At the annual Berkshire meeting last week, Warren Buffett continued to balk at Bitcoin’s history-making ROI over the last decade. But the investing legend also gave advice to beat inflation which is precisely what makes Bitcoin so valuable.
The world of investing news has been filled with responses to Warren Buffett’s latest remarks that scorned Bitcoin. The legendary investor took his notorious “rat death squared” slur from 2018 even further.
From the day Buffett made that joke in May 2018 until this weekend, Bitcoin’s price has returned investors a yield of roughly 300% ROI, even with the market drastically capitulating this year since last November’s all time highs.
Warren Buffett won’t buy all BTC for $25
At Berkshire Hathaway’s 2022 annual meeting of shareholders last Saturday, Buffett said he wouldn’t buy all the bitcoin in the world for twenty-five dollars:
“If you told me you own all of the bitcoin in the world and you offered it to me for $25, 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.”
It’s a confident anti-endorsement of Bitcoin, but later in the live event for a huge auditorium of Berkshire Hathaway boosters, the former “Oracle of Omaha” gave some advice on inflation hedging in answer to a Q&A question.
Ironically, Warren Buffett’s advice to beat inflation is exactly what Bitcoin does so well. He said in response to a shareholder question about how to invest to beat inflation:
“The best thing you can do is be exceptionally good at something. If you’re the best doctor in town, if you’re the best lawyer in town, if you’re the best whatever… [people] are going to give you part of what they produce in exchange for what you deliver.
Mr. Buffett continued by elaborating his answer:
“Whatever abilities you have can’t be taken away from you. They can’t actually be inflated away from you. … So the best investment by far is anything that develops yourself, and it’s not taxed at all.”
This is actually why Bitcoin is so successful.
Bitcoin is exceptionally good at doing several very difficult things for banking and remittances, using open source software that anyone can download and use to participate in the network.
Bitcoin is exceptional in a revolutionary way in high tech software architecture innovation, open-source cloud computing, real-world civilian commercial use cases for employing strong public-key cryptography, and of course, the ultimate product delivered by these innovations— providing financial services on a public blockchain with an open-source protocol.
Bitcoin Illustrates Oracle of Omaha’s Anti-Inflation Advice
But on top of that, one of the things that Bitcoin is specifically intentionally designed to be exceptional and has proven to be exceptional in the market for 13 years – is beating inflation. The dollar has been falling steadily since 2009.
Check out this chart of the US dollar inflation rate and Bitcoin’s price (the S&P 500 Index level is thrown in for reference). The correlation is visually apparent at a glance.
It’s as if the Bitcoin price is riding the US dollar inflation rate to new highs in the past year and a half since late 2019, just before the current dollar crisis began.
And the dollar has also depreciated suddenly and rapidly since 2020 after a host of emergency fiscal and monetary stimulus measures taken by legislatures and central banks and historically unprecedented in scale.
This is what prompted the Berkshire shareholder’s question about fighting inflation. It’s a question that resonates across financial markets and hedge funds this year.
So it’s a wonder that Warren Buffett and his longtime business partner Charlie Munger do not see the value in Bitcoin.
By their own modest and sensible principles and standards of value, by their own very reasonable and worldly advice they give to Berkshire shareholders – advice they have used to beat the stock market in a storied career that has made Warren Buffett the richest man in America for many years – Bitcoin fits right in.
