Crypto Biz: Step aside, Warren Buffett; stablecoin issuers hold more US debt than Berkshire Hathaway

August 26, 2022 Coin Telegraph

Stablecoin issuers Tether, Circle and others hold more short-term U.S. Treasury Bills than Berkshire Hathaway.

Warren Buffett raised eyebrows this week when his firm, Berkshire Hathaway, upped its exposure to United States Treasury bills. If you’re one of the few remaining bulls out there, Buffett’s flight to safety is concerning because it signals that the Oracle of Omaha would rather get a 3% yield instead of playing the stock market. If equities go belly-up in the fall, as I’ve been predicting for months, expect Bitcoin (BTC) to follow.

Looking at the numbers, Berkshire’s T-bill exposure grew to $75 billion at the end of June, up from $58.5 billion at the beginning of 2022. But, even with the 28% spike, Berkshire doesn’t hold as many T-bill investments as the leading stablecoin issuers. Stablecoins presently command a market capitalization of $153 billion, and a large percentage of their backing comes from T-bills. This is just another reminder that stablecoins are serious business.

Stablecoin issuers hold more US debt than Berkshire Hathaway: Report

Warren Buffett’s Berkshire Hathaway holds a massive amount of short-term U.S. debt. Well, stablecoin issuers hold more. According to data from JPMorgan, stablecoin issuers Tether, Circle and others hold $80 billion worth of short-term Treasury bills, compared with $74 billion for Berkshire Hathaway. These vast sums collect interest from the U.S. government, allowing holders to earn a passive income. If you’re surprised by this development, don’t be — stablecoins are a force to be reckoned with and are paving the way for mass crypto adoption.

Iconic brands including Nike, Gucci have made $260M off NFT sales

Nike, Adidas, Gucci, Dolce & Gabbana, and Tiffany & Co. — these companies have found real value and utility in nonfungible tokens (NFTs). Industry data revealed this week that these companies generated a combined $260 million in NFT sales. Nike’s revenue from NFTs amounted to a whopping $185.3 million, with volumes in secondary markets hitting nearly $1.3 billion. While nobody denies how badly the NFT market has cratered in recent months, the world’s most iconic brands have successfully incorporated novel technology into their business engagement efforts. Expect a lot more NFT-focused customer engagement in the future.

Nike's NFT-related projects have made over $185M in revenue, positioning it as the biggest earning brand from NFTs.@DuneAnalytics dashboard by @nlevine19. pic.twitter.com/UDD90kz8Af
— NFTgators (@NFTgators) August 22, 2022

DBS bank reports 4x growth in Bitcoin buys on DDEx exchange in June

Are savvy investors quietly buying the Bitcoin dip using trading platforms developed by major banks? Data from DBS Bank suggests so. The bank’s DDEx exchange saw a massive influx of buyers in June, as investors looked to capitalize on plunging BTC and Ether (ETH) prices. In fact, between April and June, BTC buy orders on the exchange rose by a factor of four. Whether these buyers become diamond-handed hodlers or speculators is yet to be seen. But, in the depths of crypto winter, it’s a positive sign nonetheless.

Bug bounty quadruples for Ethereum network — Up to $1M payouts ahead of Merge

With excitement and trepidation in full swing ahead of Ethereum’s highly anticipated Merge, the foundation behind the smart contract platform has announced a $1 million bounty program to incentivize white hats to uncover "critical bugs” on the blockchain. The bounty program reflects the high-stakes nature of the upcoming Merge, which is tentatively scheduled for Sept. 15. If you’re an ETH holder, all you need to do is sit back and relax — and keep a close eye on scams.

Don’t miss it! What crashed the crypto relief rally?

What looked like a promising relief rally quickly turned sour last week, as Bitcoin plunged from a high near $25,000 all the way back to $21,000. Where does crypto go from here? In this week’s Market Report , I sat down with fellow analysts Marcel Pechman and Benton Yaun to discuss the recent price movements in the market. I also warned about September and October being volatile months for traditional finance — and hence crypto. You can watch the full replay below.

Crypto Biz is your weekly pulse of the business behind blockchain and crypto delivered directly to your inbox every Thursday.

Warren Buffett pivots to U.S. Treasuries — a bad omen for Bitcoin’s price?

August 23, 2022 Coin Telegraph

Berkshire Hathaway

Berkshire Hathaway now allocates 60% of its cash portfolio to T-bills, leaving individual investors with the potential to mirror a similar strategy.

Warren Buffett has put most of Berkshire Hathaway's cash in short-term U.S. Treasury bills now that they offer as much as 3.27% in yields. But while the news does not concern Bitcoin (BTC) directly, it may still be a clue to the downside potential for BTC price in the near term.

