Has Warren Buffett Become a Crypto Believer?

Reports of Buffett's Bitcoin conversion turn out to be greatly exaggerated.

Billionaire investor Warren Buffett has never had a lot of time for cryptocurrency. Back in 2018, the Berkshire Hathaway chair said Bitcoin (BTC) was "probably rat poison squared." The company's vice chair Charlie Munger told journalists he wishes cryptocurrency had never been invented.

More recently, Buffett's preferred to keep quiet on the topic. He refused to be drawn into a discussion about Bitcoin at last year's annual shareholder meeting on the basis he'd only make hundreds of thousands of Bitcoin owners angry or unhappy. Munger had no such compunction. He declared, "The whole damn development is disgusting and contrary to the interest of civilization."

However, not long after that meeting, Berkshire Hathaway put money into a crypto-friendly bank in Brazil. Nubank is Brazil's largest fintech bank, and its investment platform, NuInvest, offers a Bitcoin exchange-traded fund (ETF). Berkshire Hathaway first invested in June 2021, and increased its position by $1 billion in the last quarter of the year.

Does this make Buffett a crypto believer?

While it's fun to point out Berkshire Hathaway's new crypto connections, the truth is there's no sign Buffett or Munger have changed their stance. Here are three reasons why:

1. The Nubank investment is only a tiny fraction of Berkshire Hathaway's portfolio

Berkshire Hathaway's portfolio is worth over $300 billion, and it holds another $150 billion or so in cash. That means the roughly $1 billion the company has invested in Nubank only accounts for 0.2% of its overall investments. It's a drop in the ocean for this investment giant.

READ MORE: Best Places to Buy Bitcoin

2. Nubank isn't that crypto friendly

Claims of Nubank's crypto credentials have been somewhat exaggerated. True, Nubank's investment platform NuInvest does allow customers to invest in a Bitcoin ETF. But that's it. It isn't a cryptocurrency exchange and investors can't buy or sell crypto on the platform.

3. Cryptocurrency is becoming hard to avoid

Berkshire Hathaway invests in several different financial institutions. These include American Express, Bank of America, BNY Mellon, and Wells Fargo. As institutional cryptocurrency adoption increases, these institutions are looking at how to best engage with digital assets. Here are some examples:

• Last year, Bank of America began research coverage of digital assets, saying these assets are too large to ignore.
• BNY Mellon is building the industry's first multi-asset digital platform.
• Wells Fargo started offering crypto exposure to certain clients last year.

It's almost impossible to hold shares in financial companies without getting a tiny bit of exposure to crypto. Indeed, other companies in Berkshire Hathaway's portfolio such as Apple and Amazon are also evaluating the pros and cons of cryptocurrencies. And others, such as Coca Cola, have gotten on the NFT bandwagon.

Bottom line

A high-profile figure who compares cryptocurrency with rat poison is almost certain to face a little ribbing if they later invest in a company with crypto connections. Even more so when their associate says he wishes the whole industry had never been invented.

However, Buffett probably continues to think Bitcon has no intrinsic value. This may come as a disappointment to crypto investors hoping another billionaire investor will do a U-turn on Bitcoin. But it's OK. Cryptocurrency investing isn't right for everybody -- it is a highly volatile asset and there are a lot of unknowns about how this industry will evolve. What matters is to understand Buffett's caution and make your own decisions based on your financial situation.