Warren Buffett Warns Of ‘Casinolike’ Behavior In Markets As Coinbase Crashes Because Of

On Mar 24, 2024

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Warren Buffett cautioned he’s seeing signs of excess in markets, likening their price action to a casino.

“For whatever reasons, markets now exhibit far more casinolike behavior than they did when I was young,” Buffett told Fortune magazine.

While he might’ve been talking about stock markets, even more volatility in the crypto markets caused Coinbase Global Inc. (NASDAQ:COIN) to be temporarily unable to handle the load.

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For a brief time, many Coinbase users saw zero account balances and were unable to buy or sell cryptocurrencies.

The chaos reminded some traders of Robinhood Market Inc.’s (NASDAQ:HOOD) 2021 fiasco caused by the unexpected rise in meme stocks such as GameStop Corp. (NYSE:GME).

A popular Reddit post titled “Dear Coinbase – Enjoy your Robinhood Moment” expressed disappointment in the similarities.

While the incident caused Coinbase’s stock to dip slightly, it’s still up about 215% over the past year, largely because of the rise of Bitcoin and the increased trading fees generated from the cryptocurrency.

The increased trading fees that both Coinbase and Robinhood have achieved are likely all part of what Buffett was voicing his displeasure over.

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Buffett’s late business partner Charlie Munger bluntly assessed Robinhood in 2021, saying, “I think it’s just God awful that something like that brought investments from civilized men and decent citizens. It’s deeply wrong. We don’t want to make our money selling things that are bad for people.”

Buffett’s Berkshire Hathaway Inc. (NYSE:BRK) might not have had the same gains as Coinbase over the past year, but it still achieved a roughly 33.3% gain over the past year.

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One benefit to owning Berkshire has been its relatively low volatility compared to the more speculative Coinbase as well as its proven staying power over time.

While times have changed, Buffett believes the speculative behavior of investors hasn’t, saying, “Today’s active participants are neither more emotionally stable nor better taught than when I was in school.”

Buffett bought his first stock in 1941, a full 71 years before Coinbase was founded.

Who will have better returns over the next 71 years is sure to be a debate.