Warren Buffett Pivots to US Treasuries – Bad Omen for Bitcoin Price?

Warren Buffett Pivots to US Treasuries – Bad Omen for Bitcoin Price?

Warren Buffett put most of Berkshire Hathaway cash in short-term US Treasury bills now they offer up to 3.27% yield. But if the news is not about Bitcoin (BTC) directly, this may still be a clue to the downside potential of the BTC price in the near term.

Berkshire Hathaway seeks safety in Treasuries

Treasury bills, or treasury bills, are US government-backed securities that mature in less than a year. Investors prefer them to money market funds and certificates of deposit (COD) because of their tax advantages.

Related: Stablecoin issuers hold more US debt than Berkshire Hathaway: report

from Berkshire Net cash was $105 billion as of June 30, of which $75 billion, or 60%, was held in Treasury bills, up from $58.53 billion at the start of 2022 of its total cash reserves of $144 billion.

This move is likely a response to the massive rise in bond yields since August 2021 following the of the Federal Reserve hawkish policies aimed at curbing inflation, which stood at 8.4% in July.

For example, the three-month U.S. Treasury note returned 2.8% on August 22, compared to a near-zero return a year ago. Similarly, the yield on one-year US Treasuries rose from zero to 3.35% over the same period.

US 3-month and 1-year bond yield versus BTC/USD daily chart. Source: Trading View

Meanwhile, non-yielding assets like gold and bitcoin have fallen around 2.5% and 57% since August 2021. The US stock market benchmark S&P 500 has also fallen. seen a declinelosing nearly 7.5% over the same period.

Related: BTC to Lose $21,000 Despite Miner Surrender Exit? 5 things to know about Bitcoin this week

Such a difference in performance presents Treasuries as an ultra-safe alternative for investors to gold, Bitcoin, and stocks. Buffett’s Treasuries strategy suggests the same thing, namely a bet on further declines in near-term risk assets – especially as the Fed prepares to more rate hikes.

“Buffett is a value investor, so he won’t allocate much when stock markets are as overvalued as they have been for the past five years,” said Charles Edwards, founder of the crypto fund. quantitative Capriole Investments.

Meanwhile, Andrew Bary, associate editor at Barron’s, pointed to the market’s potential to follow Buffett’s strategy, saying:

“Individual investors may want to consider following Buffett’s lead now that they are yielding up to 3%.”

Bitcoin: safe haven or risk?

The risk of positive-yielding debt is dampening demand for other potential safe havens, including Bitcoin. In other words, increasingly risk-averse investors might opt ​​for assets that offer fixed returns rather than those that don’t.

The performance of bitcoin-focused investment funds in August supports this argument with capital outflows for three consecutive weeks, including an outflow of $15.3 million in the week ending August 19.

Overall, these funds have lost $44.7 million since the start of the month, according to CoinShares Weekly Report. In total, digital asset investment products, including BTC, saw monthly outflows totaling $22.2 million.

Flow per asset. Source: CoinShares

Does this mean that Bitcoin will continue to lose its luster against positive yielding US government debt? Edwards disagrees.

“Allocation to Treasuries and other low-yielding cash products is really a decision that needs to be made on a case-by-case basis depending on an individual’s goals and risk appetite,” said he explained, adding:

“In the short term, sometimes it makes sense to hedge against Bitcoin volatility with cash, the best being the US dollar. But, in the long term, I think all fiat currencies tend to zero against Bitcoin.

Edwards also points out that Buffett’s long-term strategy remains largely risk-driven. Notably, Berkshire deployed 34% of its cash to buy stocks in May and that more than 70% of its portfolio is still in risky assets.

“Looking at Buffett’s 75% risk allocation; and knowing that Bitcoin has been the best performing asset of any asset class over the past decade, with the highest risk-adjusted returns, I know where I would put my money,” he adds.

Buffett’s portfolio, however, will likely continue to eschew direct BTC investments as the “oracle of Omaha” remains a fierce critic. In February 2020, he stated that he “does not create anything,” to add:

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

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

The views and opinions expressed herein 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.