It’s no secret that cryptocurrencies like Bitcoin and Ethereum have their loyal followers along with scathing detractors. Billionaire investor Warren Buffett has never been a fan of cryptocurrencies, but he ratcheted up the rhetoric this week by calling Bitcoin “rat poison squared”.
Buffett helms Berkshire Hathaway and made the comments at the company’s 2018 annual shareholder meeting. He went on to further explain his comments to CNBC, stating, “It does create a rising price, creates more buyers … If you don’t understand it, you get much more excited. People like to speculate, they like to gamble.”
Lots of excitement swirled around Bitcoin in the closing months of 2017. Bitcoin was at around $3,200 in September 2017, then steadily rose to nearly hit $20,000 in mid-December. However, the cryptocurrency came crashing back down at the start of the year and has been hovering below $10,000 since that time. While its current value has still increased 3x since September, the volatility has many investors shaken.
“[Bitcoin] itself is creating nothing,” Buffet added. “When you’re buying nonproductive assets, all you’re counting on is the next person is going to pay you more because they’re even more excited about another next person coming along.”
Interestingly, Buffet also likened the Bitcoin craze to the “tulip mania” that arose in the 17th century during the Dutch Golden Age. During this period, it is reported that a single tulip bulb could be sold for roughly 10 times the annual salary of a skilled craftsman. Prices eventually crashed down to “normal levels” once everyone came to their senses.
JPMorgan Chase CEO Jamie Dimon also referenced tulip bulb mania in his own critique of Bitcoin last year. “It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed. Currencies have legal support. It will blow up,” said Dimon. “It’s just not a real thing, eventually it will be closed.”
Dimon also said that he would fire any JPMorgan trader discovered to be involving because “they are stupid”.