21.06.2024

What assets does Warren Buffett invest in and why does he never invest in Bitcoin?

Warren Buffett is one of the most famous and successful investors in the world. In numerous interviews, he has stated many times that he plays long-term, prefers «safe» investments and is not too open to innovation.

And the evidence for the latter fact is also known: Buffett has repeatedly declared the «uselessness» of Bitcoin, called it «rat poison» and criticized it many times. It seems that even the recent rise of the main cryptocurrency has not been able to shake faith in his beliefs.

And while Bitcoin is hailed as the «best investment of the 21st century» by many famous personalities like Tesla CEO Elon Musk, Twitter co-founder Jack Dorsey, billionaire Winklevoss brothers, and so on, Warren Buffett’s opinion is still highly respected on Wall Street.

Therefore, it is important to understand what kind of strategy the investor is building and what global trends are on his account. Today we will focus on them.

What is Warren Buffett investing in?

While most others are betting on Bitcoin and other risky investments, Warren Buffett will stick with stocks that are trading at discounts to their intrinsic value range – that is, a normal value given the asset’s previous behavior. With US bond yields expected to surpass the 1.5 percent mark , gains are likely to continue to give way to real value and dividend-paying stocks.

Consider Buffett’s recent bets on Chevron and Verizon, the two highest dividend stocks with yields above 4 percent . Both options are «classic» components of an investor’s strategy, which look ridiculously boring in the eyes of a new class of novice market players. For example, here’s Chevron’s annual dividend yield.

trading stock exchange

Chevron Annual Dividend Yield

A similar figure for Verizon looks like this.

For contrast, let’s immediately recall the Dogecoin cryptocurrency, which jumped 800 percent at the end of January – and this in a day. And although many investors joined the growth too late and lost money on investment, there was still an opportunity to increase their deposit at times. And someone took advantage of it.

In the case of Buffett’s choice, the return is calculated by only a few percent over the long run, but the risks are negligible compared to even the rest of the stock market, not to mention Bitcoin. Given Buffett’s billions of dollars of capital under management, this is an important factor, according to The Motley Fool. The «bigger» the investor, the less his appetite for risk – and this is quite reasonable.

Warren Buffett’s right-hand man, Charlie Munger, previously noted that returns in the next decade could be significantly lower than in the past. If expected returns are at the bottom, then investors need to either moderate their expectations of returns or increase their risk appetite. Buffett and Munger chose the former.

Another obstacle to investments by Buffett and other classic investors in blockchain assets is the peculiarity of the latter. The fact is that Bitcoin, Ethereum and other coins cannot be touched, and in addition they «do not produce anything» in the context of conventional factories. That is, it is difficult for conservatives to realize that the value of cryptocurrencies lies in their blockchain, the potential for changing the modern niche of finance and asset security at the expense of miners on the network. In addition, this can include conducting a transaction anywhere in the world without the approval of financial authorities.

That is, from Buffett’s point of view, Bitcoin does not create cars, as Tesla does, so cryptocurrency does not seem to add a value product to this world . This means that the growth of the exchange rate occurs «from scratch», that is, in fact, this is all speculation. Naturally, in this case, an older investor is unlikely to be able to grasp the prospects of blockchain and the value of cryptocurrencies as a new instrument of accumulation and settlement. So, it is unlikely that it will be possible to change the attitude of classic investors towards BTC very quickly.

Note that exceptions also occur here. For example, Microsoft founder Bill Gates recently changed his view of Bitcoin from negative to neutral. You can read more about this in a separate article.

What conclusion can be drawn from all of the above? Warren Buffett, due to his experience and convictions, is unlikely to ever change his mind about the crypto market. This is the playground for the next generation of millennial and buzz investors. The latter have comparatively very little capital, which they seek to increase in the shortest possible time. Yes, they will have to face insane risks, but this is the only way they can get the most out of their investments.

An example is the recent listing of the ALICE coin on the Binance exchange. The cryptocurrency started at the level of 10 cents, but literally in the first seconds of trading, its value soared hundreds of times against the backdrop of news and hype and reached a maximum of $ 60. That is, the rate increased 600 times within a few minutes – and these are incredible opportunities for earning in the current environment, although many are steadily losing money on such investments.

Note that now the value of ALICE continues to decline – probably to a new zone of accumulation by large investors.

alice cryptocurrency rate

Alice’s instant rise and fall

Another important factor is that many new investors will come to the markets even without their hard-earned money, which creates space for experimentation. Now capital for investment is allocated by the state itself, which is actively distributing «helicopter money» – material assistance from the new plan of US President Joe Biden to save the American economy. In the coming years, the stock market and the crypto market may even pump into unprecedented bubbles.

Bubble or not – the main thing is that now someone manages to make a fortune at huge risks. It would seem that Bitcoin has grown by 1000 percent in a year , the ceiling has been reached. But this is not so: judging by the data of analysts, we are witnessing the beginning of a full-fledged phase of the bullish trend of the industry and no one is able to predict its long-term maximum. However, we will definitely not be able to see the fall of BTC to zero, as critics often like to say.

Therefore, in this case, the existence of two polar opposite positions is possible. Some may not see anything valuable in cryptocurrencies and ignore them, while others will laugh at the 5% annual return and prefer far greater risks in order to get a big win. And here everyone decides for himself which side to speak for.

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