Technology

Warren Buffett gives in to cryptocurrencies

Warren Buffet He was always a staunch critic of cryptocurrencies, but this week, the North American tycoon saw how the unstoppable expansion of crypto assets in the financial market reached his own home, after a Brazilian neobank financed by his investment fund announced its opening to the trading them.

“The widespread adoption of digital assets in Latin America continues to accelerate, with Brazilian fintech leading the way,” said the statement issued by Nubankthe carioca neobank participated by Buffett with up to 1,000 million dollars.

In pursuit of this adoption, Nubank closed an agreement with the blockchain technology startup Paxosand will begin offering the ability to buy, hold, and sell cryptocurrencies like bitcoin and ether to its more than 50 million users.

The bank also announced the allocation of about 1 percent of the cash on its balance sheet to bitcoins.

A maneuver that the financial entity defines as strategic for its future, and that will also “further accelerate the adoption of cryptocurrencies” in the region. And all, despite the disdain of buffett for these assets.

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The constant negative of Warren Buffett

“I wouldn’t pay $25 for all the bitcoins in the world,” Warren Buffett said a few weeks ago to investors in his mutual fund, BerkshireHathaway.

“Whether (bitcoin) will go up or down in the next year, in five or ten, I don’t know. But what I’m sure of is that it doesn’t multiply, it doesn’t produce anything,” he added.

The great investor, who conceded that the market’s leading cryptocurrency “has a magic”, before quickly disdaining this attribute, assuring that “people have attributed magic to many things”, thus reiterating his firm conviction before the crypto market.

The posture of buffett, yes, it is not new. Already in 2018 he noted that “in terms of cryptocurrencies, I can generally say with almost certainty that they will come to a bad end”, adding: “I already have enough problems with things that I know something about. Why would I have to take a position long or short term of something I know nothing about?

The passing of the years, and the gradual integration of cryptocurrencies into the social and business fabric, however, put these declarations of the oracle of omahawhich although it maintains its position against cryptocurrencies, is now part of its game, albeit indirectly.

The bet on Nubank

Nubank is a Brazilian neobank founded in 2013 that went public last December and is currently trading at just 4 dollars, after seeing its price drop by nearly 66 percent in a matter of 6 months.

Investors’ panic to bet on growth stocks in times of high inflation and possible economic recession severely penalized a booming bank.

In the last quarter of 2021, Nubank posted a loss of $0.04 per share, despite raising record total revenue of nearly $636 million, up 224.3 percent year-over-year.

Buffett’s investment in Nubank represented a certain deviation from the main strategy in the US businessman’s portfolio, in which securities from large US corporations such as Apple, Bank of America, Coca-Cola, or American Express.

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So far, therefore, the decision has certainly not been profitable for Buffett’s fund, but the Brazilian entity may correct this course next week after its May 16 results presentation.

“Nubank’s first quarter results may be a litmus test for skeptics’ concerns about growth and credit quality, and these two indicators may have more value than first quarter net numbers,” they explained from Bloomberg Intelligence. .

The neobank, therefore, will go to its accountability before the market with a lot of meat on the grill to determine its future. And to add points in his favor, he decided to open up to cryptocurrencies.

Nubank’s bet

“Latin America is currently the fastest growing region in cryptocurrency adoption worldwide, with Brazil accounting for more than a quarter of the $500 billion cryptocurrency market in the region, making it the the leading country in the area”, they explained from Nubank during the announcement of its opening to the crypto market.

In this way, the neobank was firmly committed to a crypto market that its CEO, David Vélez, defined as “an upward trend throughout Latin America, which we have been closely following and which we believe will have a transformative impact in the region.”

Nubank, therefore, was trusting part of its future growth and income generation to cryptocurrencies, and in the process, dragged in a great skeptic like Warren Buffett.

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