Bitcoin Outperforms Warren Buffett

Warren Buffett recently turned 93 in August. His iconic value investing technique shares some traits with the cryptocurrency-associated “buy and hold” tactic.

Buffett emphasizes assets with robust profit prospects, investing in industries where he and his team have extensive knowledge about the risks, competition, and benefits involved.

The key debate centers around whether Buffett’s meticulous approach can surpass Bitcoin’s returns over time. Furthermore, it’s intriguing to see such a legendary stock selector holding a significant amount of cash and short-term bonds in his portfolio.

A telling case of his methodology is Berkshire Hathaway’s primary stake in Apple. They initially bought these shares in 2016 when Apple’s valuation was already over $500 billion, highlighting that they weren’t early birds. Despite a 500% price surge since its first purchase, Berkshire Hathaway augmented its Apple shares in 2022, a testament to Buffett’s unwavering faith in long-term investments.

Buffett has historically been skeptical of unproductive assets as value storage. A 2012 shareholder letter from Berkshire Hathaway raised concerns about the diminishing value of paper money and underscored gold’s shortcomings as a value reservoir. The company opined that gold’s value is predominantly influenced by sentiment rather than practical utility.

However, Buffett’s skepticism towards unproductive assets took a hit when Bitcoin skyrocketed by 683% in the year after his remarks. Over a four-year span, Bitcoin’s surge was a remarkable 9,014%.

Comparing Berkshire Hathaway’s stock achievements with Bitcoin reveals a compelling narrative. If someone had invested $1,000 in Bitcoin and also in Berkshire Hathaway with a leveraged stance in 2019, the return from Bitcoin would’ve been $7,020, surpassing the $5,623 from Berkshire Hathaway.

Interestingly, a 2017-initiated investment would’ve yielded $3,798 in Bitcoin against $1,998 from the leveraged Berkshire Hathaway shares.

A point of contention is Berkshire Hathaway’s current $147 billion stash in cash and short-term assets, which accounts for 18.5% of its total market cap. This vast cash holding sparks debates on whether Buffett is awaiting more favorable market conditions or content with fixed-income returns.

This situation underscores the hesitancy even among stock market maestros in fully deploying their assets. It raises the question of potential reallocation of funds if inflation poses a threat again.

While Bitcoin’s status as a solid value store remains debatable due to its volatility and lack of recession testing, its consistent outpacing of Berkshire Hathaway stocks indicates a growing confidence in it as an alternative.

Considering Berkshire Hathaway’s extensive cash reserves, skeptics should perhaps reevaluate their stance on Bitcoin. With a $500 billion market cap, Bitcoin might just be gearing up for an even bigger role in the financial realm.