Warren Buffett and Crypto

Warren Buffett’s Last Stand (as CEO): Sticking to the Old School

Warren Buffett capped a 60-year run at Berkshire Hathaway by announcing he'll step down as CEO at the end of 2025. At his final shareholder meeting in Omaha, the 94-year-old "Oracle of Omaha" didn't suddenly pivot to trendy assets or techy buzzwords – instead, he doubled down on what he knows best. Buffett and his anointed successor, Greg Abel, reassured investors that Berkshire's core approach will endure: focus on business fundamentals and intrinsic value. "It's really the investment philosophy and how Warren and the team have allocated capital for the past 60 years," Abel noted, vowing "it will not change, and it's the approach we'll take as we go forward." This philosophy centers on buying stakes in companies with real earnings, solid management, and strong cash flows – and valuing them via discounted cash flow (DCF) models and common sense. It's the no-nonsense playbook Buffett has used to turn a failing textile mill into a $1.1+ trillion conglomerate. (Indeed, Buffett quipped that Apple's Tim Cook "made Berkshire a lot more money" than Buffett himself did, a testament to investing in cash-generating businesses.)

Yet, one thing Buffett never bought into was cryptocurrency. He famously called Bitcoin "probably rat poison squared" and later scoffed that if you offered him all the Bitcoin in the world for $25, he wouldn't take it – "because what would I do with it? … It isn't going to do anything". In Buffett's eyes, crypto isn't a productive asset: it has no revenues, tangible outputs, or CEO making business decisions. And that raises an intriguing question: in a future dominated by crypto tokens and decentralized finance, how does a Buffett-style investor find “intrinsic value” in assets that throw off no cash?

Buffett’s Valuation Mindset vs. the Crypto Enigma

Buffett’s investing mantra can be summarized in one word: value. He seeks companies trading below their intrinsic worth, which he calculates by projecting future cash flows and discounting them to present value—no cash flows, no intrinsic value – simple as that. Buffett sticks to businesses with steady earnings, strong management, and real products serving customers. Whether it's Coca-Cola pumping out billions in annual profit or Japanese trading houses with "consistent cash flow" that he deems undervalued, Buffett wants to see money being made. To him, a share of stock represents a claim on future earnings. He passes if he can't estimate those earnings (or doesn't trust the business model).

Now consider cryptocurrencies, stablecoins, and DeFi protocols – the wild west of finance. A stablecoin like USDC or Tether is a digital dollar designed to hold a steady value. It isn't a company; it's more like a currency or an IOU, often backed by reserves. There's no traditional business activity, quarterly earnings reports, or CEO. You can't do a standard DCF on a token in your wallet. DeFi (decentralized finance) takes it further: these blockchain-based protocols offer services like lending, trading, or payments without centralized intermediaries or CEOs. Instead of corporate offices and org charts, you have open-source code and community governance. It’s a radically different animal from the cozy, cash-flowing businesses in Buffett’s portfolio.

From Buffett's perspective, this is a puzzling terrain. How do you value a decentralized lending platform or an algorithmic stablecoin? If you ask him, he might say you don’t – because it "isn't going to do anything" in producing cash or dividends. In Buffett's world, value comes from profits, not promises.

Yield Hunters: Crypto's Temptation of Cash Flow Without a Company

Here's the twist: Although crypto assets lack traditional earnings, many crypto platforms dangle yields to entice investors. In fact, interest rates (or "APY") offered in DeFi have soared shockingly high during recent cycles. In early 2024, yields on some stablecoin and Ether deposits were north of 20% which is vastly higher than anything in traditional banking. MakerDAO, for instance, bumped its DAI stablecoin savings rate to 15%, while lending protocols like Aave and Compound paid 6–10% to depositors. Those numbers would turn any income investor's head. After all, who wouldn't want a 10%+ yield on a dollar-pegged asset?

But a Buffett-style thinker immediately asks: “Where is this yield coming from?” Traditionally, a 20% annual yield would imply you're taking on enormous risk or tapping into extraordinary business growth. In DeFi, the answers are varied – and sometimes murky:

• Lending interest: Much like a bank, some DeFi lending platforms pay you interest because borrowers on the other side are paying even higher rates to borrow your crypto. Interest yields can be legitimate if there is robust demand to borrow (say, traders leveraging up). In this case, one could argue there is an underlying business activity – akin to a bank lending margin though without formal bankers. The yield is the borrower’s interest payment to you, facilitated by code.

• Trading fees: In decentralized exchanges (DEXes) like Uniswap, liquidity providers earn fees from trades. These fees can add up to real revenue. If a DeFi token entitles holders to a share of those fees or buybacks, one might value it like a revenue-sharing business. This is the "real yield" concept that crypto insiders talk about – returns generated from actual usage (trading, borrowing, etc.) rather than pure speculation.

• Token incentives (a.k.a. “Ponzi nomics”): This part makes value investors shudder. Many DeFi projects have historically subsidized high yields by simply minting new tokens as rewards. Essentially, they pay you with their funny money. Sure, you might get 100 XYZ tokens as yield but if XYZ token has no income backing it, the only way to cash out is to hope someone else buys those tokens later. This works great for early birds and founders (who sell tokens at high prices) and ends badly for latecomers. As one report put it, in past DeFi cycles, yields were "paid in novel, valueless and inflationary governance tokens," fueling bursts of unsustainable activity where early entrants prospered and "everyone else was left holding the bag." If that sounds like a Ponzi scheme, you're not alone the crypto community dubbed this behavior “Ponzinomics.”

