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Bitcoin Price Rise Does Not Impress Berkshire Hathaway’s Charlie Munger

Last Updated November 6, 2023 3:04 PM
Teuta Franjkovic
Last Updated November 6, 2023 3:04 PM

Key Takeaways

  • Charlie Munger has expressed concerns about the rising price of Bitcoin referring to it as a “stink ball.”
  • Berkshire Hathaway’s vice chair advocates for traditional sovereign-issued currency.
  • Munger has consistently voiced strong opposition to cryptocurrencies, referring to them as “rat poison”.
  • His friend and colleague Warren Buffett recently invested in Nubank, a fintech company that embraces cryptocurrencies.

Charlie Munger, vice chairman of Berkshire Hathaway and a close associate of Warren Buffett, expressed alarm as the price of Bitcoin increased.

In his recent interview , Charlie Munger, the vice chairman of Berkshire Hathaway, again made fun of Bitcoin referring to it as a ‘stink ball’. Whether the 99-year-old is concerned about the recent spike in the price of Bitcoin was one of the queries presented to him.

Advocating for Traditional Currencies

When discussing the development of a cryptocurrency, the executive stated :

“Of course, it concerns me. I have a lot of very simple fundamental ideas that I think every educated person ought to have. Those ideas include what Adam Smith taught everybody … In order to get the Smithian results, you need a currency to facilitate exchanges. And to make the currency respected widely, the trick we’ve used is the sovereign issues it,” Munger added .

Munger further stated that the historical transition from hunter-gathering societies to civilizations has consistently involved the presence of a robust currency, which could take various forms, such as seashells, corn kernels, gold coins, or even the promises embedded in modern banking systems found in countries like the United States and England.

He said :

“When you start creating an artificial currency…you’re throwing your stink ball into a recipe that’s been around for a long time, that’s worked very well for a lot of people.”

Munger has consistently expressed strong opposition to cryptocurrencies, particularly Bitcoin. Last month, the Berkshire executive issued a caution that the majority of crypto investments would eventually become worthless, describing Bitcoin as the most ill-advised investment he had ever encountered.

In earlier instances, he referred to BTC as “rat poison ” and compared its trading to dealing in undesirable assets. In February, he sharply criticized it, deeming the idea of buying such assets as ludicrous and deplorable. He expressed embarrassment that a significant number of people in his country believed in cryptocurrencies, and he criticized the government for permitting their existence.

In July of the previous year, he went further by stating his aversion  to cryptocurrencies and advising others to avoid them as if they were hazardous. He also likened cryptocurrencies to a contagious disease and called for government interventions to prohibit their use.

He even expressed regret that cryptocurrencies were ever introduced, labeling their development as a repugnant and counterproductive aspect of civilization.

Buffett Softening On Crypto?

Given his close association with Warren Buffett, it’s unsurprising that Munger holds a negative stance on cryptocurrencies.

Warren Buffett, the renowned billionaire investor, has long been an outspoken critic of Bitcoin and cryptocurrencies amid a perceived US “battle” against Bitcoin.

Nevertheless, in light of a looming crisis that threatens the US dollar, a recent analysis of Warren Buffett’s Berkshire Hathaway stock portfolio has unveiled that his most successful investment in the current year is Nubank .

Nubank is a fintech company with a proclivity for Bitcoin and other cryptocurrencies.

Back in June 2021, Berkshire Hathaway, under Buffett’s guidance, made a substantial $500 million investment  in Brazil’s Nubank. This was before to the company’s initial public offering (IPO) later that same year.

Buffett’s stake in Nubank has now appreciated to approximately $840 million. It followed an additional $250 million infusion into the fintech firm during its IPO.

Nubank, a financial institution that permits users to engage in Bitcoin and other cryptocurrency trading and recently introduced its own digital currency called “Nucoin,” has witnessed its stock price surge by over 100% in the current year. This impressive growth has been driven by a substantial increase in revenue and a growing customer base.

Buffett’s ‘Rat Poison’ and Munger’s Crypto Contagion

Buffett has previously characterized  Bitcoin as “rat poison squared,” deeming it a valueless fantasy. On the other hand, Munger has drawn parallels between cryptocurrencies and contagious diseases. He advocated for a US ban on them and expressed disapproval of the extensive speculation driving their recent price surges.

Regardless of the situation, the swift advancements and the profound transition from a profit-driven orientation to a more altruistic perspective promise to liberate the world from the dominance of large corporations.

The reality is that the traditional leaders in the industry responsible for the ongoing sustainability challenges are expressing their dismay at something they neither comprehend nor manage.

Nevertheless, the majority of rapid innovations are unfolding within the realm of cryptocurrencies, leaving us to ponder whether the skepticism of the Buffett-Munger duo towards Bitcoin will endure.

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