The Oracle of Omaha, Warren Buffett, has been recently grabbing headlines because of his enormous cash position. As of early November, Buffett’s Berkshire Hathaway is sitting on $128.2 billion in cash.
Analysts are quick to speculate. Some say the billionaire investor doesn’t see a lot of upside in the stock market considering that the S&P 500 has printed a fresh all-time high. Others believe he’s just waiting for the stock market to plunge so he can buy shares at dirt cheap prices.
Nevertheless, a prominent figure in the cryptocurrency industry believes that Buffett is not expecting a downturn soon. On the contrary, this person says Berkshire Hathaway’s chief executive is expecting for his cash stockpile to increase in value.
Over the last few weeks, we’ve been covering the repo market and how the surging rates signal a global dollar shortage. By applying the basic rules of supply and demand, if the world is short on dollars, one can expect the greenback to rise in value. According to Pierre Rochard, co-founder of Satoshi Nakamoto Institute, this is Warren Buffett’s playbook.
You can’t blame the billionaire investor for stockpiling cash. If there are no interesting companies to acquire as the stock market trades at an all-time high, it might be better to let your money grow in value. This strategy looks good considering that the Dollar Currency Index (DXY) is in a bull market.
The monthly time frame shows that the DXY broke out of a double bottom reversal pattern after breaching resistance of 89. The index then flipped this resistance into support in February 2018. That’s textbook reversal process.
Warren Buffett has publicly stated that he despises cryptocurrencies. He called bitcoin “rat poison” and has been quoted by CNBC that the largest cryptocurrency is basically a delusion. Buffett’s hostility against cryptocurrencies may have prompted Pierre Rochard to make the comparison.
With the DXY likely in a bull market, it appears that the billionaire investor is just waiting for the value of his cash position to rise. This is the same strategy that bitcoin HODLers employ. They buy the dominant cryptocurrency and hold on to their positions regardless of daily price action. Using the same strategy, Rochard blasts Buffett by tweeting,
He has far more in common with bitcoin HODLers than he thinks!
In addition, Rochard grills Buffett by stating that the U.S. dollar is an unproductive asset:
In a CNBC interview, Buffett said that bitcoin is a non-productive asset. That’s the case because you have to rely on the next person to buy your coin at a higher price than what you paid for it. Ironically, Buffett is using the same strategy with his cash/bond holdings, although there is a small difference since he actually earns interest from the bonds his investing in with that case. Nonetheless, the comparison still applies since you can lend your bitcoin for interest as well. Well-played Pierre Rochard.
Disclaimer: The above should not be considered trading advice from CCN.com. The writer owns bitcoin, Ethereum, and other cryptocurrencies. He holds investment positions in the coins but does not engage in short-term or day-trading.
Last modified: January 11, 2020 2:31 PM UTC