Berkshire Hathaway seeks safety in T-bills

Treasury bills, or T-Bills, are U.S. government-backed securities that mature in less than a year. Investors prefer them over money-market funds and certificates of deposits (COD) because of their tax benefits.

Berkshire's net cash position was $105 billion as of June 30, out of which $75 billion, or 60%, was held in T-bills, up from $58.53 billion at the beginning of 2022 out of its $144 billion total cash reserves.

The move is likely a response to bond yields jumping massively since August 2021 in the wake of the Federal Reserve's hawkish policies aimed at curbing inflation, which was running at 8.4% in July.

For instance, the three-month U.S. T-bill returned a 2.8% yield on Aug. 22 compared to a near-zero yield a year ago. Similarly, the yield on U.S. one-year T-bill climbe from zero to 3.35% in the same period.

*U.S. 3-month and 1-year bond yield versus BTC/USD daily timeframe chart. Source: TradingView*

Meanwhile, non-yielding assets like gold and Bitcoin have dropped roughly by 2.5% and 57% since August 2021. The U.S. stock market benchmark S&P 500 likewise saw a decline, losing nearly 7.5% in the same period.

Such a difference in performance presents T-bills as an ultra-safe alternative for investors when compared to gold, Bitcoin and stocks. Buffett's T-bill strategy suggests the same, namely a bet on more downside for risk-on assets in the near term — particularly as the Fed gears up for more rate hikes.

"Buffett is a value investor, so he won't allocate much when the equity markets are as overvalued as they have been for the last five years," said Charles Edwards, founder of quantitative crypto fund Capriole Investments.

Meanwhile, Andrew Bary, an associate editor at Barron's, underscored the market's potential to tail Buffett's strategy, saying:

"Individual investors may want to consider following Buffett's lead now that they are yielding as much as 3%."

Bitcoin: safe-haven or risk-on?

Positive-yielding debts risk are dampening the demand for other potential safe-havens, Bitcoin included. In other words, increasingly risk-averse investors could be opting for assets that offer fixed yields over those that don't.

The performance of Bitcoin-focused investment funds in August supports this argument with capital outflows for three weeks in a row, including a $15.3 million exit in the week ending Aug. 19.

Overall, these funds have lost $44.7 million on a month-to-date basis, according to CoinShares' weekly report. In total, digital asset investment products, including BTC, have witnessed month-to-dat outflows totaling $22.2 million.

Does that mean Bitcoin will continue to lose its sheen against positive-yielding U.S. government debts? Edwards does not agree.

"Allocation to treasuries and other low-yield cash products is really a decision that needs to be made case-by-case depending on an individual's goals and risk appetite," he explained, adding:

"In the short-term, there are times it makes sense to hedge against Bitcoins volatility with cash, the best cash being the US Dollar. But, in the long-term, I think all fiat currencies tend towards zero against Bitcoin.

Edwards also points out that Buffett's long-term strategy remains largely risk-on. Notably, Berkshire deployed 34% of its cash holdings to buy equities in May and that over 70% of its portfolio is still made up of risk-on assets.

"Looking at Buffett's 75% risk allocation; and knowing that Bitcoin has been the best performing asset of all asset classes in the last decade, having the highest risk-adjusted returns, I know where I would be putting my money," he add.

Buffett's portfolio, however, will likely continue to eschew direct BTC investment as the "oracle of Omaha" remains a fierce critic. In February 2020, he said that it "does not create anything," adding:

“I don’t own any cryptocurrency. I never will… You can’t do anything with it except sell it to somebody else.”

Earlier this year, however, Buffett's Berkshire Hathaway increased exposure in a Bitcoin-friendly neobank while reducing its stake in Visa and Mastercard.

The views 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 conduct your own research when making a decision.

Stablecoin issuers hold more US debt than Berkshire Hathaway: Report

August 22, 2022 Coin Telegraph

Berkshire Hathaway

Tether, Circle and other stablecoin firms held $80 billion worth of short-term U.S. government debt as of May 2022, more than owned by Warren Buffett’s Berkshire Hathaway.

Stablecoin issuers like Tether (USDT) and Circle have accumulated a significant share in the United States Treasury market, outperforming major traditional finance players.

Various stablecoin providers collectively held $80 billion worth of short-term U.S. government debt as of May 2022, according to a study by the investment bank JPMorgan released on Aug. 16.

Tether, Circle and other stablecoin firms accounted for 2% of the total market for the U.S. Treasury bills, holding a bigger share of T-bills than totally owned by Warren Buffett’s investment giant Berkshire Hathaway.

Stablecoin issuers have also outperformed offshore money market funds (MMF) and prime market MMFs in terms of their Treasury-bill investment proportion, according to the data.

