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The Oklahoma Oracle, better known as Warren Buffet, is a living legend in the investment arena. With his holding company Berkshire Hathaway, Buffet owns large shares in globally known companies such as American Express, Coca-Cola, IBM and Walmart. Buffet takes a fairly conservative approach to investing. It still stays away from cryptocurrencies like Bitcoin.
A tweet from Anthony Pompliano has caused a sensation. Pompliano draws attention to Warren Buffet’s huge cash reserves. These amount to around $ 137 billion. Pompliano said Buffet could buy almost all of Bitcoin. Is this really true?
Bitcoin and Warren Buffet: opposites attract?
Anyone who reads our articles regularly knows the relationship between the investor legend and Bitcoin. Buffet is a skeptic of cryptocurrency. You don’t see any real assets in BTC because it lacks the intrinsic value. Even an extremely expensive meal with TRON founder Justin Sun and other cipher luminaries couldn’t change Buffet’s attitude.
Now we come to Anthony Pompliano and Changpeng Zhao. The former is best known as a co-founder of Morgan Creek Digital and his daily analysis of the financial market. “Pomp” likes to tweet, and often in Bitcoin, cryptocurrency, and Co. Changpeng Zhao is, of course, well known as the founder of Binance.
In a recent tweet, Pompliano spoke about Warren Buffet’s high liquidity, which amounts to around $ 137 billion. Pompliano said this was enough to buy almost all BTC in circulation. First off: This is, of course, extremely unrealistic since Buffet would not invest in Bitcoin. On the other hand, however, it shows an interesting thought:
Can a single person really buy all BTC as long as they have enough liquidity?
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Buy all BTC at once? – Is that possible?
Let’s take a closer look at Anthony Pompliano’s original tweet and the response from Binance CEO Changpeng Zhao.
Is it the question that was asked if one person could really buy all the BTC directly?
This is where math cheats.
It is only true if EVERY Hodler is willing to sell at the current price, which is obviously not true as there is no 21m BTC sell wall.
Unfortunately, Mr. Buffet will only be able to buy a small portion of bitcoins, and at very high prices. 😀
– CZ Binance 🔶🔶🔶 (@cz_binance) May 2, 2020
The shortest answer to the previous question is very clear: no! – To elaborate further on the answer, we need to rethink what exactly CZ says and how exchanges work. And that is exactly what we are doing now!
Bitcoin exchanges and the principle of order books
We start with the concept of exchange and how order books work. The basic principle of an exchange is to bring buyers and sellers together in the most efficient way possible. This is linked to the order book concept. Both buyers and sellers can use an exchange to indicate how much Bitcoin they want to buy or sell at the desired price. This is recorded in the order book.
It is extremely important to understand that only the amount of Bitcoin that the vendor provides can be exchanged. It directly follows from this that Warren Buffet could never buy all the Bitcoin in circulation at once. This is due to the fact that many BTCs are not held on the exchanges and are therefore not ‘freely available’. Because, as already mentioned, a buyer should always find a willing seller.
Furthermore, there is the effect that the price of Bitcoin would skyrocket with such a massive order, as the available supply is far from sufficient.
Warren Buffet does not become a whale
CZ summarizes these two aspects well in the tweet mentioned above. So he says Buffet could only buy all Bitcoin if all (!) HODLer sold his BTC and secondly he could only buy a certain amount of Bitcoin and then only at a very high price.
Therefore, we can affirm that Anthony Pompliano’s statement is unfounded. Buffet, even if he wanted to, couldn’t just fly to Bitcoin Whale.
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The statements in this article do not constitute trading recommendations or investment advice.
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