Warren Buffett’s Advice for Beating Inflation is Actually the Key to Bitcoin’s Success (Opinion)

Warren Buffett's Advice for Beating Inflation is Actually the Key to Bitcoin's Success (Opinion)


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 investment news world has been filled with responses to Warren Buffett’s latest remarks heaping scorn on Bitcoin. The legendary investor took his notorious “rat poison squared” insult from 2018 a step 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 the 2022 Berkshire Hathaway annual shareholder meeting last Saturday, Buffett said he wouldn’t buy all the bitcoin in the world for twenty-five dollars:

Minergate

“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.”

That’s one confident anti-endorsement of Bitcoin, but later in the live event for a massive auditorium of Berkshire Hathaway boosters, the old “Oracle of Omaha” gave some advice about hedging against inflation in response 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 to 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 it may be… [people] are going to give you some 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.”

That’s actually why Bitcoin is so successful.

Bitcoin is exceptionally good at doing several very hard things to do for banking services and payment remittances, using an open-source software program 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 Exemplifies the Oracle of Omaha’s Inflation-Beating Advice

But on top of that, one of the things Bitcoin is specifically intentionally designed to be exceptional at and has proven exceptional at it on the market for 13 years— is beating inflation. The dollar has steadily declined in value 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 surfing the US dollar inflation rate to its new highs over the past year-and-a-half since late 2019, just before the present dollar crisis began.

Source: TradingView

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.

That’s what prompted the Berkshire shareholder’s question about beating inflation. It’s a question that resounds through 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 that they give Berkshire shareholders — advice they’ve used to beat the stock market over a legendary career that made Warren Buffett the richest man in America for many years — Bitcoin fits right in.

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