Warren Buffett and Berkshire Hathaway substantially cut their position at Wells Fargo, selling 100 million shares. The Oracle of Omaha continues to cut its position in bank stocks, driving the bullish thesis on gold and Bitcoin (BTC).
Berkshire reportedly had $32 billion in Wells Fargo stock at one point, according to Fox Business on September 5th. The investment conglomerate now owns 3.3% of the lender’s shares, worth only $3.36 billion.
Warren Buffett’s theory for stocks can be applied to cryptosystems.
Why did Buffett cut back on Wells Fargo and how could this benefit Bitcoin?
Throughout his career, Buffett has emphasized the importance of value investing and cash flow. Investors typically prefer businesses with predictable, stable operations that result in consistent returns.
In July, Wells Fargo posted a $2.4 billion loss, the first since the 2008 real estate crisis. After the disappointing quarterly report, the company said it would reduce its dividend to 10 cents per share.
This month, Moody’s downgraded its rating from stable to negative, citing its government’s slow review process. Allen Tischler, a Moody’s analyst, said:
„The change in perspective reflects Wells Fargo’s slower than expected pace in addressing its weaknesses in managing its governance legacy, oversight, compliance and operational risk management. The slow pace weighs on its expense base, further undermining its earnings potential in the context of difficult operating conditions.
The correlation of Bitcoin and short-term gold is not a sign of comparability
The confluence of the quarterly loss, the dividend cut, and the prospect of rating downgrades likely led Buffett to cut his position.
But the lingering theme in the reorganization of Berkshire’s portfolio in recent months is its investment in Barrick Gold. While decreasing his exposure to the US banking sector, Buffett invested in gold and Japanese trading companies.
The decision shows that Buffett is looking for security in terms of cash flow and an inflation hedge. The investment in Barrick Gold drives the bullish thesis on Bitcoin because the perception of BTC as a value store is improving, especially given the close correlation between the two since the March 2020 downturn.
Bitcoin will „cannibalize“ gold in the future, says Winklevoss
Other notable investors, including the Winklevoss twins, believe that Bitcoin Trader as „digital gold“ would compete with gold in the long run. Specifically, its immense upside potential makes it an attractive investment, as Btcoin’s market capitalization remains at only approximately 1.5% of gold.
What do the world’s richest men think about cryptomonies and the Blockchain?
Cameron Winkelvoss, the co-founder of Gemini, said Bitcoin has already gained a lot of ground with gold. He said that:
„Bitcoin has gained a lot of ground on gold: going from being a white paper to having over $200 billion in market capitalization in less than a decade. It will continue to cannibalize gold dramatically over the next decade.
As Cointelegraph Markets reported last Monday, Wall Street veteran and Keiser Report anchor Max Keiser believes that Buffett’s departure from the dollar is a bullish signal for the price of gold and Bitcoin.
„Buffett’s move to Japan, along with his investment in gold, confirms that he is exiting the dollar in a big way,“ he said. „Bitcoin, Gold and Silver will reach new record highs in the short term.