Warren Buffett's bitcoin attack drags crypto prices down

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Warren Buffett declared on Saturday that bitcoin 'doesn't produce anything'. Photo: Bill Pugliano/Getty
Warren Buffett declared on Saturday that bitcoin 'doesn't produce anything'. Photo: Bill Pugliano/Getty

When Warren Buffett speaks investors across the world sit up and listen, and at his annual shareholder meeting at the weekend the legendary investor claimed that "bitcoin doesn't produce anything".

The Berkshire Hathaway (BRK-A) CEO showed his contempt for the digital asset by stating that "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?"

The news comes at a fragile time for bitcoin (BTC-USD), as the world's preeminent cryptocurrency is having a tough time lifting above $38,000 and Buffet's recent derision of the number one cryptocurrency made holding this resistance level even harder.

On Tuesday bitcoin slipped again, down 1.4%, seeing a slump of over 5% in the week.

The world's preeminent cryptocurrency took the rest of the cryptocurrency market with it, with the market cap of $1.83tn falling 1% in the last 24 hours.

Ethereum (ETH-USD) displayed its tendency to mimic its older sibling by also falling 1%, also down over 5% in the week.

The bitcoin price has seen a support level of around $38,000 for the past week, suggesting whales are setting their buys at this price.

Read more: Crypto live prices

A bitcoin whale is a cryptocurrency term that refers to individuals or entities that hold large amounts of bitcoin. Whales hold enough cryptocurrency that they have the potential to manipulate currency valuations.

According to CNBC, Buffett spoke at Berkshire Hathaway's annual shareholder meeting and said: “Whether it goes up or down in the next year, or five or 10 years, I don’t know.

"But the one thing I’m pretty sure of is that it doesn’t produce anything.

“It’s got a magic to it and people have attached magics to lots of things.

"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."

Watch: Warren Buffett bashes bitcoin at annual Berkshire Hathaway meeting

Vice-chairman of Berkshire Hathaway Charlie Munger also hit out at the digital currency: "In my life, I try to avoid things that are stupid and evil and make me look bad and bitcoin does all three."

The comments drew immediate reaction from bitcoin proponents such as Anthony Pompliano who tweeted that "everyone fears something they don't understand". New Twitter chief Elon Musk retorted: "Haha, he says ‘bitcoin’ so many times".

The bitcoin price was not bolstered by Tesla's new SEC filing, where the electric car maker stated that bitcoin has “long-term potential” and is “a liquid alternative to cash.”

Crypto investors have their attention locked on Jerome Powell's actions at this week's US Federal Reserve two day meeting, which will conclude on Wednesday.

CEO of the Federal Reserve Bank of St. Louis James Brian Bullard warned that a 75 basis point rate hike should not be ruled out as the US central bank tries to slow the US economy enough to control inflation, but not enough that it teeters into a recession.

Read more: 'Crypto lobby groups are dictating terms in Washington'

Bearish sentiment was further inflamed when former Federal Reserve vice-chair Roger Ferguson reacted to the rate hike anticipation by saying on CNBC that "a recession at this stage is almost inevitable".

Traders are expecting markets to react negatively if the Fed does push through with a rate hike of more than 50 basis points,

When traditional markets nosedive bitcoin has not acted as a safe haven to store value in.

Instead of being a hedge against the institutional financial system, bitcoin is still heavily correlated to traditional markets.

Watch: Steve Hanke: 'Cryptocurrencies are fiat money on steroids'

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