Warren Buffett warned about signs of excess in markets, comparing their behavior to that of a casino.
“For various reasons, markets today exhibit more casino-like behavior than in the past,” Buffett told Fortune magazine.
While he may have been referring to stock markets, increased volatility in the crypto markets led Coinbase Global Inc. (NASDAQ:COIN) to experience temporary issues handling the load.
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During this period, many Coinbase users noticed zero account balances and were unable to trade cryptocurrencies.
This chaos reminded some traders of the 2021 fiasco involving Robinhood Market Inc. (NASDAQ:HOOD) due to the sudden surge in meme stocks like GameStop Corp. (NYSE:GME).
A popular Reddit post titled “Dear Coinbase – Enjoy your Robinhood Moment” expressed disappointment at the similarities.
Although this incident caused a slight dip in Coinbase’s stock, it is still up around 215% in the past year, largely due to the rise of Bitcoin and the increased trading fees generated from cryptocurrency.
The increased trading fees from both Coinbase and Robinhood are likely part of what Buffett criticized.
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Buffett’s business partner Charlie Munger criticized Robinhood in 2021, stating, “I think it’s just God-awful that something like that attracted investments from civilized men and decent citizens. It’s deeply wrong. We don’t want to make money selling things that harm people.”
While Berkshire Hathaway Inc. (NYSE:BRK) may not have seen the same gains as Coinbase in the past year, it still achieved a gain of approximately 33.3%.
One advantage of owning Berkshire is its relatively low volatility compared to the more speculative Coinbase and its long-term staying power.
Despite changes over time, Buffett believes the speculative behavior of investors remains the same, stating, “Today’s active participants are no more emotionally stable or well-informed than when I was in school.”
Buffett bought his first stock in 1941, a full 71 years before Coinbase was founded.
The debate over who will have better returns in the next 71 years is sure to continue.
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This article Warren Buffett Warns Of ‘Casinolike’ Behavior In Markets As Coinbase Crashes Because Of ‘Heightened Traffic’ From Its ‘Robinhood Moment’ originally appeared on Benzinga.com
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