The financial world has long revered the likes of Warren Buffett, a paragon of strategic, value-based investment. Buffett has focused his attention on assets with a promising earning potential, investing only in sectors and businesses where his team has a comprehensive understanding of the associated risk, competition, and advantages. This philosophy has resulted in an illustrious career over his 93 years, but the question remains if his strategy can outpace that of Bitcoin (BTC).
An instance of Buffett’s strategy is his investment in Apple (Apple) stocks, Berkshire Hathaway’s largest holding, bought in early 2016. Even though the company was valued at over $500 billion when originally purchased, Berkshire Hathaway remained active in its investment into 2022. Despite the significant 500% rally after the initial purchase, Buffett maintained his long-term strategies, ignoring recent price movements.
In contrast, Buffett has historically dismissed the concept of ‘non-productive’ commodities as a store of value, such as gold. In a 2012 suggestion to shareholders, Berkshire Hathaway expressed concern regarding the devaluation of paper currency and the limitations of gold as a store of value. Buffett’s understanding of gold lacks practical utility, with its demand in industrial and jewellery sectors falling short of production. The price, therefore, is driven primarily by fear-driven sentiment, leading only to a temporary price increase. Even though Bitcoin saw a price surge of 683% in the year following Buffett’s critical comments on non-productive commodities, Bitcoin’s performance unmatched the returns from Berkshire Hathaway’s pertinent stock holdings, even when given the advantages of leverage.
What is more surprising is the current state of Berkshire Hathaway’s portfolio. The firm holds $147 billion in cash equivalents and short-term investments, which makes up 18.5% of the company’s total market capitalization. This lack of capital deployment leads to questions in the minds of the observers, hinting a potential inconsistency in Buffett’s persisting strategy.
Even though Bitcoin is not a perfect store of value, it cannot be downplayed. Its volatility often raises criticisms but no definitive judgment can be passed as Bitcoin hasn’t yet encountered a global economic recession. However, the consistent outperformance of Bitcoin’s price against Berkshire Hathway’s shares encourages investors to view Bitcoin as a viable alternative store of value. Potential sceptics may look at Berkshire Hathaway’s substantial cash position as a cautionary tale. With Bitcoin’s total market cap standing at $500 billion, it underlines the enormous and untapped role it can play in the global financial landscape.
Source: Cointelegraph
