Warren Buffett has made his dislike for Bitcoin known over the years. “In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending,” he said in 2018 . At the time, Bitcoin was priced at about $15,000.
Today, Bitcoin’s value has soared above $50,000. Yet Buffett hasn’t changed his tune. Even if someone offered him all the Bitcoin in the world for $25, Buffett said, he wouldn’t take it. “Because what would I do with it?” he asked. “I’ll have to sell it back to you one way or another. It isn’t going to do anything.”
There’s an exception to every rule. Buffett doesn’t like Bitcoin, but that doesn’t mean his holding company, Berkshire Hathaway (BRK.A 1.38%) (BRK.B 1.44%), dislikes it.
Berkshire now has a market cap of almost $900 billion, and Buffett has many experienced advisors helping him manage its sprawling portfolio. Either he or one of his advisors, it seems, loves one stock in particular, enough to make a $1 billion bet on it. That stock is heavily exposed to the rise of cryptocurrencies, Bitcoin included.
Riding the Bitcoin wave
There’s an old adage during gold rushes: Don’t chase the gold, sell pickaxes — you’re sure to profit whether gold is discovered or not. This is exactly the strategy Nu Holdings (NU 2.68%) is following when it comes to profiting from crypto.
In 2013, Nu took the Latin American banking industry by storm under the name Nubank. The pitch was simple: For too long, the region’s banking industry had been controlled by a handful of powerful players that used their market dominance to charge customers high fees for simple services.
Born as a digital-first bank, Nubank began offering low-cost financial products like bank accounts, credit cards, and personal loans to anyone with a smartphone or computer .
Latin America’s appetite for low-cost and easy-to-use financial products proved overwhelming. In 2014, for example, the bank had almost no customers. That figure has grown every quarter since, surpassing 90 million in 2023 . Amazingly, more than half of Brazil’s adult population are now Nubank customers.
Nubank has done a terrific job adding new financial products as customer growth has taken off. That way, the company benefits not just from a rising customer count, but also from those customers using an increasing number of products.
When Nubank was launched, the average customer was using only one of its products — the only product the bank was offering at the time. Today, new customers start with an average of three financial products, a number that only grows the longer they are with Nubank .
One of those new products is Nucripto, introduced in 2022, which allows Nubank users to buy, sell, and transact in more than a dozen cryptocurrencies, Bitcoin and Ethereum included. In its first month of operation, Nucripto gained more than 1 million active users .
Nubank is still early in its crypto growth. It is rolling out its own digital currency, Nucoin, and continues to add new cryptos to the platform, including Polkadot and Avalanche .
The company still makes most of its money from other financial products like credit cards, insurance policies, and traditional investment accounts. But it has a leading position in Latin America’s crypto market, with more than 1 million active users and a platform that grows stronger every quarter.
Source: Nu Holdings.
A classic Buffett stock?
While Buffett avoided technology stocks for decades, he has a long history with banks. Berkshire Hathaway owns stock in Bank of America and Citigroup, for example, and it owned Wells Fargo stock for years.
In many ways, Nubank is a classic Buffett stock. The company was founded by David Velez, a former venture capitalist with experience at Sequoia Capital. Besides an experienced founder, Nubank also has a strong economic moat. Competitors will find it difficult to replicate its business model.
That’s because Nubank started from a digital-first position. The rest of the industry, meanwhile, is largely stuck with a high-cost business model that requires large staffs and expensive physical branches.
Nubank can simply move faster and more efficiently than the competition, an advantage that won’t disappear anytime soon. The crypto aspect is only one growth driver for the company, but that is exactly the point. Nubank offers many high-demand financial products to its growing customer base, and despite rapid growth in recent years, the company still hasn’t tapped most of its potential addressable market.
Shares aren’t exactly cheap given a strong run-up in 2023, but investors like Buffett know that it pays to be an early investor in stocks that can grow consistently for decades to come.
Citigroup is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Ryan Vanzo has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Avalanche, Bank of America, Berkshire Hathaway, Bitcoin, and Ethereum. The Motley Fool recommends Nu. The Motley Fool has a disclosure policy.
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