Should Warren Buffett-Led Berkshire Hathaway Buy Bitcoin Right Now?

Warren Buffett is one of the most-watched investors on the face of the planet. His track record allocating capital as the longtime CEO of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) speaks for itself, with shares of the conglomerate up a jaw-dropping 52,720% in the past four decades.

The Oracle of Omaha is second to none when it comes to analyzing certain industries, businesses, and stocks. Perhaps it's time for the investing legend to consider taking a closer look at a new type of asset.

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It might sound bananas, but I think Warren Buffett-led Berkshire Hathaway would be smart to buy Bitcoin (CRYPTO: BTC) right now.

Buffett and Bitcoin

Buffett has historically shied away from putting money into technology companies because he has said he didn't understand them. Focusing on things he fully understands means it's no surprise that Buffett hasn't really been a fan of Bitcoin. In 2018, he said the cryptocurrency was "probably rat poison squared."

Buffett also said in 2022 that he wouldn't buy all the Bitcoin out there for $25. I'm certain this bearish view stems from the fact that Bitcoin is different from a traditional business that makes products and services to sell to customers, generating revenue and cash flow.

Cash hoard

Despite what Buffett previously said about Bitcoin, casting the top crypto in a negative light, there are some obvious reasons why Berkshire might consider buying it right now. One has to do with cash.

As of Sept. 30, the conglomerate had $325 billion in cash, cash equivalents, and short-term investments on its balance sheet. That figure is almost double from the end of 2023, due to sizable share sales in its public equities portfolio throughout 2024. The massive amount of cash Berkshire has held for quite some time has been a hot topic of discussion, with the investment community wondering what Buffett could possibly buy with it.

Berkshire clearly has more cash than it knows what to do with, with limited places to park that capital. Here's where Bitcoin comes into the picture.

As of Jan. 27, Bitcoin had a market cap of $2 trillion. Berkshire could invest 5% of its cash balance, about $16 billion, in the top digital asset over multiple transactions over a year, for example, and it likely wouldn't have any impact on Bitcoin's price action.

That relatively small allocation would also help Berkshire manage risk, and it would leave plenty of capital for the business to continue waiting patiently for the opportunity to buy large amounts of stock or complete a major acquisition.

The potential to outpace inflation and produce adequate returns, at least better than holding cash or Treasuries would do, is another reason for Berkshire consider buying Bitcoin. Bitcoin could be value-accretive for Berkshire, as it has been for other companies that have adopted this strategy, most notably MicroStrategy.

If Berkshire had purchased $5 billion of Bitcoin when MicroStrategy did on Aug. 11, 2020, that position would be worth over $44 billion right now. Despite the volatility, shareholders couldn't complain with that kind of outcome.

Vote of confidence

As someone with a brilliant analytical mind, I think Buffett should be open-minded to learning more about Bitcoin. If he took a long and hard look at it, he'd probably find the digital asset at least interesting, if not a compelling investment opportunity. This would signal a vote of confidence for the Bitcoin community.

I haven't heard anything about Bitcoin being on the radar of Berkshire Hathaway, but if the crypto continues on the impressive trajectory it's been on, it will be impossible to ignore.

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Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Bitcoin. The Motley Fool has a disclosure policy.