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Warren Buffett says bitcoin will ‘come to a bad ending’

MarketWatch logo MarketWatch 1/11/2018 William Watts
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Video by CNBC

Billionaire investor Warren Buffett is confident the cryptocurrency story will end in tears, but he isn’t staking any money on bitcoin or its brethren either way.

“In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending,” the chairman and chief executive of Berkshire Hathaway (BRK)(BRK) told CNBC in a Wednesday interview.

Buffett said he wouldn’t short bitcoin and had no interest in trading futures on the cryptocurrency. But if five-year put options existed, Buffett said he’d buy one on practically every cryptocurrency that exists. A put option gives the holder the right, but not the obligation, to sell an underlying security at a set price and can be used to bet the price of an asset will fall.

The bitcoin spot price (BTCUSD) was off more than 5% Wednesday at $13,786.32, far off the all-time high above $19,000 it hit in mid-December.

The sharp rise in the price of bitcoin and other cryptocurrencies over the past year has drawn increasing attention from Wall Street. JPMorgan Chase & Co. (JPM) Chairman and CEO Jamie Dimon on Tuesday expressed regret over calling bitcoin a “fraud” in September but said he still thinks that cryptocurrencies are hyped even if blockchain, the distributed ledger technology behind cryptocurrencies, is “real.”

Earlier Wednesday, Berkshire said it elevated executives Gregory Abel and Ajit Jain to vice chairman roles, a move that all but confirmed longstanding speculation that one of the pair is in line to eventually replace Buffett at the helm of the conglomerate.

As for the stock market, Buffett argued that the corporate tax cut signed into law last month likely hasn’t been fully baked into prices.

Buffett likened the cut in the corporate tax rate from 35% to 21% as the equivalent of a “silent shareholder,” in this case the U.S. government, giving up a large chunk of its claim to profits to other shareholders.

“You had this major change in the silent stock holder…who has been content with 35%…and now instead of getting 35% interest in the earnings they get 21% and that makes the remaining stock more valuable,” he said.

Stocks ended 2017 on a tear, continuing the rally over the first six trading days of 2018, with the S&P 500 (SPX) notching records each day to match the record for longest streak of all-time high closes to begin a new year that’s stood since 1964. The S&P 500 was threatening to post its first down day of 2018 on Wednesday, declining slightly as Treasury yields continued their recent rise.

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