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Warren Buffett was wrong about a ‘rat poison’ Bitcoin portfolio, data shows

Warren Buffett was wrong about a ‘rat poison’ Bitcoin portfolio, data shows

Warren Buffett, famously known for calling Bitcoin (BTC) “rat poison squared,” sees no value in the cryptocurrency. But data shows that including Bitcoin in a portfolio of equally weighted stocks from Berkshire Hathaway, Microsoft, JPMorgan, and BlackRock, which he dubbed as the “rat poison portfolio,” would have resulted in much better returns for Buffett.

Improved Returns with Bitcoin in “Rat Poison Portfolio”

Alpha Zeta, an independent market analyst, reported that allocating just 2.5% of Bitcoin yearly to the “rat poison portfolio” increased returns by almost 20% with reduced risks since 2014. The portfolio currently has returns of around 16%.

Rat poison portfolio with Bitcoin allocations. Source: Alpha Zeta

Although Bitcoin is highly volatile, Alpha Zeta noted that BTC’s correlation with the said stocks is very low. It means Bitcoin negates losses imposed by downside movements in the said stocks, such as the 2021–2023 bear market where allocating Bitcoin to the “rat poison portfolio” could have offset losses by around 10%. Therefore, allocating a small portion of Bitcoin to the “rat poison portfolio” serves as a reasonable hedging strategy against potential negative returns.

Correlation between Bitcoin and Berkshire Hathaway, Microsoft, JP Morgan and BlackRock stocks since 2014. Source: Alpha Zeta

Bitcoin Outperforms Berkshire Hathaway by 320,000%

Bitcoin supporters see it as an alternative to traditional safe-haven assets owing to its fixed supply of 21 million BTC and increasing deflation over time. It has attracted many buyers as a way to offset fiat debasement and excessive money printing by central banks worldwide. Glassnode reported that non-zero Bitcoin addresses grew from around 2,500 in 2009 to over 45 million in 2023.

The number of non-zero Bitcoin addresses since 2009. Source: Glassnode

However, Buffett considers Bitcoin a gambling token and “doesn’t have any intrinsic value…. But that doesn’t stop people from wanting to play the roulette wheel.” Nonetheless, he has exposure in the broader crypto market through his investments in companies like Nubank, which offers crypto-related services in Latin America.

As of April 2023, Bitcoin is down nearly 60% from its record high of $69,000 in November 2021, but it has gained 100% this year. Since its launch in January 2009, Bitcoin has outperformed Berkshire Hathaway’s portfolio by over 320,000%.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their research before making a decision.