When it comes to bitcoin, billionaire investor Warren Buffett wants to make one thing clear: Unlike buying stocks, bonds or real estate, buying bitcoin is not an investment.
That's because it lacks intrinsic value, Buffett says.
"If you buy something like bitcoin or some cryptocurrency, you don't have anything that is producing anything," Buffett says in an interview with Yahoo Finance. "You're just hoping the next guy pays more. And you only feel you'll find the next guy to pay more if he thinks he's going to find someone that's going to pay more.
"You aren't investing when you do that, you're speculating."
"Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio's market value," Buffett wrote in his 1996 letter to shareholders. "If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes."
To be an investment, what you're buying has to be worth something on its own, Buffett says.
For example, "If you buy something [like] a farm, an apartment house or an interest in a business and look to the asset itself to determine whether you've done something — what the farm produces, what the business earns ... it's a perfectly satisfactory investment," Buffett explains to Yahoo Finance. "You look at the investment itself to deliver the return to you.
"If you ban trading in farms, you could still buy farms, and have a perfectly decent investment," Buffett says.
Bitcoin, however, only increases in value by being bought and sold, he argues. Its value comes from what people are willing to pay.
"[I]f you ban trading in ... bitcoin, which nobody knows exactly what it is, people would say, 'Well why in the world would I buy it?'"