Omaha Oracle Warren Buffett may take part in investing in assets like Bitcoin. (Cryptography: BTC) Which – On the surface, will you break all of his traditional rules for investment?
That’s more reasonable than I thought. This is why.
Buffett’s nature towards Bitcoin over the years, and the general nature towards cryptocurrency, has been one of the unrestrained aversions. He calls it “rat poison” and says he doesn’t buy all the bitcoins in the world, even at a rock bottom price of $25, because he “doesn’t do anything.” He believes all crypto investments are on track due to the catastrophe. It is believed to be shared by his longtime friend and investment partner Charlie Munger.
So he probably won’t buy it now. But if that were the case, he would probably choose to hold it forever, as he likes most of his investments. Bitcoin is a good asset to hold forever – and there’s why Buffett misses out on a big investment despite having many qualities he normally says he likes there is.
Thanks to Bitcoin’s harving schedule, supply growth is slowing as it is a rough timeline when mining difficulty increases compared to the generated rewards. As a result of the strict restrictions encoded in that protocol, only 21 million bitcoins exist can exist (approximately 19.8 million have already been in circulation). Therefore, given the constraints on supply, even if there is a certain level of demand for a coin, its price will rise over time.
Let’s consider its meaning a little more closely to address one of Buffett’s important criticisms. This means he needs to find someone to sell Bitcoin at a higher price than what he bought it.
Don’t forget that Buffett said he wouldn’t buy all the Bitcoin in the world for $25. But he never gets the opportunity.
There are a lot of Bitcoin fanatics who backup trucks to back up trucks at a much higher price than that. One of them is Michael Saylor, founder and executive chairman of MicroStrategy. His company just bought $742 million in Bitcoin on February 10th, giving it a storage of coins that is now close to $32 billion.
Saylor is not just a bitcoin evangelist willing to buy billions. The boosters for all coins are also not fully funded. The bigger point here is that no one willing to buy a coin is uncertain that no one willing to buy it.
The story continues
As Buffett said, it really doesn’t matter if Bitcoin says “we’re not going to do anything.” The social consensus could resist traditional methods of value investment assessment, but it is a brand with many values. It is exactly the kind of economic moat that Buffett is, as part of his quest to identify companies with a competitive advantage. And, as it has been established, there are only more owners of the coin over time, so the long-term picture is even better than what only Halving might imply.
There is no chance that Buffett would find the above argument convincing. Nor is there a way to oppose his implicit resistance that he is not used to determining intrinsic value. If you made your career by creating a careful valuation and purchasing assets you knew were cheaper than their true value, you would be the same. But that doesn’t mean you need to follow his lead here.
Buying Bitcoin is a great way to build inflationary resistance in your portfolio. The value in terms of purchasing power should be well preserved, as actors cannot simply print. Plus, if you’re willing to hold it for a very long time, you’ll see that the price will also rise significantly.
If you’re feeling the concerns of Buffett like Buffett that the coin’s prices are rising now, then there’s no fear. Simply exercise a bit of Buffett’s legendary patience and wait calmly for the price to return to a level that’s more appealing to you, and it could easily happen within the next few years.
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Alex Carchidi has a Bitcoin position. Motley Fool has a position and recommends Bitcoin. Motley Fools have a disclosure policy.
Will Warren Buffett buy Bitcoin now and hold it forever? Originally published by The Motley Fool
