Warren Buffett thinks bitcoin is worthless, Elon Musk responds

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).

Warren Buffett, chairman and CEO of Berkshire Hathaway, has a low opinion of bitcoin. Picture: AFP

At the annual shareholder meeting for his company Berkshire Hathaway, Mr Buffett, whose net worth is US$123 billion, 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.”

Tesla CEO and new owner of Twitter Elon Musk commented on Warren Buffett’s speech. Picture: AFP

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.”

Cryptocurrencies like bitcoin and ethereum may fare better than altcoins as interest rates rise. Picture: iStock

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.”