Here Are 4 of Bitcoin's Biggest Critics

Crypto mania may have taken hold, but these hardened critics have not changed their minds.

Everybody's talking about cryptocurrencies and Bitcoin this year. Bitcoin, the world's first and largest cryptocurrency, surpassed the $60,000 price point in March. In recent weeks, the price has dipped considerably, but at the time of writing, it is still up over 35% since the start of this year.

Many are optimistic about the coin's future. But it's important to listen to the Bitcoin bears as well. Even if you disagree, it's a good way to temper your crypto enthusiasm.

1. Warren Buffett

The vastly successful investor has long believed the crypto story will not end well. Back in 2018, Buffett described Bitcoin as "probably rat poison squared."

His main concern is that Bitcoin is a speculative asset that doesn't produce anything and doesn't have any inherent value. He sees it as similar to the tulip mania that took hold in The Netherlands in the 1600s, with people buying something in the hope they could sell it for even more than they'd paid.

"When you buy non-productive assets, all you're counting on is whether the next person is going to pay you more because they're even more excited about another next person coming along," he said on CNBC TV. "But the asset itself is creating nothing."

He is not alone in comparing it to tulip mania, which many cite as the first market bubble. Tulips were the must-have item of the 1600s in Europe. Tulips were difficult to grow, and particular strains were especially valuable. Speculation got so out of control that it's said you could buy a house with just one tulip bulb -- until the bubble burst and confidence fell, along with tulip prices.

Buffett's lack of enthusiasn for Bitcoin is to be expected, as it goes against his main investment strategies. He is a value investor who looks to buy undervalued stocks or companies with long-term economic value. He also only invests in things he understands.

2. Peter Schiff

The CEO and chief strategist of Euro Pacific Capital says the only cryptocurrency he'd support is one that's backed by gold. That's hardly surprising, given he's a big believer in commodities like gold, silver, and oil.

He told Kitco news: “The only cryptocurrencies that would make sense would be legitimate cryptocurrencies. Just like I don’t like fiat paper currency, that is paper currency backed by real money, I don’t like fiat digital currency. But, if you have a digital currency that’s backed by gold and redeemable in gold, well then that’s fine, that’s great, I think that would work perfectly.”

Schiff isn't optimistic about the dollar, either. But he thinks we'll see Bitcoin fall before the dollar does. "I personally think the Bitcoin bubble will pop before the dollar bubble. We may have a cryptocurrency crisis before we have a dollar crisis," he said in a recent interview with online financial TV channel, Real Vision.

3. Paul Krugman

The Nobel prize-winning economist and New York Times columnist has long been a vocal Bitcoin skeptic. He raises concerns about energy consumption, which he believes translates into high transaction costs, and a lack of government backing. He thinks government backing is what gives traditional (fiat) money its value.

In addition, in a recent column, he argues that Bitcoin has had 12 years to prove itself as a currency and it hasn't succeeded. "Twelve years on, cryptocurrencies play almost no role in normal economic activity. Almost the only time we hear about them being used as a means of payment -- as opposed to speculative trading -- is in association with illegal activity," he wrote.

Krugman compares Bitcoin to a huge, long-running Ponzi scheme. Any asset is worth what people are willing to pay for it. People continue to buy, even if they don't completely understand the technology, so the prices continue to rise.

That said, he recently tweeted that he's given up predicting the end: "But I've given up predicting imminent demise. There always seem to be a new crop of believers. Maybe just think of it as a cult that can survive indefinitely."

4. Bill Gates

Microsoft founder Bill Gates has a different reason for not investing in Bitcoin: The environment. He told The New York Times in a recent interview, “Bitcoin uses more electricity per transaction than any other method known to mankind.”

Bitcoin's carbon footprint has been in the spotlight recently after Elon Musk suspended Tesla purchases due to environmental concerns. According to Cambridge University research, the digital currency uses as much electricity in a year as a country the size of The Netherlands -- a fact not connected to tulip mania.

Are they right to be critical?

When Bitcoin drops almost 50% in six weeks (as it has in recent months), even the most hardened Bitcoin fan could be forgiven for wondering if these investors are right to steer clear.

There is a lot of hype. And it is a relatively untested market. As such, there's nothing wrong with sticking to commodities or only investing in environmentally-friendly technologies, especially if you are risk averse. But if you are willing to take risks in exchange for higher potential rewards, you might decide to diversify by investing a small part of your portfolio into cryptocurrency.

Perhaps you believe Bitcoin, or the blockchain technology behind it, has potential. Or you may agree with those who say society will eventually move away from traditional money. In the end, it's about doing your own research. Bitcoin has some big critics, but it has some big fans, too -- like Mark Cuban -- and it's worth understanding both sides of the debate.

If you decide to invest, sign up with a top cryptocurrency exchange so you can do it safely, and only invest money you can afford to lose. That way, if the bubble does burst, you won't be left with nothing.