The stablecoin TerraUSD (UST) was a poster child of yield-chasing gone wrong. UST promised a “risk-free” 19–20% yield to anyone who deposited it into the Anchor Protocol. For a while, billions of dollars were poured in as if someone had found a magic money tree. Critics warned it made no sense how could a dollar-pegged coin pay 20% yearly without real business behind it? (Buffett would have raised an eyebrow, to put it mildly.) The scheme relied on new users' funds to pay yields. When confidence faltered in May 2022, UST de-pegged and collapsed, vaporizing tens of billions in value. The SEC later alleged that Terraform Labs (UST's creator) had essentially built a fraud reliant on continually recruiting new money. In other words, no sustainable engine generated those generous payouts it was all temporary smoke and mirrors.

Quality of Yield: Fad or Fundamental?

This raises a fundamental question for investors: Are any of these crypto yields defensible in the long run, or are they all just financial illusions? Can quality yield exist without a traditional business underpinning it?

Some crypto proponents argue that DeFi is developing real fundamentals. They point to protocols that earn fees (like a decentralized exchange taking a cut of trades or a stablecoin issuer investing reserves in treasuries) and then share those earnings with users. In this optimistic view, a DeFi platform could be valued like a fintech company – if it consistently generates revenue (fees, interest) and profits. For example, a decentralized lending pool that reliably earns 5% on its loans and passes that to depositors might be seen as having a real business model (just without a CEO or office). Some newer projects tout that their yields come from "real yield" sources – genuine economic activity – rather than token printing.

Skeptics, however, caution that there are dozens of yield mirages for every real yield. When you see double-digit APYs vastly higher than anything in the economy, you should suspect either high risk or a subsidy that won’t last. A prudent investor might ask: Who is paying me this yield, and why? Is it coming from borrowers who find it profitable to pay even more? Does actual user demand drive trading fees? Or simply from the project diluting its token value to attract TVL (total value locked)? If the answer is the latter, the party will end as soon as the token incentives dry up or the user growth stalls – much like a classic pyramid scheme. As an analysis of DeFi yields noted, "Ponzinomic" reward structures use aggressive incentives to lure capital but "deflect questions of sustainability." In plainer terms, if you can't tell where the yield comes from, you might be the yield (to adapt a Wall Street saying).

Buffett’s school of investing would demand the quality of earnings be high preferably boring, steady, and backed by real activity. He often says he’d rather have a lumpy 15% return rooted in real business performance than a smooth 15% that might be a house of cards. Applied to crypto: a 5% yield funded by actual transaction fees might impress him more than a 25% APY from printing tokens out of thin air. But separating the wheat from the chaff in DeFi has been tricky so far. Even seasoned crypto investors got burned by misreading protocol risks (as seen in hacks and collapses in 2022–2023).

Will Future Generations Defy Buffett’s Doubt?

Buffett’s long career teaches one overarching lesson: stick to fundamentals and be skeptical of fads. It’s hard to argue with that wisdom, considering his track record. Crypto, as of 2025, still looks like the antithesis of Buffettism – it has spawned fortunes and fiascos alike, often seemingly unmoored from traditional valuation logic. Yet, finance never stands still. Today's outsider asset can become tomorrow's mainstream play. The internet, after all, was once dismissed as a "fad" by some pundits; value investors shunned tech stocks until companies like Amazon proved they could generate enormous cash flows.

So here’s a provocative thought: What if we eventually crack the code to evaluate crypto projects with the same rigor as stocks or businesses? Suppose analysts develop credible frameworks to value a stablecoin issuer's ecosystem or a DeFi protocol's user base and fee stream – essentially treating them like new-age companies (minus the CEO). The gap between Buffett's world and the crypto world might narrow at that point. And if these digital assets are here to stay, with real adoption and measurable economic value, investors in 2040 or 2050 might look back at the 2020s and shake their heads. Will our grandchildren wonder why we didn't buy into the Googles and Amazon of crypto when they were cheap? Once the intrinsic value of a crypto platform can be rationalized – once it “does something” that can be quantified – the Buffett approach could, in theory, be applied to crypto too. By then, Buffett's current crypto skepticism may look prescient (if many coins go to zero) or like a missed opportunity akin to skipping an early tech revolution.

Either way, the clash between Buffett’s discounted cash-flow mindset and the cash-flow-less nature of crypto is one of our time's most fascinating finance debates. It pits decades of proven wisdom against a decade of radical innovation. Buffett has earned the right to be skeptical – after all, he's seen every bubble from dot-com to subprime. However, the crypto world is busy trying to invent new forms of value that don't fit the old formulas. As investors, we're left in the middle, watching the legend of value investing meet the frontier of digital finance. The final verdict isn’t in yet. In the meantime, Buffett’s advice to know what you’re investing in and to be wary of anything that promises riches without real work or real earnings remains as relevant as ever – even if that means sitting out the crypto frenzy until it proves its worth (or not).

Sources: Buffett’s retirement announcement and remarks; Buffett’s views on crypto and intrinsic value; CoinDesk analysis of DeFi yield sustainability; Reuters on TerraUSD/Anchor’s 20% yield collapse; Outlook India on Ponzinomics vs. real yield; Berkshire 2025 meeting coverage (Investopedia).

We’re at a fork in the financial road: Buffett’s classic value path (anchored by discounted cash flows and tangible fundamentals) on one side, and crypto’s daring detour into stablecoins and DeFi on the other. Which direction will define the next era of investing?