Famously, Warren Buffett once referred to all cryptocurrencies as “rat poison“. Don’t take the Sage of Omaha’s words as gospel just yet. Mr. Buffett seems to have had a change of heart.
Warren Buffet‘s Berkshire Hathaway purchased $1 billion of stock in a digital banking institution that focuses on cryptocurrency.
Berkshire Hathaway announced its crypto investment through a SEC filing. It was revealed that Buffett’s firm had bought $1 billion worth of shares in Nubank, a Brazilian digital bank and one of the most important in Latin America.
After a bullish quarter that saw an all-time high of $63,000 per unit in April, the world’s most popular digital currency has lost over 40% of its value and settled at just under $35,000 on Friday, 28 May.
Nubank promotes itself as an innovator. They’re referred to as a neobank. This type of bank operates outside the norms of traditional banking. NuInvest, the digital bank’s investment arm, allows users to invest in Bitcoin exchange-traded funds (ETFs). This is a new way for people to tap into a space in finance that Berkshire leaders are not fond of.
Why was Warren Buffett averse to purchasing crypto?
Buffett was a successful investor because he only invested in stocks that he understood. He isn’t a gambler.
The billionaire investor uses the value investing strategy. In other words, he focuses on purchasing undervalued stocks in strong companies and keeping them for a long period of time.
There are simple reasons why Buffett has been averse to purchasing crypto. The most common one might be that he simply doesn’t understand blockchain technology. This is not to say that he cannot! Buffett’s reluctance may have meant that he has not developed the knowledge to understand crypto. Has this changed?
Furthermore, Buffett says he failed to see the intrinsic value of Bitcoin. Still, the utility of crypto has grown in recent years. This wasn’t something Buffett seems to have expected.
Finally, Warren Buffett claimed that crypto could not be viewed as “real money”. However, in recent times, crypto has more and more been accepted as a legitimate currency with banks and even governments expressing their interest.
Have potential profits swayed Warren Buffett’s opinion?
Buffett and Munger might have a personal dislike for cryptocurrency. However, the investment duo may see a completely different opportunity in digital financial services providers like Nubank.
There is great competition between up-and-coming digital banking institutions in Latin America. A large part of Latin America feels unserved by traditional banking and financial services. Nubank is looking to tap into the huge potential consumer market of people who are dissatisfied with the current system.
In other words, the world’s most succesful investor may have warmed up to the idea that investing in a crypto-related project is a worthwhile investment.
Buffett’s personal philosophy is unlikely to have changed. His experience, however, has shown him when stubbornness is required and when it is hazardous.
Don’t expect Warren Buffett to be publically endorsing cryptocurrencies just yet. Expect him, however, not to miss out on a financial opportunity when it presents itself.