Warren Buffett put most of Berkshire Hathaway’s money into short-term US Treasury bills, where they now provide up to 3.27% of the proceeds. But even though the news is not directly related to Bitcoin (BTC), it may still be evidence of the potential downside of its price in the short term.
Berkshire Hathaway seeks safety in T . bills
Treasuries, or Treasuries, are U.S. government-backed securities that mature in less than a year. Investors prefer them over money market funds and certificates of deposit because of their tax advantages.
Related: Stablecoin Issuers Own More US Debt Than Berkshire Hathaway: Report
Berkshire’s net cash position was $105 billion as of June 30, of which $75 billion, or 60%, is held in Treasury bills, up from $58.53 billion at the beginning of 2022 of its total cash reserves of $144 billion.
The move is likely in response to a significant jump in bond yields since August 2021 in the wake of the Fed’s hawkish policies aimed at curbing inflation, which was running at 8.4% in July.
For example, the three-month US Treasury bill returned a 2.8% return on August 22 compared to a near-zero yield a year earlier. Similarly, the yield on one-year US Treasury bills increased from zero to 3.35% in the same period.
US 3-month and 1-year bond yield vs BTC/USD daily time frame chart. Source: TradingView
Meanwhile, non-yielding assets such as gold and bitcoin have fallen by about 2.5% and 57%, respectively, since August 2021. Likewise, the US S&P 500 stock market index has seen a decline, losing nearly 7.5% in the same period.
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This difference in performance presents T-bills as a very safe alternative to investors compared to gold, bitcoin, and stocks. Buffett’s Treasury bill strategy suggests the same thing, namely betting more on the downside for risky assets in the near term — particularly as the Fed prepares for further rate hikes.
“Buffett is a value investor, so he wouldn’t put in as much when stock markets are as overvalued as they have been in the past five years,” Charles Edwards, founder of quantitative crypto fund Capriol Investments, told Cointelegraph.
Meanwhile, Barron’s Associate Editor Andrew Barry emphasized the market’s ability to adapt Buffett’s strategy, saying:
“Retail investors may want to follow in Buffett’s footsteps now that they have made up to 3%.”
Bitcoin: a safe haven or a risk?
Positive yield debt risks dampening demand for other potential safe havens, including bitcoin. In other words, risk-averse investors may increasingly choose assets that offer fixed returns over those that do not.
The August performance of Bitcoin-focused mutual funds supports this argument, with capital outflows for three consecutive weeks, including an exit of $15.3 million in the week ending August 19.
Overall, this money lost $44.7 million on a monthly basis, according to a weekly CoinShares report. In all, digital asset investment products, including BTC, have seen monthly outflows so far totaling $22.2 million.
flows according to the assets. Source: CoinShares
Does this mean that Bitcoin will continue to lose its luster against the positive-yielding US government debt? Edwards is different.
“Allocation to Treasurys and other low-yield cash products is really a case-by-case decision depending on the individual’s goals and risk appetite,” he explained, adding:
“In the short term, there are times when it makes sense to hedge against bitcoin’s volatility with cash, and the best liquidity is the US dollar. But in the long term, I think all fiat currencies tend towards zero against bitcoin.”
Edwards also noted that Buffett’s long-term strategy still carries significant risks. Notably, Berkshire used 34% of its cash holdings to buy stocks in May, and more than 70% of its portfolio is still made up of risky assets.
“Given Buffett’s 75% risk allotment and knowing that bitcoin has been the best performing asset of all asset classes in the last decade, and has the highest risk-adjusted returns, I know where I’m going to put my money,” he added.
However, it is likely that Buffett’s wallet will continue to avoid direct investment in BTC, as the “Oracle of Omaha” remains a fierce critic. In February 2020, he said that it “is not creating anything,” adding:
“I don’t own any cryptocurrency. I would never do it. […] You can’t do anything with it except sell it to someone else.”
However, earlier this year, Buffett’s Berkshire Hathaway increased its exposure to a new bitcoin-friendly bank while reducing its stake in Visa and Mastercard.
The opinions and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.