Crypto Prices May Correct Soon If Buffett Is Right

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The Oracle of Omaha, whose opinion is seen by many as a barometer of economic health, suggests that corporate performance could decline, leading to lower stocks in the near term. This decline could spur a correction in crypto prices due to the Nasdaq’s correlation to cryptos.

Speaking at a Berkshire Hathaway shareholder meeting in Nebraska, Buffet said many companies would report lower profits caused by discounts after their COVID-19 inventories piled up.

Oracle of Omaha predicts lower earnings after selling $13 billion in stock

The Oracle of Omaha surmised:

In the broader economy, the feedback we’re getting is that, I would say, maybe the majority of our companies will actually report lower earnings this year than they did last year.

Apple Inc. reported lower iPad, Mac and wearable device revenue in the second quarter, despite iPhone revenue growth of 2% year-over-year. The iPhone maker accounts for nearly half of the Berkshire empire’s stock portfolio.

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

First-quarter earnings from the investment in Berkshire Chevron Corp were down 40% from quarterly earnings a year ago. Analysts expect Occidental Petroleum’s quarterly earnings to fall 38% to $1.30 a share when it reports earnings later on Tuesday.

Berkshire increased its stake in the company earlier this year.

Berkshire Hathaway is sitting on $130.6 billion in cash after selling $13.3 billion worth of stock in the first quarter. It bought back some of its own stock and invested $2.9 billion in other companies.

Interest rates pushed the yield on treasury bills and bank deposits from $164 million last year to $1.1 billion this year.

Despite previous investments in Goldman Sachs and Bank of America, Buffet has not revealed any intention to help alleviate the current US banking crisis.

Nasdaq Correlation May See Cryptos Trend Down

Buffets’ business partner Charlie Mungers said last month that investors should prepare for falling stock returns amid higher interest rates.

Earlier this month, the Federal Reserve (Fed) raised 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 Buffets and Mungers’ prediction of an economic slowdown could accompany a crypto slide.

A correlation coefficient closer to one means that the performance of Nasdaq and Bitcoin almost perfectly match.

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

Additionally, a larger drop in the stock market will impact the performance of larger cap cryptos that track Bitcoin.

BTC correlation with ETH and BNB | Source: K33 Research

Other macro pressures could drive down crypto prices, such as US regulatory uncertainty discouraging institutional investment.

Despite the boost from the collapse of several US banks earlier this year, Bitcoin needs this investment to break out of its current trading range, according to Kevin OLeary.

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

For the latest Bitcoin (BTC) analysis from BeInCryptos, click here.

Disclaimer

In accordance with the guidelines of the Trust Project, BeInCrypto is committed to providing impartial and transparent reports. This news article aims to provide accurate and timely information. However, readers are urged to independently fact-check and seek professional advice before making any decisions based on this content.

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