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Warren Buffett Cash Pile Rises to $130.6 Billion – a Potential Signal for Crypto Market Correction?

2 mins
Updated by Geraint Price
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In Brief

  • Warren Buffett predicts depressed corporate results caused by COVID-19.
  • One of Berkshire Hathaway's largest investments has recorded two consecutive quarters of depressed revenue.
  • Bitcoin's correlation with the Nasdaq may see the asset follow tech stocks downward.
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The Oracle of Omaha, whose opinion many regards as an economic health barometer, suggests that businesses’ performance could decline, leading to a short-term stock decrease. This decline could spur a crypto price correction because of the Nasdaq’s correlation with cryptos.

Speaking at a Berkshire Hathaway shareholder meeting in Nebraska, Buffet said many firms would report lower earnings caused by discounts after their COVID-19 inventory build-up.

Oracle of Omaha Predicts Lower Earnings After Dumping $13 Billion in Stocks

The Oracle of Omaha surmised:

“In the general economy, the feedback we get is that, I would say, perhaps the majority of our businesses will actually report lower earnings this year than last year.”

Apple Inc. saw declines in iPad, Mac, and wearables revenue in Q2, despite iPhone revenue growing 2% year-over-year. The iPhone maker comprises almost half of the Berkshire empire’s stock portfolio.

Services, Apple’s second-largest segment after the iPhone, experienced a third straight quarter of mid-single-digit growth. As a result, Apple’s total revenue declined 3% annually, marking two consecutive quarters of revenue decline.

Q1 profits of Berkshire investment Chevron Corp were down 40% from quarterly profits last year. Analysts expect quarterly earnings of Occidental Petroleum to fall 38% to $1.30 per share when it reports earnings later Tuesday.

Berkshire increased its stake in the firm earlier this year.

Berkshire Hathaway is sitting on $130.6 billion in cash after selling $13.3 billion in shares in Q1. It repurchased some of its own stock and invested $2.9 billion in other companies.

Interest rates boosted returns from Treasury bills and bank deposits from $164 million last year to $1.1 billion this year.

Despite earlier investments in Goldman Sachs and Bank of America, Buffet did not reveal any intentions to help alleviate the current U.S. banking crisis.

Nasdaq Correlation Could See Cryptos Trend Downward

Buffet’s business partner Charlie Munger said last month that investors should brace for lower stock market returns amid higher interest rates.

Earlier this month, the Federal Reserve (Fed) increased interest rates by 25 basis points to 5-5.25%, but hinted at a future pause.

The 30-day correlation between Bitcoin and the Nasdaq rose to around 0.5 at the end of April. This tracking implies that Buffet’s and Munger’s prediction of an economic slowdown could accompany a crypto slide.

A correlation coefficient closer to one means that the Nasdaq and Bitcoin performances dovetail almost perfectly.

BTC 30-Day Correlation With Stocks, Gold, and Dollar
BTC 30-Day Correlation With Stocks, Gold, and Dollar | Source: K33 Research

Furthermore, a larger stock market decline will impact the performances of larger-cap cryptos tracking Bitcoin.

BTC relationship with ETH and BNB
BTC Correlation With ETH and BNB | Source: K33 Research

Other macro pressures could depress crypto prices, such as U.S. regulatory uncertainty discouraging institutional investment.

Despite getting a boost from the collapse of several U.S. banks earlier this year, Bitcoin needs this investment to break out beyond its current trading range, according to Kevin O’Leary.

Bitcoin lost substantial liquidity after the collapse of FTX and Alameda Research last year.

For BeInCrypto’s latest Bitcoin (BTC) analysis, click here.

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...