Warren Buffett has put most of Berkshire Hathaway’s cash in short-term U.S. Treasury bills now that they offer as much as 3.27% in yields. But while the news does not concern Bitcoin (BTC) directly, it may still be a clue to the downside potential for BTC price in the near term.
Berkshire Hathaway seeks safety in T-bills
Treasury bills, or T-Bills, are U.S. government-backed securities that mature in less than a year. Investors prefer them over money-market funds and certificates of deposits (COD) because of their tax benefits.
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Berkshire’s net cash position was $105 billion as of June 30, out of which $75 billion, or 60%, was held in T-bills, up from $58.53 billion at the beginning of 2022 out of its $144 billion total cash reserves.
The move is likely a response to bond yields jumping massively since August 2021 in the wake of the Federal Reserve’s hawkish policies aimed at curbing inflation, which was running at 8.4% in July.
For instance, the three-month U.S. T-bill returned a 2.8% yield on Aug. 22 compared to a near-zero yield a year ago. Similarly, the yield on U.S. one-year T-bill climbe from zero to 3.35% in the same period.
Meanwhile, non-yielding assets like gold and Bitcoin have dropped roughly by 2.5% and 57% since August 2021. The U.S. stock market benchmark S&P 500 likewise saw a decline, losing nearly 7.5% in the same period.
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Such a difference in performance presents T-bills as an ultra-safe alternative for investors when compared to gold, Bitcoin and stocks. Buffett’s T-bill strategy suggests the same, namely a bet on more downside for risk-on assets in the near term — particularly as the Fed gears up for more rate hikes.
“Buffett is a value investor, so he won’t allocate much when the equity markets are as overvalued as they have been for the last five years,” said Charles Edwards, founder of quantitative crypto fund Capriole Investments.
Meanwhile, Andrew Bary, an associate editor at Barron’s, underscored the market’s potential to tail Buffett’s strategy, saying:
“Individual investors may want to consider following Buffett’s lead now that they are yielding as much as 3%.”
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