Warren Buffett has bad news for anyone who invested in Bitcoin or any other cryptocurrency. The billionaire investor made a gloom and doom prediction about the future of these currencies during an interview with CNBC’s“Squawk Box.”
“In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending,” Buffet said. “When it happens or how or anything else, I don’t know.”
Cryptocurrencies are part of a decentralized digital cash system that enables peer to peer electronic transactions over the internet. Bitcoin is the most well known of these currencies, but others exist too like Ethereum, Litecoin, Dash, Ripple, and others.
Buffett’s partner echoed the sentiment. In his interview with CNBC, Charlie Munger was critical of the “frothiness” of cryptocurrencies. He said that he believes that their bubbles will burst.
“There are always bubbles… that are going to end badly,” Munger said.
Munger compared the current investment climate around cryptocurrencies and venture capital to the dot-com bubble in that late nineties. As Investopedia notes, the dot-com bubble burst because venture capitalists invested a lot of money into tech businesses with unproven business models that would not make profits for several years. Internet companies without revenues or profits filed initial public offerings and the prices of their stocks tripled and quadrupled quickly. But it all came crashing down when Dell and Cisco put large sell orders on their stocks. This triggered massive selling among other investors and many Internet companies went out of business.
Bitcoin and cryptocurrency also seem to be on the rise right now like those dot-coms were in the nineties. As the Daily Mail notes, last week the price of Bitcoin rose by almost 14 percent to $15,017 after news broke that Peter Thiel, the co-founder of Paypal, had invested in the currency. The report went on to say that Thiel and his company had bought $15 to $20 million in Bitcoin last year. It’s estimated that Thiel’s Bitcoin is now valued at hundreds of millions of dollars after the currency’s price increase in 2017.
But Munger, one of the most successful investors in the world, says he isn’t swayed by the hype surrounding these new digital currencies.
“Bitcoin and the other cryptocurrencies are also bubbles,” he added in his CNBC interview. “Investors are excited because things are going up at the moment and it sounds vaguely modern… But I’m not excited.”
As the Daily Mail notes, traditional investors have been wary about putting money into the cryptocurrency market because they are concerned about liquidity and cybersecurity.