What is Warren Buffet’s exposure to crypto?

There are many ways to measure Bitcoin’s penetration into mainstream investing. One of the more exotic is measuring Warren Buffet’s indirect exposure to Bitcoin despite his distaste for the new asset class.

Why Warren Buffett Dislikes Bitcoin?

After the rapid descent of Gautam Adani after Hindenberg’s scathing report, Warren Buffett is now ranked as the world’s 5th richest man, with a net worth of $108.9 billion, according to Forbes. Yet, besides his fortune, Buffett is best known as probably the most notable investor alive.

Specifically, Warren’s value-oriented investment philosophy has had a lot of impact. The ‘Oracle of Omaha’ once said that “price is what you pay, value is what you get.” But he also warned that “risk comes from not knowing what you’re doing.”

Both of these statements manifested regarding Buffett’s views on Bitcoin. In particular, he does not see Bitcoin as “sound money”, which is peer-to-peer, limited in supply and censorship-resistant. Instead of highlighting their, as some would say, revolutionary properties, Buffett has always compared Bitcoin to something completely irrational.

When Charlie Munger called Bitcoin “rat poison” in 2013, BTC was at $100. Five years later, when Bitcoin topped $9,000, Buffett upped Munger’s assessment, calling it “probably rat poison squared.” Therefore, Bitcoin’s problem is not valuation, but the baseline of it.

“Cryptocurrencies basically have no value and they don’t produce anything. They don’t reproduce, they can’t send you a check, they can’t do anything, and what you’re hoping for is that somebody else comes along and pays you more money for them later, but then that person got the problem. As for value: zero.”

Warren Buffet to CNBC, February 2020

This view ignores fiat currency devaluation and the risk of having bank accounts frozen or closed via bank runs. It also mixes cryptocurrencies with Bitcoin, ignoring that each BTC is backed by energy. More importantly, Bitcoin’s core value is to disambiguate the transfer of value.

Yet, as these Bitcoin attributes became recognizable, it was inevitable that Buffett himself would have been indirectly exposed to Bitcoin investing.

Join our Telegram group and never miss a story about digital values.

Berkshire Hathaway’s crypto exposure

Since 1965, Warren Buffett has served as chairman and CEO of Berkshire Hathaway. In that time, the company grew to a $690 billion investment. The bulk of Buffett’s portfolio is in Apple (41.76%) and other classic holdings such as Coca-Cola (7.57%), Chevron (8.02%) and Bank of America (10.30%).

However, Buffet also has Visa shares worth $1.47 billion ( V ), Mastercard shares worth $1.1 billion ( MA ) and Nu Holdings ( NU ) worth $471.3 million. All three companies are heavily involved in crypto rails.

Brazil-based Nu Holdings, formerly Nubank before it went public, is none other than a digital neo-bank that will launch its token, Nucoin, in the first half of this year. Aside from offering Bitcoin and Ethereum trading, Nu will use Ethereum’s Polygon network for Nucoin to reward customer loyalty.

In Brazil alone, Nubank’s customer base has expanded to 53.9 million in 2021, an increase of +439% from 2019. Also, last May, Nu Holdings announced that 1% of neobank’s equity would be converted to Bitcoin.

“There can be no doubt that cryptocurrencies are a growing trend in Latin America. We have followed the market closely and we believe so [crypto has] transformational potential in this region.”

David Velez, CEO of Nubank

Likewise, both Visa and Mastercard payment processors have partnered with crypto companies to offer crypto-linked debit cards. To name a few, Mastercard partnered with BitOasis, the top crypto exchange in MENA (Middle East and North Africa), enabling customers to convert fiat to crypto across 90 million global merchant locations.

Visa recently partnered with Wirex for the Asia-Pacific (APAC) region, along with the UK, to expand crypto-linked debit cards already issued in the US. Visa’s strategy has always been clear when it comes to digital assets.

“Visa wants to bring more payment options to consumers by connecting digital currencies to our network of banks and merchants,”

Matt Wood, Head of Digital Partnerships, Asia Pacific, Visa

In this light, where does Warren Buffett’s advice that “risk comes from not knowing what you’re doing” apply?

Assume that so many people and companies see value in cryptocurrencies. If so, his approach is to rely on payment rails to mitigate risk, whether it’s the risk from people not knowing what they’re getting into or Buffett’s lack of knowledge.

What do you think is most likely? Is Buffett too used to the fiat system, or does he privately own crypto? Let us know in the comments below.

About the author

Tim Fries is the co-founder of The Tokenist. He has a B. Sc. in mechanical engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate in the investment team at RW Baird’s US Private Equity division and is also a co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.