The correct posture for Buffett to buy digital currency?
There is an article "If Buffett wants to buy Bitcoin, how would he buy it?" ".
Friends in the currency circle know that Buffett's attitude towards Bitcoin is as always disgusting or even dismissive. He once publicly called Bitcoin "rat shit."
The article starts from the perspective of how Buffett skillfully uses contracts to buy stocks at low prices and introduces how ordinary investors can use contracts to buy Bitcoins at low prices.
After reading this article, I thought of the other two "skills" and "experiences" that Buffett often used when investing in stocks, and felt that these two "skills" and "experiences" were also appropriate for digital currency investment.
Buffett's first "trick" is "Be greedy when others are fearful." It refers to the fact that when the market is extremely depressed and the overall investor sentiment is extremely panicky or even desperate, they should do the opposite, actively discover potential stocks, and massively increase their positions to buy.
The last time Buffett perfectly performed this approach was after the 2008 financial crisis.
In 2008, the unprecedented financial crisis caused the U.S. stock market to plummet. When the market was most panicked, Buffett acted as a "savior" to inject $5 billion into Goldman Sachs and $3 billion to General Electric. In 2009, the Federal Reserve began quantitative easing, and U.S. stocks began to rebound. In just half a year, the value of Goldman Sachs and General Electric invested by Buffett doubled.
Buffett once said, "The stock market crash is God's best gift to value investors."
Isn't this not the case in digital currency investment? Since the end of 2017, led by the plunge of Bitcoin, the entire digital currency market has entered a bear market. The bear market has continued so far, except for the rebound of about 4 months last year, it has basically fluctuated at other times. Although the current price of Bitcoin has nearly doubled from the lowest point of more than 3,000 US dollars, it is only 40% of the peak price of the bull market.
Following Buffett's words, we can say that in digital currency investment, "the bear market is God's best gift to value investors."
Harvesting this gift requires patience and faith.
Buffett's second experience is a warning to ordinary investors. He once said: "Most investors, including institutional investors and individual investors, will sooner or later find that the best way to invest in stocks is to buy index funds with very low management fees."
why? Because most investors do not have the ability to read statements and identify stocks, it is better to directly buy funds that represent stock indexes than blind stock selection.
The last time Buffett perfectly interpreted this warning was also around the 2008 financial crisis.
In 2008, Ted Seides, president of the American hedge fund Protege Partners, bet $1 million, believing that his complex and high-cost investment strategy would defeat Buffett's index fund investment method.
At the beginning of the bet, Buffett chose the conservative style stock allocation of the American Vanguard Group based on the S&P 500 Index. Sedes used the group's five funds to invest in other hedge funds. Ten years later, the fund that Buffett chose has made a profit of 63.5% since 2008, while Seders' "fund-of-funds" strategy has returned investors 19.6%. If you don't deduct fund fees, Sedes's fund returns only 44%.
The so-called stock index refers to an investment method in which representative stocks are selected from a series of stocks to calculate an index according to a certain weight, and the fund company allocates according to the proportion of each stock in the index.
This method can also be used in digital currency investment.
In digital currency investment, I will choose the mainstream currency with good liquidity, the highest degree of consensus, and the lowest zero risk for allocation. At present, the market value of Bitcoin accounts for 68% of the market value of the entire digital currency, and the market value of Ethereum accounts for 7.3% of the market value of the entire digital currency. Together, these two account for more than 75% of the entire market value. Therefore, if ordinary investors do not have the energy to choose too much, it is enough to invest in Bitcoin or Ethereum according to this ratio.
