neobank

Bitcoin is beating Warren Buffett’s ‘crypto bet’ in 2023

Bitcoin’s rebound in 2023 has also seen Coinbase stock gaining over 100% year-to-date, boosting Cathie Wood’s ARK portfolio.

In 2023, Bitcoin (BTC) and Cathie Wood’s Coinbase (COIN) investment are finally outperforming Warren Buffett’s popular “crypto bet” in Brazil’s fintech giant Nubank (NU).

Bitcoin vs. crypto-exposure stocks NU, COIN

As of March 17, Bitcoin’s price is up nearly 55% year-to-date (YTD). In comparison, Nubank has risen by only 26%. Meanwhile, another crypto-exposure asset, namely Coinbase stock (COIN), has seen the biggest rebound of the three, rising over 100% YTD.

*BTC/USD and COIN versus NU yearly performance. Source: TradingView*

Nevertheless, Buffett’s investment has fared better than COIN over the past 12 months.

As of March 17, NU is down 38% year-over-year compared to COIN’s 61.76%, nearly equal to Bitcoin’s 37% losses in the same period.

Warren Buffett sticks by his neobank investment

Buffett’s investment firm Berkshire Hathaway purchased $1.50 billion worth of class-A Nubank stock in two separate rounds in July 2021 and February 2022.

The news came as a surprise to many since Buffett is a well-known cryptocurrency critic, and Nubank offers crypto trading services via one of its wings called Nucripto. In May 2022, the bank said that it would allocate 1% of its net assets to Bitcoin.

“This move reinforces the company’s conviction in Bitcoin’s current and future potential in disrupting financial services in the region,” Nubank said at the time.

But despite Nubank’s crypto exposure and NU’s price decline, Buffett has not sold a single share, according to Berkshire’s latest annual earnings report.

The decision to keep holding NU through a rough market likely coincides with Nubank’s growth in the Latin American banking sector.

Nu Holdings, the parent company of Nubank, reported a solid 2022 with 140% year-on-year growth in revenue and a 38% year-over-year rise in active customers.

Cathie Wood doubling down on COIN in 2023

The same cannot be said about Coinbase’s earnings in 2022 with its 57% drop in year-over-year revenue.

But ARK Invest CEO, Cathie Wood, appears unfazed by continuing to buy COIN shares via her ARK Next Generation Internet ETF (ARKW) and ARK Innovation ETF (ARKK) in 2023. The COIN buys, in particular, account for roughly 30% of all the stock purchased so far this year.

*COIN weight across ARK ETFs portfolios. Source: Ark Invest*

As a result, Coinbase has become Wood’s fifth-largest holding on record worth nearly $670 million at the time of writing.

Holding Bitcoin a better strategy?

Comparing Bitcoin’s price performance with the market debut of Coinbase and Nu Holdings reaffirms that BTC not only regularly outperform stocks, but also crypto-exposure stocks. Although exceptions have been seen, such as with the Bitcoin mining stock boom in 2021.

But overall, holding Bitcoin is proving to be a better strategy year-over-year, and likely with more upside potential, than traditional stocks.

Notably, NU has dropped by more than 50% since its market debut in December 2021. Since then, BTC has fared better with a 44% decline in the same period.

*NU’s returns since market debut vs. BTC. Source: TradingView*

Similarly, COIN is down 80% since its IPO in April 2021. The same down-cycle, however, has seen Bitcoin only losing around 50%, emerging as better performer overall against crypto-exposure stocks such as Coinbase and Nu Holdings.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Coinbase CEO ponders banking features after Silicon Valley Bank crisis

Coinbase CEO Brian Armstrong says the exchange has previously considered adding features to become a neobank.

The broader cryptocurrency community continues to debate the ongoing fallout following the closure of three major American banks, with calls for neobank services for the industry on the cards.

Silicon Valley Bank (SVB), which has traditionally served startups across several innovation sector industries, was shuttered by California’s Department of Financial Protection and Innovation on March 10.

The reasons surrounding the closure are still coming to light, but the news caused shockwaves through the industry, primarily driven by USD Coin (USDC) issuer Circle having over $3.3 billion of its $40 billion reserves locked up in the bank.

Signature Bank, which also serves cryptocurrency firms, met a similar fate on March 12. The New York Department of Financial Services took possession of the bank to prevent further bank runs as customers scrambled to pull funds from SVB and Signature.

The closure of SVB was particularly hard-hitting, with the USDC stablecoin briefly losing its $1 peg driven by major uncertainty around the effect Circle’s exposure would have on its ability to manage redemptions.

USDC has seen its peg creep back up to the $1 mark after Circle CEO Jeremy Allaire announced that the stablecoin issuer has lined up new banking partners in the United States.

Given the tumult of the past few days, the cryptocurrency ecosystem is now taking a closer look at ties to traditional finance institutions that serve fiat currency deposits, withdrawals and monetary flows.

Coinbase CEO Brian Armstrong took to Twitter on March 13, saying the American cryptocurrency exchange has previously considered features that could potentially bypass or serve to bridge gaps exposed in the latest mainstream banking failure.

Ryan Lackey, chief strategy officer of cryptocurrency insurance firm Evertas, questioned whether the exchange had considered offering neobanking services to high-net-worth individuals and businesses:

Hey @brian_armstrong and @coinbase — after the SVB hell over the weekend, why don’t you set up Coinbase as some kind of HNW + business neobank, with the “pass through assets to community banks and treasuries” as a first-class option in parallel with crypto.

— Ryan Lackey (@octal) March 13, 2023

Armstrong replied by saying that Coinbase would need to add a number of features and opened the door for comments in the thread:

“Definitely something we’ve thought about. Need a few more features like outbound wires, multi-user support etc. Non-fractional reserve “banking” is definitely looking more attractive right now.”

Coinbase confirmed that it had around $240 million held at Signature Bank on March 10 but expects to recover all of its cash holdings.

The closure of SVB and Signature Bank caused fears of widespread runs on regional banks across the United States over the weekend. A Bloomberg report also suggests that the United States Federal Reserve and Federal Deposit Insurance Corporation are weighing up the creation of a fund to cover deposits at ailing banks.