Warren Buffett’s Bitcoin ‘Rat Poison’: A Misunderstood Metaphor?
Warren Buffett’s Bitcoin ‘Rat Poison’: A Misunderstood Metaphor?
In 2018, Warren Buffett famously called Bitcoin "rat poison squared," warning investors against its speculative nature. As a legendary investor known for his astute, practical approach, evidenced by his success at Berkshire Hathaway and insights shared in his annual letters, (please read them if you haven't already: https://www.berkshirehathaway.com/letters/letters.html) Buffett’s words carry weight. But is he right about Bitcoin, or might his metaphor hold an unexpected truth? This article explores Buffett’s investment philosophy, his skepticism of cryptocurrencies, and whether Bitcoin, as a decentralised asset, could indeed be the "rat poison" that eliminates financial "vermin", the systemic flaws Bitcoin threatens to dismantle.
Buffett’s Investment Philosophy
To understand Buffett’s Bitcoin skepticism, we must first explore his core investment philosophy. Buffett favours high-quality, well-managed businesses in growing sectors, think Coca-Cola or Apple, because they can compound earnings faster than inflation erodes currency value. For example, his long-term holding of Coca-Cola has delivered consistent dividends and growth, outpacing the debasement of the U.S. dollar. In contrast, hard assets like gold or real estate, while often seen as inflation hedges, typically only appreciate in line with currency debasement, adjusted for supply and demand fluctuations. Buffett’s preference for businesses stems from their ability to generate intrinsic value over time, a trait he finds lacking in assets like gold and non existent in nonsense like Bitcoin.
Why Bitcoin Confounds Buffett
Buffett has long been wary of speculative "get rich quick" schemes, high fees, and unchecked financial engineering, traits he associates with much of the crypto space. He once quipped, "When a man with money meets a man with experience, the man with the money ends up with the experience, and the man with experience ends up with the money." This applies to Bitcoin’s early days, marked by hype, scams, and volatility, which likely reinforced his view of it as a risky gamble. However, Buffett isn’t entirely averse to financial innovation, he has used derivatives like options contracts at Berkshire Hathaway to hedge risks or generate income, albeit with strict discipline. His concern with Bitcoin seems less about innovation itself and more about its lack of tangible value in his framework.
Despite his preference for traditional businesses, Buffett has embraced innovation when he perceives real value. In the 1960s, he took a significant stake in American Express during a crisis, betting on its novel charge card model, a risky "idea" at the time. His bet paid off as Amex became a financial powerhouse, showing Buffett’s ability to back innovation with strong fundamentals. Similarly, after years of avoiding tech, Buffett invested heavily in Apple in 2016, recognising its ecosystem as a modern "moat", a competitive advantage he admires. Apple’s stock soared, becoming one of Berkshire’s largest holdings. These examples suggest Buffett can adapt to new paradigms, but Bitcoin remains a bridge too far. Unlike Amex or Apple, which generate revenue and profits, Bitcoin produces no cash flow for holders, resembling a "collectible" in Buffett’s eyes, lacking the intrinsic value he seeks.
To Buffett, Bitcoin is an alien concept. As a decentralised network, it produces no revenue or dividends for token holders, functioning more like a digital collectible than a productive asset. This view aligns with his broader skepticism of non-income-generating assets, he famously avoids gold for the same reason. Buffett has also criticised Bitcoin’s speculative nature, pointing to its volatile price swings and association with scams, such as the 2017 ICO boom, where billions were lost to fraudulent projects. Yet, Bitcoin’s proponents argue it offers unique value: a censorship-resistant, borderless store of value with a fixed supply of 21 million coins. Its adoption has grown significantly, by 2025, over 200 million wallets hold Bitcoin, and daily transaction volume averages $50 billion, rivalling major payment networks like Visa. While Buffett sees a speculative bubble, Bitcoin’s resilience and utility suggest it may transcend the "collectible" label.
The Bitcoin Advocate’s Rebuttal
Bitcoin advocates argue that Buffett underestimates the flaws in the fractional reserve banking system, particularly since the shift to fiat currencies in 1971. The 2008 financial crisis, followed by bank bailouts and minimal accountability, exposed systemic vulnerabilities, while subsequent quantitative easing has fuelled inflation, eroding purchasing power. For example, U.S. inflation averaged 8% annually from 2021 to 2023, forcing savers to take on greater risk to preserve wealth.
Bitcoin, with its capped supply and decentralised structure, is seen as a hedge against this erosion, often dubbed "Gold 2.0." Unlike gold, which has a $14 trillion market cap but is cumbersome to store and transfer, Bitcoin’s $1.8 trillion market cap (as of April 2025) offers digital portability and divisibility, making it a more practical alternative for the modern era. Advocates argue that Bitcoin’s ability to operate outside traditional financial systems addresses the very "vermin" Buffett might criticise: rent-seeking intermediaries and inflationary policies.
Reframing Rat Poison
Rat poison eliminates vermin, and in the financial world, "vermin" could be the rent-seekers and inefficiencies Bitcoin aims to disrupt. In this sense, Bitcoin might indeed be "rat poison", not for holders, sorry, 'hodlers', but for flawed systems and assets. Over the past decade, Bitcoin has outperformed most alternative cryptocurrencies and fiat currencies, with its market dominance rising to over 60% in 2025, up from 40% in 2018. Weaker crypto projects and inflationary currencies, like the Venezuelan Bolívar (which lost 99.9% of its value since 2015), struggle to retain value against Bitcoin’s deflationary design. Even the U.S. dollar has depreciated by 20% against Bitcoin annually since 2015. By targeting systemic inefficiencies, centralized control, high fees, and currency debasement, Bitcoin may fulfil Buffett’s metaphor in a way he didn’t intend, acting as a cleansing force in finance.
Conclusion
Buffett’s philosophy, investing in growing, well-managed businesses, remains a gold standard, as his success with Coca-Cola and Apple demonstrates. Yet, Bitcoin’s evolution challenges his "rat poison" critique. With a $1.8 trillion market cap, institutional adoption (e.g., BlackRock’s Bitcoin ETF), and a robust network securing $50 billion in daily transactions, Bitcoin has proven its durability and utility as a store of value. Its 21 million coin cap, a "moat" Buffett might appreciate, positions it as a hedge against the systemic "vermin" of inflation and centralised control. While Buffett may never embrace Bitcoin, its growth suggests it’s more than a speculative collectible. Could Bitcoin eventually earn a place in a value investor’s portfolio, or will it remain rat poison in Buffett’s eyes? The answer may hinge on whether its real-world impact can match its promise.
