Warren Buffett Invests $1 Billion in Bitcoin-Friendly Bank, Dumps Visa, Mastercard Stocks

Warren Buffett's Berkshire Hathaway sold some of its Visa and Mastercard holdings and increased its exposure to Nubank. Nubank, the largest fintech bank in Brazil, is also popular among bitcoin investors in the country.

In a securities filing late on Feb. 14, the industrial conglomerate disclosed that it bought $1 billion worth of Nubank Class A shares in the fourth quarter of 2021. On the other hand, the company sold $1.8 billion worth of Visa and $1.3 billion worth of Mastercard stock, suggesting it is shifting away from a credit company to investing in its fintech rivals.

Buffett, known as the "Oracle of Omaha," is popular for his prudent approach to investing, especially in the market's hottest sectors such as financial technology. The veteran investor has also disparaged emerging decentralized finance solutions like bitcoin, deriding it as an asset that "doesn't create anything."

But Berkshire's new stake in Nubank shows that Buffett has softened his attitude towards fintech recently. Specifically, the company invested $500 million in the startup in July 2021. The returns on the said investments amount to $150 million in December 2021 after Nubank's listing on the New York Stock Exchange (NYSE).

Nubank, backed by Buffett, will be listed on the New York Stock Exchange, valuing the company at about $41.5 billion based on IPO pricing.

The company sold 289.15 million shares in the IPO, raising $2.6 billion. Berkshire bought a 10% stake in the offering.

— InvestingDesk (@InvestingDesk) December 9, 2021

So far, Buffett has not shown any intention to sell Nubank shares.

The Buffett and Bitcoin Connection

Buffett's additional investment in Nubank shows that he recognizes the fundamental theme of the fintech industry, the digitization of financial services, and is willing to work with companies involved in the cryptocurrency space.

Specifically, Easyinvest, a trading platform acquired by Nubank in September 2020, has been actively offering bitcoin exchange-traded funds (ETFs) since June 2021. The ETF, called QBTC11, is backed by QR Asset Management and listed on Brazil's second-oldest stock exchange, B3.

As such, Nubank, which still has exposure to the nascent crypto space through Easyinvest, seems likely to use the extra revenue opportunity to benefit its top investor Warren Buffett, who once viewed bitcoin as “rat poison.”

This is mainly due to the growth of crypto-related investment products in 2021. Notably, their number doubled during the year, from 35 to 80, while their holdings totaled $63 billion, up from $24 billion at the start of 2021, according to Bloomberg Intelligence. Dollar.

Cash inflows into crypto funds to double in 2021 Source: Bloomberg Intelligence

Emily Portney, chief financial officer at BNY Mellon, another firm in Buffett's portfolio, noted that as bitcoin investment vehicles become more mainstream, the digital asset could become a "meaningful revenue stream" for investment banking firms. ".

Meanwhile, Leah Wald, CEO of crypto asset manager Valkyrie Investments, predicted an increase in inflows into crypto-related investment vehicles, stating that this has become an “emerging phenomenon,” before commenting:

“If you look at inflows from a volume standpoint, not only is it holding up despite Bitcoin’s notorious price corrections, but you’re seeing a lot of institutions pouring in.”

Buffett's portfolio is full of crypto-loving companies

While Buffett may not be investing directly in Bitcoin, he is already gaining exposure indirectly as companies in his portfolio move into the crypto space.

For example, in October 2021, just a month before Bitcoin hit its all-time high of $69,000, US Bancorp, the fifth-largest U.S. bank, launched cryptocurrency custody for its institutional investment managers and Noting that over the past few years, they have witnessed an increase in demand from their "fund servicing clients".

Similarly, in a separate statement in October 2021, Bank of America launched a cryptocurrency research program, citing "growing institutional interest."

A few months ago, BNY Mellon announced that it would hold, transfer and issue bitcoin and similar cryptocurrencies for its asset management clients.

BNY Mellon's Digital Assets Division announced the formation of the team working to build the first multi-asset custody and management platform for traditional and digital assets, including cryptocurrencies.

— BNY Mellon (@BNYMellon) February 11, 2021

Greg Waisman, co-founder and chief operating officer of encrypted wallet service Mercuryo, said: "Investing in Nubank can be seen as Buffett's way of supporting the fintech/crypto world without retracting past criticisms." Indirectly support the "digital currency ecosystem".

"Even an indirect investment is bound to boost positive sentiment, which could drive more investors into the space."

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