*U.S. Treasury bill investor composition. Source: JPMorgan*

Considered to be low-risk assets, Treasury bills are debt instruments that are commonly used by companies as a cash equivalent on corporate balance sheets. Tether and Circle — issuers of the world’s biggest asset-backed stablecoins, Tether and USD Coin (USDC), — have pledged to buy U.S. Treasury bills while cutting reliance on commercial paper earlier this year.

The move came amid uncertainty surrounding algorithmic stablecoins sparked by TerraUSD (formerly UST) losing its U.S. dollar peg in May 2022.

In contrast to algorithmic stablecoins, which rely on algorithms and smart contracts to support their U.S. dollar backing, asset-backed stablecoins like USDT and USDC are designed to guarantee the 1:1 peg by holding cash and common cash equivalents. At the time of writing, USDT’s market capitalization amounts to $67.6 billion, while USDC’s market value is $52.4 billion, according to data from CoinGecko.

As previously reported, USDC has seen notable growth in market cap, while Tether’s market dominance has been dropping since May. "Market confidence in Tether as a stablecoin has been gradually eroding, with the events over the past few months accelerating that dynamic," JPMorgan said. According to the bank, one of the primary drivers behind the shift has been the "superior transparency and asset quality of USD Coin’s reserve assets."

Charlie Munger: Everybody Should Avoid Crypto ‘as if It Were an Open Sewer, Full of Malicious Organisms’

July 13, 2022 Bitcoin.com

Warren Buffett-Backed Nubank Launches Crypto Trading — Holds Bitcoin on Balance Sheet

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Warren Buffett Won’t Pay $25 for All Bitcoin in the World — Charlie Munger Calls BTC ‘Stupid and Evil’

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March 6, 2022 Bitcoin.com

Crypto is like ‘venereal disease’ and should be banned: Charlie Munger

February 17, 2022 Coin Telegraph

Berkshire Hathaway

Comments made by Warren Buffet’s right-hand man and vice chairman of Berkshire Hathaway have gone viral for their imaginative depiction of cryptocurrency.

Charlie Munger, the ancient vice chairman of Berkshire Hathaway and Warren Buffet’s right hand man, has no issue with providing his honest thoughts on cryptocurrency: He hates it.

Speaking at a shareholder’s Q&A session at the annual meeting for LA-based newspaper company, Daily Journal Corp, the 98-year-old investing icon likened crypto to a sexually transmitted disease.

"I certainly didn't invest in crypto. I'm proud of the fact that I avoided it. It's like some venereal disease."

Munger continued to express his contempt for Bitcoin and other cryptocurrencies, adding, “I wish it had been banned immediately… I admire the Chinese for banning it. I think they were right and we were wrong to allow it.”

Munger and Buffet are no strangers to criticizing and downplaying the emergence of cryptocurrency. Buffett has previously ridiculed Bitcoin for being an asset that "does not create anything," he’s called it "rat poison squared” and said that it is nothing more than a “delusion that attracts charlatans”.

Munger’s imaginative depiction of cryptocurrency do not seem to be reflected in the new investment thesis of Berkshire Hathaway, which is softening up on its exposure to cryptocurrency.

In a securities filing late Feb. 14, Berkshire Hathaway disclosed that it had increased its exposure to cryptocurrency by purchasing $1 billion worth of Nubank stock, Brazil’s largest fintech bank which is popular amongst Brazil’s crypto investors.

"The Nubank investment can be tagged as Buffett's way of supporting the fintech/crypto world without taking back his criticisms of the past," asserted Greg Waisman, co-founder and chief operating officer of crypto wallet service Mercuryo, adding that Berkshire is now backing the "digital currency ecosystem indirectly."

Crypto Twitter has been quick to respond to Munger’s comments on digital assets.

@gmoneyNFT called out the irony in Munger’s recent remarks point blank to their 225,000 followers:

Charlie Munger: Fiat currency is going to zero

Also Charlie Munger: Crypto is like some venereal disease. I'm proud of the fact that I've avoided it. pic.twitter.com/ua85ubdy35
— gmoney.eth (@gmoneyNFT) February 17, 2022

While @cryptonator1337 took aim at Munger’s age, stating to his 35k followers that Munger may not be the best person to consult when it comes to new technology.

When Munger was born in 1924...

.. Lenin died
.. the Ottoman Empire ended
.. Disney created the first cartoon
.. IBM was founded in New York State
.. the US president delivered a radio broadcast the first time

But sure let's listen to him talking about #Bitcoin
— CR1337 (@cryptonator1337) February 16, 2022

Warren Buffett invests $1B in Bitcoin-friendly neobank, dumps Visa and Mastercard stocks

February 15, 2022 Coin Telegraph

Warren Buffett invests B in Bitcoin-friendly neobank, dumps Visa and Mastercard stocks

Bank of America

The "Oracle of Omaha" now has more companies in his portfolio that have direct/indirect exposure to Bitcoin and similar cryptocurrencies.

