It is official. Warren Buffett, the veteran investor who compared Bitcoin to rat poison, fears what the cryptocurrency strives to fight: fiat inflation.
The 89-year old tycoon’s $506.23 billion conglomerate, Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B), revealed its equity portfolio for the second quarter of 2020. It showed that the fund had about $130 billion to spend on stocks. But going against its traditional strategy, Berkshire decided to put that money in gold.
Bitcoin Cousins A Hit
The financial report showed that Mr. Buffett and his two portfolio managers, Ted Weschler and Todd Combs, invested in Barrick Gold Corp. (NYSE:GOLD), a gold mining firm. The capital for the precious metal firm came from a reduction in bank shares. Berkshire sold out their long-held stakes in JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Co. (NYSE:WFC) stakes.
They also wholly quitted Goldman Sachs under the reeling pressure of the coronavirus lockdowns.
The Warren Buffett & Friends illustrated strategies that a typical Bitcoin investor implements. The narrative is simple: the Federal Reserve’s open-ended bond-buying program, as well as its decision to maintain near-zero interest rates, causes bond yields to collapse. Investors, therefore, move their capital in riskier assets for better returns.
Meanwhile, the US government’s decision to dispatch trillions of US dollars for coronavirus-struck American individuals, households, and businesses puts additional downside pressure on the greenback.
The last five months have seen both US Treasury yields and the US dollar crashing harder. In one instance, the Treasury Inflation-Protected Securities, which protect against inflation, rose higher as their yields fell into the negative territory. That somewhat legitimized investors’ fears of inflation.
So did Berkshire. The US’s top conglomerate entered the gold market to seek an insurance against the Fed’s relentless money printing policy. That explains why the precious metal logged a record-setting bull run towards its all-time high. The flight to safety is real.
A Billion-Dollar Split Personality
But Mr. Buffett contradicted himself with the said move. He was among the top voices that warned people against investing in gold, explaining that the commodity had “no utility.”
The investor’s latest decision showed that he might have been wrong about gold and its inherent capability as a hedge, after all.
As the wealthy tycoon becomes a precious metal bull, Bitcoin investors have started treating it as a reason to pat their backs.
Lark Davis, a popular crypto-focused Youtuber, treated Mr. Buffett’s move as a signal of a booming safe-haven market. Excerpts from his tweet:
“Warren Buffett just moved a big stake into gold. Safe-haven assets are hot right now. Bitcoin will continue to soar in such an environment.”
While other Bitcoin bulls didn’t make a direct remark, they decided to highlight Mr. Buffett renewed love for safe-havens. Dan Tapeiro, the founder of DTAP Capital, mocked the Berkshire boss for deciding to go from “gold doesn’t have a yield” to purchasing stakes in one gold mining business.
“Number 1 equity investor changes his mind,” he added.
Does that mean Mr. Buffett can change his mind about Bitcoin, as well? Probably not. But his fears of fiat inflation would go a long way among secondary investors: those who are desperately looking for better yields elsewhere.