi­ous­ly told the share­hold­er meet­ing: “In my life, I try to avoid things that are stu­pid and evil and make me look bad … and bit­coin does all three.”

Mr Buffett’s com­ments attract­ed the notice of the world’s rich­est man and cryp­to enthu­si­ast Elon Musk, who not­ed the investor had a lot to say about bit­coin for some­one with such a low opin­ion of dig­i­tal currencies. 

The Tes­la CEO com­ment­ed on a clip of Mr Buffett’s speech, tweet­ing: “Haha he says ‘bit­coin’ so many times.”

The new own­er of Twit­ter also gave his view on the best way to invest, writ­ing, “Since I’ve been asked a lot: Buy stock in sev­er­al com­pa­nies that make prod­ucts and ser­vices that you believe in.

“Only sell if you think their prod­ucts and ser­vices are trend­ing worse. Don’t pan­ic when the mar­ket does. This will serve you well in the long-term.”

Inter­est rates and crypto

With the cash rate wide­ly expect­ed to be raised by the Reserve Bank of Aus­tralia today, it’s pos­si­ble the cryp­to mar­ket could be impacted.

High­er rates gen­er­al­ly mean a low­er investor appetite for high risk assets like cryp­to, ana­lyst Josh Gilbert told Mot­ley Fool.

He not­ed, how­ev­er, that high­er rates were unlike­ly to change the long-term pic­ture for the asset.

“It’s expect­ed that we will con­tin­ue to see a peri­od of con­sol­i­da­tion with cryp­to, as long as geopo­lit­i­cal ten­sions ensue. In the sit­u­a­tion that they do ease, a cryp­to relief ral­ly is antic­i­pat­ed to occur.”

He said well-known cryp­tos like bit­coin and ethereum would like­ly per­form better.

“Alt­coins will be more sus­cep­ti­ble to investors rotat­ing out of cryp­to, as they tend to car­ry more risk than the larg­er capped cryp­to assets such as bit­coin and ethereum,” he said.

“This is because larg­er capped cryp­to assets are more estab­lished and their use cas­es to the every­day investor are much clear­er as shown by their rise in recent months.”

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