Warren Buffett's Berkshire Hathaway dumped a portion of its Visa and Mastercard holdings and increased exposure in Nubank, the largest fintech bank in Brazil that's also popular among the country's Bitcoin investors.

In a securities filing late Monday, the industrials conglomerate disclosed that it had purchased $1 billion worth of Nubank Class A stock in Q4/2021. On the other hand, it sold $1.8 billion and $1.3 billion worth of Visa and Mastercard stock, respectively, signaling a shift away from credit companies to gain exposure in their fintech rivals.

Buffett, the so-called "Oracle of Omaha," is popular for his cautious approach to investing, particularly in the market's hottest sectors such as fintech. The veteran investor had also downplayed emerging decentralized finance solutions like Bitcoin (BTC), ridiculing it as an asset that "does not create anything."

But Berkshire's new stake in Nubank shows that Buffett has been softening up to fintech lately. In detail, the firm had invested $500 million in the startup in July 2021. Its returns on the said investment amounted to $150 million in Dec. 2021 after Nubank debuted on the New York Stock Exchange (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

So far, Buffett has not shown any intention to sell his position in Nubank.

The Buffett-Bitcoin connection

Buffett's additional investment into Nubank shows his acknowledgment of the fintech sector's underlying theme: the digitization of financial services, as well as his willingness to associate with companies that are involved in the cryptocurrency sector.

In detail, Easynvest, a trading platform that Nubank acquired in September 2020 has been actively offering a Bitcoin exchange-traded fund (ETF) since June 2021. Dubbed QBTC11, the ETF is backed by QR Asset Management and is listed on the B3 stock exchange, the second-oldest bourse in Brazil.

Thus, it appears that Nubank, which remains exposed to the emerging crypto sector via Easynvest, could use the additional revenue opportunities to benefit its top investor, Warren Buffett, despite his views that Bitcoin is a "rat poison squared."

That is primarily because of the growth of crypto-related investment products in 2021. Notably, their numbers doubled in the year, rising from 35 to 80, as per Bloomberg Intelligence data, while the total valuations of the assets they held reached $63 billion versus $24 billion at the start of 2021.

*Cash flowing into crypto funds doubled in 2021. Source: Bloomberg Intelligence*

Emily Portney, chief financial officer at Bank of New York Mellon Corp. — another firm in Buffett's investment portfolio, noted that digital assets could become a "meaningful source of revenue" for investment banking firms in the future as Bitcoin investment vehicles become more mainstream.

Meanwhile, Leah Wald, chief executive of crypto-asset manager Valkyrie Investments, predicted an increase in the capital flows into crypto-related investment vehicles, saying they have become a "phenomenon that's starting to take off." Wald:

"If you look at inflows from a volume perspective, not only has it been steady even with the price corrections that Bitcoin is notoriously famous for, but you're seeing a lot of institutions jump in."

Buffett's portfolio full of crypto-loving companies

While Buffett might not invest in Bitcoin directly, he is already gaining indirect exposure as companies in his portfolio foray into the crypto sector.

For instance, in October 2021, just a month before Bitcoin reached its all-time high of $69,000, fifth-largest U.S. bank, U.S. Bancorp, launched a cryptocurrency custody service for its institutional investment managers, noting that they witnessed an increase in demand from their "fund services clients" over the last few years.

Similarly, in another announcement made October 2021, Bank of America launched a cryptocurrency research initiative, citing "growing institutional interest."

Months before, BNY Mellon announced that it would hold, transfer, and issue Bitcoin and similar 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 can be tagged as Buffett's way of supporting the fintech/crypto world without taking back his criticisms of the past," asserted Greg Waisman, co-founder and COO of crypto wallet service Mercuryo, adding that the Berkshire boss is now backing the "digital currency ecosystem indirectly."

"Even an indirect exposure is bound to increase the positive sentiment that may push more investors into the space."

Berkshire Hathaway

Stablecoin issuers hold more US debt than Berkshire Hathaway: Report

Iconic brands including Nike, Gucci have made $260M off NFT sales

DBS bank reports 4x growth in Bitcoin buys on DDEx exchange in June

Bug bounty quadruples for Ethereum network — Up to $1M payouts ahead of Merge

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Berkshire Hathaway seeks safety in T-bills

Bitcoin: safe-haven or risk-on?

The Buffett-Bitcoin connection

Buffett's portfolio full of crypto-loving companies

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