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DeFi and Credit Risk

Bitcoin has slowly gained respect in the traditional financial and investing sector in recent years, but Warren Buffett remains dubious of the cryptocurrency.

He stated it's not a productive asset that produces anything concrete during the Berkshire Hathaway Annual Shareholder Meeting on Saturday. Despite a change in public opinion toward bitcoin, Buffett remains unconvinced.

"I have no idea if it will rise or fall in the next year, five years, or ten years." But there's one thing I'm certain of: it doesn't generate anything," stated Buffett. "It has a magical quality to it, and people have ascribed magical qualities to a variety of things."

Even bitcoin fans consider the cryptocurrency to be a passive asset that investors acquire and keep in the hopes of seeing a long-term price gain. Buffet himself stated that "nobody" is short on bitcoin and that everyone is a long-term investor.

For more experienced crypto investors, some currencies provide a method to put their coins to work — either through lending or as collateral — to boost their portfolio's value. They are, however, still new, extremely speculative, and have yet to break into the public like bitcoin.

Buffett went on to explain why he doesn't think bitcoin has value, comparing it to other things that produce value.

"If you said... give our organization $25 billion for a 1% stake in all the farmland in the United States, I'll send you a check this afternoon," Buffett stated. "I now own 1% of the cropland in the United States for $25 billion." I'll give you a check if you provide me 1% of all apartment houses in the country and you want another $25 billion, it's that simple. I wouldn't take it if you told me you had all of the bitcoin in the world and offered it to me for $25 because I wouldn't know what to do with it. In any case, I'd have to sell it back to you. It's not going to make a difference. The flats will generate rent, while the farms will provide food."

For years, investors have been perplexed as to how to value bitcoin, in part because to its capacity to fulfill a variety of purposes. It has established itself as an investment asset in Western markets, particularly in the last year as interest rates and inflation have risen. People in other areas still believe it has a lot of potential as a digital currency.

"Assets must deliver something to someone in order to be valuable. And just one type of money is accepted. "We can put up Berkshire coins... but in the end, this is money," he added, holding out a $20 dollar. "And there's no reason in the world why the US government... will allow Berkshire money to replace their own."

Both Warren Buffett and Charlie Munger have previously made negative remarks about bitcoin. Buffett famously said bitcoin to be "probably rat poison squared." Munger reaffirmed that stance on Saturday.

"I try to avoid things in my life that are dumb and nasty, and that make me appear awful in relation to other people - and bitcoin achieves all three," Munger remarked. "First and foremost, it's dumb because it'll almost certainly go to zero. It's bad because it weakens the Federal Reserve System... and it makes us appear dumb in comparison to China's Communist leader. He was astute enough to prohibit the use of bitcoin in China."