More companies in the “Oracle of Omaha’s” portfolio now have direct or indirect exposure to Bitcoin and other cryptocurrencies.
Berkshire Hathaway, led by Warren Buffett, sold a chunk of its Visa and Mastercard assets and expanded its stake in Nubank, Brazil’s largest fintech bank and a favourite among Bitcoin investors.
The industrial conglomerate announced in a regulatory filing late Monday that it had purchased $1 billion worth of Nubank Class A stock in Q4/2021. On the other side, it sold $1.8 billion in Visa stock and $1.3 billion in Mastercard stock, indicating a shift away from credit companies in favour of fintech rivals.
The so-called “Oracle of Omaha,” Warren Buffett, is known for his conservative approach to investment, particularly in the hottest sectors of the market, such as fintech. The seasoned investor has previously dismissed developing decentralised financial solutions such as Bitcoin (BTC), dismissing it as an asset that “creates nothing.”
Berkshire Hathaway’s current investment in Nubank, on the other hand, demonstrates Buffett’s recent softening toward fintech. In July 2021, the company invested $500 million in the venture. After Nubank debuted on the New York Stock Exchange in December 2021, it earned $150 million on the investment (NYSE).
$NU Buffett-backed Nubank stock set for NYSE debut as IPO pricing valued company at about $41.5 Billion.
The company raised $2.60 Billion as it sold 289.15 Million shares in IPO. Berkshire bought 10% of the shares in the offering.#fintechnews pic.twitter.com/HTujZZvCtJ
— InvestingDesk (@InvestingDesk) December 9, 2021
Buffett has indicated no intention of selling his Nubank stock thus yet.
The Warren Buffett-Bitcoin link
Buffett’s further investment in Nubank demonstrates his understanding of the fintech sector’s fundamental theme: the digitization of financial services, as well as his willingness to work with cryptocurrency firms.
In more detail, starting June 2021, Easynvest, a trading platform acquired by Nubank in September 2020, has been actively marketing a Bitcoin exchange-traded fund (ETF). The ETF, dubbed QBTC11, is backed by QR Asset Management and listed on the B3 stock exchange, Brazil’s second-oldest stock exchange.
Despite his beliefs that Bitcoin is “rat poison squared,” it appears that Nubank, which remains exposed to the developing crypto industry through Easynvest, could exploit the additional revenue prospects to benefit its top investor, Warren Buffett.
In 2021, this is mostly due to the growth of crypto-related investment products. According to Bloomberg Intelligence statistics, their numbers more than quadrupled in the year, going from 35 to 80, while the total value of the assets they held increased to $63 billion from $24 billion at the start of 2021.
As Bitcoin investment vehicles grow more widespread, Emily Portney, chief financial officer of Bank of New York Mellon Corp., another firm in Buffett’s investment portfolio, remarked that digital assets might become a “significant source of revenue” for investment banking firms in the future.
Meanwhile, Leah Wald, CEO of crypto-asset management Valkyrie Investments, projected that money flows into crypto-related investment vehicles will expand, calling them a “phenomenon that’s starting to take off.” Wald:
“If you look at inflows from a volume standpoint, not only has it remained stable despite the price declines that Bitcoin is infamous for, but you’re seeing a lot more institutions jump in,” says the author.
Buffett’s portfolio is brimming with crypto-friendly businesses.
While Buffett may not engage directly in Bitcoin, he is already acquiring indirect exposure to the cryptocurrency as companies in his portfolio enter the market.
For example, the fifth-largest U.S. bank, U.S. Bancorp, launched a cryptocurrency custody service for its institutional investment managers in October 2021, just a month before Bitcoin hit an all-time high of $69,000, citing an increase in demand from their “fund services clients” over the previous few years.
In October 2021, Bank of America announced the establishment of a cryptocurrency research effort, citing “increasing institutional interest.”
BNY Mellon had declared months previously that it would hold, transfer, and issue Bitcoin and other cryptocurrencies for its asset-management clients.
Announcing the creation of the BNY Mellon Digital Assets unit – A team dedicated to building the first multi-asset custody and administration platform for traditional and digital assets, including #cryptocurrencies. https://t.co/aZ7wMfAXqg pic.twitter.com/L54TFVpJNv
— BNY Mellon (@BNYMellon) February 11, 2021
“The Nubank investment might be viewed as Buffett’s method of indirectly helping the fintech/crypto business without reversing his previous concerns,” said Greg Waisman, co-founder and COO of crypto wallet service Mercuryo.
“Even an indirect exposure is guaranteed to boost favourable sentiment, potentially attracting more investors.”
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.