One of the biggest criticisms about cryptocurrencies today is the reality that it lacks intrinsic value. It is mainly based on a number of things such as utilization and hype. And recently, the Oracle of Omaha Warren Buffet echoed these sentiments. He mentioned that “If you buy something like bitcoin or some cryptocurrency, you don’t have anything that is producing anything”.
He added that “you’re just hoping the next guy pays more. And you only feel you’ll find the next guy to pay more if he thinks he’s going to find someone that’s going to pay more”. He reiterated that “you aren’t investing when you do that, you’re speculating”.
Buy and Hold Investment Strategy
Warren Buffet has been known for his buy and hold strategy. In fact, he was able to build his company as well as his asset worth $82 billion using this strategy. He even mentioned that “if you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes”.
He even describes an investment to be worth something on its own. For instance, he said that “if you buy something like a farm, an apartment house or an interest in a business and look to the asset itself to determine whether you’ve done something—what the farm produces, what the business earns.. it’s a perfectly satisfactory investment”. Buffet further explained that “if you ban trading in farms, you could still buy farms, and have a perfectly decent investment”.
Bitcoin Holding On
Fortunately, Bitcoin seems to not get affected by the statements of Warren Buffet. It was able to hold on to its $9,000 value right after the sentiments. It is worth mentioning that Bitcoin had a solid run last April even increasing by 30%. It was a bullish trend needed by Bitcoin since it is still struggling to keep half of its all-time high’s value last mid-December.
However, it seems that there are whales becoming interested in cryptocurrencies. Nasdaq and even Goldman Sachs are just two big players considering the use of cryptos. And come to think of it, Buffet really said nothing new. In late 2017, he also warned that Bitcoin was a “real bubble”.
Volatility May Come to an End Soon
One of the things that contributed to the popularity of cryptocurrencies especially in 2017 was its price volatility. Starting from less than $1,000, Bitcoin was able to reach almost $20,000 right before the year ended. However, there is a chance that this could come to an end. And you can blame institutional investors for this.
However, it isn’t a 100% guarantee that the industry is going to mature immediately and experience reduced volatility. In fact, if you will ask Ruslay Guseynov who is the Co-Founder and Head of Strategy and Development at Soundeon, he said that “Institutional investors’ entrance into cryptocurrency suggests that the market is obtaining a formal structure. Whilst traditionally, a maturing industry is correlated with reduced volatility, it is premature to suggest that this will manifest in the cryptocurrency market in the near or medium term. Crypto-community’s response to institutional investors’ market signals will be most curious to observe”.