Berkshire's death cross! Lagging behind the S&P by 34%, Buffett's successor's position on Bitcoin remains unclear.

Since Buffett announced his retirement in May, the “Buffett Premium” of Berkshire seems to be rapidly disappearing. Barchart reported that Berkshire Hathaway's stock price has formed a death cross, with the 50-day moving average falling below the 200-day moving average for the first time since August. The successor, Greg Abel's stance on Bitcoin remains unclear, raising questions about how Berkshire will treat digital assets in the future.

Buffett premium disappears, Berkshire death cross warning

(Source: barchart)

Due to Warren Buffett's retirement plans, Berkshire triggered a rare death cross, intensifying investor caution. Barchart reported that Berkshire Hathaway's stock price experienced a death cross, with the 50-day moving average falling below the 200-day moving average, the first time since August. The last time this technical signal occurred, it marked a market bottom. However, this time the situation is different. Since Buffett announced his retirement, the company's performance has been 34% lower than the S&P 500 index.

The death cross is one of the most famous bearish signals in technical analysis. When the short-term moving average crosses below the long-term moving average, it indicates that the recent price trend has clearly weakened compared to the long-term trend, and the bullish momentum is fading. For blue-chip stocks like Berkshire, the occurrence of a death cross is particularly rare and significant, as it usually represents a shake in market confidence in the company's fundamentals or management.

(Source: X)

Critics argue that this is merely the market readjusting after Buffett's decades of dominance. However, supporters believe that this fall is just a temporary fluctuation within an overall bull market led by technology stocks. Berkshire Hathaway Class B shares are currently just 3 dollars away from a 30 RSI (Relative Strength Index), which is a rare sign of potential oversold conditions.

However, this data also reveals cautious information. Since May, Berkshire Hathaway's stock price has only risen by about 5%, while driven by the strong momentum of artificial intelligence and tech stocks, the S&P 500 index has soared over 35%. This 34 percentage point gap is not just a number, but a market declaration of the end of the Buffett era.

344 billion USD cash reserves, both cautious and hesitant

Warren Buffett's unwavering value investment philosophy has allowed the company to hold $344 billion in cash, a figure that reflects both caution and the market's indecision. “When Berkshire holds a record cash reserve but its performance lags behind the S&P 500 Index, history often repeats itself. In most cases, after such a situation occurs, the market doesn't stay calm for long,” investor Peter B pointed out on X.

$344 billion is an astonishing figure, equivalent to 40% of Berkshire's market value. This proportion of cash is extremely rare among large publicly traded companies, usually indicating that management believes the market valuation is too high and finds no worthy investment targets. Buffett's value investing philosophy emphasizes “be fearful when others are greedy,” and the current high cash reserves are a reflection of this principle.

However, the question is: is this caution excessive? When the S&P 500 index surged 35% driven by the AI wave, Berkshire only rose 5%, which means that Berkshire's shareholders missed out on a huge market opportunity. From the perspective of opportunity cost, the $344 billion in cash, if invested in index funds, could have generated over $100 billion in additional returns.

Performance Comparison of Berkshire and S&P 500 (Since May)

Berkshire stock price increase: about 5%

S&P 500 Increase: Over 35%

Performance Gap: Behind by 34 percentage points

Cash Reserves: $344 billion (accounting for 40% of market value)

Opportunity cost: If investing in the S&P could yield an additional profit of about 100 billion dollars.

This conservative strategy may have been accepted by the market during Buffett's time, as investors trusted his judgment. However, after his successor Greg Abel took over, the market may not grant the same patience. If Abel continues to maintain high cash reserves while the market keeps rising, Berkshire's stock price may lag further, and the disappearance of the “Buffett premium” will accelerate.

Greg Abel's unclear stance on cryptocurrency sparks speculation

For cryptocurrency investors, the leadership change raises a more speculative question: Will Buffett's successor Greg Abel be more open to Bitcoin? The 95-year-old Buffett has long scoffed at cryptocurrencies, calling Bitcoin “rat poison squared” and predicting it will “end in tragedy.” His successor, 63-year-old Vice Chairman of Non-Insurance Operations, has remained silent on cryptocurrencies, leaving the market in the dark.

“Although it is well known that Buffett holds a pessimistic view of the cryptocurrency market, Greg Abel has not expressed a strong opinion on this asset class,” said Juan Pellicer, head of research at Sentora, to BeInCrypto recently. This silence may imply two situations: either Abel aligns with Buffett's position but chooses to remain low-key, or he has an open attitude towards cryptocurrency but finds it inconvenient to express publicly during Buffett's era.

Abel is likely to continue Buffett's investment philosophy, focusing on companies that can generate actual cash flow. However, Berkshire has quietly invested in the Brazilian digital bank Nu Holdings (which is involved in the cryptocurrency sector), indicating that Berkshire's doors may not be completely closed. Nu Holdings not only provides traditional banking services but also allows users to buy and trade cryptocurrencies, marking the first appearance of a crypto-related company in Berkshire's investment portfolio.

The symbolic significance of this investment may be greater than the actual amount. It suggests that even in the Buffett era, Berkshire has been quietly engaging in the crypto space, albeit indirectly. If Abel chooses to expand this engagement after taking over, even directly investing in Bitcoin or Bitcoin-related companies, it could have a huge impact on the entire crypto market. As one of the most respected investment institutions in the world, Berkshire's change in attitude may prompt other traditional institutions to follow suit.

Three Major Insights for Crypto Investors

Although Wall Street's trust in Greg Abel has yet to be tested, with Berkshire's technical indicators sending warning signals, investors are debating the end of the “Buffett premium.” For cryptocurrency investors, this shift at Berkshire provides three key insights.

First, traditional value investing faces challenges in the AI era. Buffett's value investing philosophy emphasizes buying undervalued quality companies and holding them for the long term, a strategy that has generated impressive returns over the past few decades. However, in the current market driven by the AI revolution, the high valuations of tech stocks and rapid changes make traditional value investing strategies seem conservative. The crypto market faces similar challenges: pure fundamental analysis may miss out on huge opportunities driven by technological innovation and narratives.

Second, leadership changes are a significant risk point. Buffett's personal brand and investment record are important components of Berkshire's valuation, and his retirement directly leads to the disappearance of the “Buffett premium.” For cryptocurrency projects, the departure of founders or core team members often triggers a similar crisis of confidence. This reminds investors that when assessing projects, they should not overly rely on personal charisma, but should focus on institutionalization and sustainability.

Third, a change in attitude may bring unexpected opportunities. If Abel's attitude towards cryptocurrencies is more open than Buffett's, Berkshire may become an important force in driving traditional institutions to accept Bitcoin. Even if only 1% of the $344 billion cash reserves is allocated to Bitcoin, it would result in an incremental demand of over $3 billion. Although this possibility is uncertain, it is worth crypto investors paying close attention to.