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Crypto Threat: Buffett Disagrees with Banks He Owns

Crypto threat

Warren Buffett, Berkshire Hathaway’s (BRK-B) chairman, has been critical of cryptocurrencies. Last year, he called bitcoin “rat poison squared.” Buffett also said that “in terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending.” He said, “If I could buy a five-year put on every one of the cryptocurrencies, I’d be glad to do it but I would never short a dime’s worth.”

part 7 bitcoin

During last year’s shareholder meeting, in response to a question on whether cryptocurrencies would impact conventional banking, Buffett was candid and compared cryptocurrencies to a “check” that doesn’t have any intrinsic value of its own. Buffett called cryptocurrencies a “nonproductive asset” and compared it to gold and tulips.

Financials

As we noted previously, Berkshire Hathaway’s portfolio looks overweight on financials (XLF). At the end of the third quarter, Berkshire Hathaway held stakes in Bank of America (BAC), Wells Fargo (WFC), American Express (AXP), and U.S. Bancorp (USB). Berkshire Hathaway also owns shares of Goldman Sachs (GS). The company took a new position in JPMorgan Chase (JPM) in the third quarter.

While Buffett doesn’t see cryptocurrencies as a threat, some of the banks he owns, like Bank of America and JPMorgan Chase, see cryptocurrencies as a threat and admitted so in their regulatory filings. However, looking at the massive volatility in cryptocurrencies like bitcoin and the opposition from some central banks, it will likely be a long time before cryptocurrencies pose any meaningful threat to traditional banks. Frequent scams associated with cryptocurrencies also raise their risk profile. However, traditional banks are also prone to scams. Buffett’s banks aren’t an exception.

Read Following Warren Buffett Might Not Always Yield Profits to learn more.

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