Major crypto prices have exploded this week.
Bitcoin price is up 20% from its February low. The price of Ethereum rose by 14%, BNB by 13%, cardano by 5%, XRP by 41% and solana by 8% during the month.
Meanwhile, the “Sage of Omaha”, Warren Buffett, is quietly turning to crypto. A recent filling of Berkshire Hathaway reveals he sold shares in former Visa and Mastercard financials and sunk $1 billion into a crypto-enabled neobank.
For the world’s biggest crypto critic, this is a big change of heart. In 2020, he said“Cryptocurrencies basically have no value and they don’t produce anything,” adding “I don’t have cryptocurrency and I never will.”
Buffett’s U-turn hints at a tipping point in institutional crypto adoption that could put a rocket under the demand (and prices) for crypto in years to come.
Buffett began investing in the 1940s, and his stock-picking talent generated a personal fortune of over $100 billion. The modern-day Midas and his sidekick Charlie Munger believe in “value investing”, that is to say in the search for nuggets at attractive prices ignored by other investors.
In the past, Buffett and Munger have ridiculed bitcoin. Buffet described it as “squared rat poison” and Munger argued that cryptocurrency trading is “just madness.”
Buffet did not invest directly in bitcoin but tripled Berkshire Hathaway’s investment in Nubank, the largest fintech bank in Brazil that is among bitcoin investors. And obviously, you wouldn’t bet on a crypto-backed business if you weren’t optimistic about it.
As Greg Waisman, co-founder and COO of crypto wallet service Mercuryo, commented: “Investment in Nubank can be characterized as a way for Buffett to support the fintech/crypto world without going back on his criticisms of the past.” Waisman added that the Berkshire boss now indirectly supports “the digital currency ecosystem.”
Moreover, Buffet is not the only big investor to change his mind.
For example, Lloyd Blankfein, a former Goldman Sachs CEO who has expressed skepticism about cryptos in the past, recently stated that his view of crypto is “evolving.”
The fact that these icons have come to cryptos will likely persuade even the most reluctant large institutional investors to consider them again, which could boost demand.
Potentially big tailwind
The increasingly positive attitude of institutional investors suggests that bitcoin is entering the mainstream and can challenge gold as a modern store of value.
As I said last year, dethroning gold has been one of the biggest narratives driving the price of bitcoin up over the past two years:
“There’s $650 billion worth of bitcoins out there. Meanwhile, investors hold at least $2.7 trillion in gold, according to the World Gold Council. If, for example, they moved just over 20% of their gold holdings to bitcoin, the cryptocurrency could double or more.
Later, I wrote, “2022 is about to produce the biggest hawkish currency reversals of the past decade, and bitcoin will finally answer the most important question: After 13 years, is it still a speculative asset? ? Or has it dissipated for investors as a safe haven? »
This question is going to be one of the most fundamental drivers of bitcoin in the near term. If bitcoin becomes a stable asset class, Cathie Wood of ARK Invest estimates that its price could reach $1 million by 2030, saying it “represents only a fraction of the value of global assets in a context of increasing adoption each year”.
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