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Warren Buffett warned that he is seeing signs of excess in the markets, comparing their price action to that of a casino.
“For some reason, markets now exhibit much more casino-like behavior than they did when I was young,” Buffett told Fortune magazine.
While he might have been talking about the stock markets, increased volatility in the cryptocurrency markets caused Coinbase Global Inc. (NASDAQ:CURRENCY) temporarily unable to handle the load.
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For a brief time, many Coinbase users saw zero balances in their accounts and were unable to buy or sell cryptocurrency.
The chaos reminded some merchants Robinhood Market Inc.‘s (NASDAQ:HOOD) 2021 fiasco sparked by unexpected 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.
While the incident caused Coinbase shares to fall slightly, they are still up about 215% over the past year, largely due to the rise of Bitcoin and the increase in trading fees generated by the cryptocurrency.
The increase in trading fees that both Coinbase and Robin Hood This is all likely part of what Buffett was expressing his displeasure about.
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Buffett’s late business partner Charlie Munger bluntly assessed Robinhood in 2021, saying: “I think it’s terrible that something like this has brought investments from civilized men and decent citizens. It’s deeply wrong. We don’t want to make money selling things that are bad for people.”
Buffett’s Berkshire Hathaway Inc. (NYSE:BRK) may not have made the same profits as Coinbase over the past year, but it still managed a gain of about 33.3% over the past year.
An advantage of 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 speculative investor behavior has not, stating, “Today’s active participants are no more emotionally stable or better educated than when I was in school.”
Buffett bought his first shares in 1941, 71 years earlier Coinbase was founded.
Who will get better returns over the next 71 years will surely be up for debate.
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This article Warren Buffett Warns of ‘Casino-Like’ Behavior in Markets as Coinbase Crashes Due to ‘Increased Traffic’ Since Its ‘Robinhood Moment’ originally appeared on Benzinga.com
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