What Would Crypto Buffett Say?

Warren Buffett has never been shy about his feelings on cryptocurrencies even so far as calling them “rat poison with no unique value.” However, it didn’t stop him from making an intriguing investment in 2021 in Brazil’s Nubank, one of the world’s largest digital banks, in a Series G IPO funding round. In fact, it’s been so lucrative that Buffett snagged an additional $1 billion in Nubank shares in February.

So what do these moves mean? Is Warren Buffett warming up to cryptocurrencies? It made me think about the wisdom he has bestowed on us over the last several decades and I wondered, could the same advice apply to crypto investments? In other words, what would “Crypto Buffett” say?

“Be fearful when others are greedy and greedy only when others are fearful.”

- Crypto Buffett

What the original meaning of this quote was:

In 2008, Warren Buffett's Berkshire Hathaway bought $5 billion of preferred stock in Goldman Sachs during the peak of the financial crisis. In 2011, Goldman Sachs redeemed the shares, earning Berkshire Hathaway a profit of $3.7 billion. Ten years after the crisis, Berkshire Hathaway still owned $3.13 billion of Goldman Sachs.

Obviously that turned out OK for him.

How it can be applied to crypto:

Crypto is famously cyclical. While this volatility is not for the faint of heart, it periodically presents tremendous opportunities for the astute follower. The best teams focus on BUIDLing and driving innovation during crypto winters and the best investors deploy capital during crypto winters. Likewise, the best teams and investors don’t succumb to the hype of the bubbly periods.

“It's far better to buy a wonderful token at a fair price than a fair token at a wonderful price."

- Crypto Buffett

What the original meaning of this quote was:

Warren Buffett is famous for saying his targeted holding period is forever. He wants to buy and hold companies that will be successful over the long-term. Given that mental model, the near-term price he pays is less important than

How it can be applied to crypto:

Despite the famously cyclical nature of crypto, bulls point out that anyone who bought and held Bitcoin for more than four years has never lost money. Token and networks that are fundamentally sound and driving innovation and adoption will outperform over time irrespective of short-term price fluctuations.

Conversely, buying the dip on a fad or scammy coin may work out in the short term, but it is not a very solid strategy for the long term.

“Long ago, Ben Graham taught me that 'Price is what you pay; value is what you get.' Whether we’re talking about socks or tokens, I like buying quality merchandise when it is marked down."

- Crypto Buffett

What the original meaning of this quote was:

This quote is a classic value investing principle: value investors believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond to a company's long-term fundamentals. The overreaction offers an opportunity to profit by buying stocks at discounted prices on sale.

How it can be applied to crypto:

There are now more than 10,000 tokens. So it is important to really diligence the token and network: how does the technology work, what are the crypto economics, what are the use cases, what is the adoption, etc. The best networks will outperform over time.

“When we own portions of outstanding cryptonetworks with outstanding communities, our favorite holding period is forever."

- Crypto Buffett

What the original meaning of this quote was:

Warren Buffett was the OG HODLer!!! But he was famously picky about which companies he chose to invest in

How it can be applied to crypto:

It is important to really diligence the token and network: how does the technology work, what are the crypto economics, what are the use cases, what is the adoption, etc. The best networks will outperform over time.

“Time is the friend of the wonderful crypto network, the enemy of the mediocre."

- Crypto Buffett

What the original meaning of this quote was:

A good business compounds value over time as the success of the business accrues value and profits back to the business. Meanwhile a mediocre business will flounder or even go bankrupt.

How it can be applied to crypto:

The network effect is a phenomenon whereby increased numbers of people or participants improve the value of a good or service. The internet is an example of the network effect. Initially, there were few users on the internet since it was of little value to anyone outside of the military and some research scientists.

However, as more users gained access to the internet, they produced more content, information, and services. The development and improvement of websites attracted more users to connect and do business with each other. As the internet experienced increases in traffic, it offered more value, leading to a network effect.

By extension, the strong crypto networks will get stronger with time while weak crypto networks will die out over time.