Is Warren Buffet Wrong About Bitcoin?

Navarre Trousselot February 5, 2020

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You might not know this about Navexa yet, but we don’t just offer portfolio tracking for traditional Australian investments.

We also provide full portfolio tracking for the cryptocurrency markets.

This isn’t because we’re Bitcoin fanatics or Blockchain evangelists.

It’s because about one in five Aussies will buy crypto assets in the next six months.

By 2025, more than half under the age of 40 will own cryptos.

That’s according to the Independent Reserve Cryptocurrency Index (and backed by our own user statistics).

We’re growing our service in line with what our growing community of customers requires.

The numbers show cryptos are becoming an increasingly significant part of Australians’ wealth building strategies.

So providing crypto analytics for Navexa users makes sense.

However, there are those who wouldn’t agree.

Top of the list in terms of influence would be the great Warren Buffett.

We’ve written about Buffett before.

The ‘Oracle of Omaha’ (worth approximately $90 billion USD) is a legend in value investing circles.

He’s renowned for making big bets on businesses that generate big long-term returns for investors.

But…

Warren Buffett Is Not
A Big Fan Of Crypto

Warren Buffet just gave up on newspapers and sold his last investment in the industry after fighting the rise of the internet. It took him 20+ years.
No wonder he doesn’t see crypto coming.”

— Blockfolio

Buffett is known for avoiding the complex in favour of the simple.

He goes for relatively boring, traditional companies as opposed to speculative startups trying to take big technological or financial leaps.

So, you can understand why he believes cryptos will “come to a bad ending”.

You can’t deny Buffett’s approach has worked out well for him.

But that doesn’t mean he hasn’t made mistakes.

While the investment titan ideally prefers to hold a position “forever”, he recently bailed on an underperforming group of assets.

More than 20 years ago, Buffett’s Berkshire Hathaway bought a swathe of newspaper business across the United States.

You might recall that about 10 years ago, the print news industry started coming under serious pressure from digital media.

To many, the writing for newspapers was on the wall around the turn of the millennium.

Circulation and advertising revenues were plummeting.

Traditional publishers scrambled to find a way to move online and remain profitable.

But Buffett grimly held on to his newspaper businesses, believing the rise of digital news to be a fad and the challenges facing the print media to be temporary.

Ten years later, and Reuters reported last week that Buffett has finally dumped the struggling newspaper businesses.

In other words…

Buffett Just Admitted
He Was Wrong.

[Bitcoin] is a remarkable cryptographic achievement
Lots of people will build businesses on top of that.

Eric Schmidt, Executive Chairman, Google

Buffett’s anti-crypto stance squares with his long-term reliance on investing in simple, relatively traditional businesses.

He doesn’t put money into things he doesn’t understand.

You have to admire that. To a point.

But as his newspaper investment saga reveals, Buffett doesn’t always get it right when selecting assets and sectors.

Buffett was wrong.

Not only that, but he stuck with an investment that went nowhere for many years.

It’s possible he was blinded by his conviction that the traditional could withstand the pressure from new, disruptive digital competition.

So perhaps it’s worth entertaining the idea that Warren Buffett is wrong, too, about cryptocurrencies.

Bitcoin launched in 2013.

Between 2013 and today, the original cryptocurrency has rocketed more than 100,000% higher.

The newspaper business, in that time, has foundered.

Buffett made no money on his decades-long newspaper investment.

He lost about $2 million.

In contrast, you could have made $2 million from just a $2,000 investment into Bitcoin when it launched in 2013.

And right now, the numbers show that here in Australia, crypto adoption is progressing.

In just five years there will be a majority of investors under 40 holding crypto assets.

More broadly, in the next 10 years, Generations X and Y will control more than two thirds of the world’s financial assets (more on that here).

Cryptos would appear to be a big part of this generational shift.

And as Eric Schmidt says in the above quote, cryptocurrencies offer a platform for a whole new breed of digital businesses.

Just because people like Warren Buffett don’t understand or approve of disruptive new tech and the associated financial instruments they create…

…does not mean cryptos or blockchain technology is going to fade into obscurity and leave the current financial status quo untroubled and unchanged.


Navarre Trousselot

Navarre is the Founder of Navexa — a portfolio analytics service made for Australian investors. Navarre left a lucrative corporate developer job to combine two of his passions; investing and entrepreneurship. He created Navexa because he couldn’t find a portfolio analytics service that met his own high standards. Now, he’s focused on helping as many Australians as possible get more from their portfolios through the smart and creative use of data. Follow Navarre on Twitter and connect with him on LinkedIn.

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