Decentral Block Post

Warren Buffett has put most of Berkshire Hathaway's cash in short-term U.S. Treasury bills now that they offer as much as 3.27% in yields. But while the news does not concern Bitcoin (BTC) directly, it may still be a clue to the downside potential for BTC price in the near term.

Berkshire Hathaway seeks safety in T-bills

Treasury bills, or T-Bills, are U.S. government-backed securities that mature in less than a year. Investors prefer them over money-market funds and certificates of deposits (COD) because of their tax benefits.

Related: Stablecoin issuers hold more US debt than Berkshire Hathaway: Report

Berkshire's net cash position was $105 billion as of June 30, out of which $75 billion, or 60%, was held in T-bills, up from $58.53 billion at the beginning of 2022 out of its $144 billion total cash reserves.

The move is likely a response to bond yields jumping massively since August 2021 in the wake of the Federal Reserve's hawkish policies aimed at curbing inflation, which was running at 8.4% in July. 

Bitcoin (BTC) hodlers are feeling the squeeze this week as repeated tests of lower levels spark increasing losses.

Data from on-chain analytics firm Glassnode shows more wallets are in the red as of Aug. 23 than at any time in the past month.

Over 17.5 million wallets in the red

BTC/USD has seen five trips below $21,000 since the end of Aug. 19, data from Cointelegraph Markets Pro and TradingView shows, and the quest for support is already making plenty of traders nervous.

Meanwhile, those who bought in recent weeks are underwater to varying degrees, as Bitcoin is at its lowest since the last week of July.

The extent to which investors added or created positions on the way to this month’s $25,200 highs is now becoming clearer — more BTC addresses are at an overall loss than at any time since July 23.

After the rising wedge formation was broken on Aug. 17, the total crypto market capitalization quickly dropped to $1 trillion and the bulls' dream of recouping the $1.2 trillion support, last seen on June 10, became even more distant. 

The worsening conditions are not exclusive to crypto markets. The price of WTI oil ceded 3.6% on Aug. 22, down 28% from the $122 peak seen on June 8. The United StatesTreasuries 5-year yield, which bottomed on Aug. 1 at 2.61%, reverted the trend and is now trading at 3.16%. These are all signs that investors are feeling less confident about the central bank's policies of requesting more money to hold those debt instruments.

Recently, Goldman Sachs chief U.S. equity strategist David Kostin stated that the risk-reward for the S&P 500 is skewed to the downside after a 17% rally since mid-June. According to a client note written by Kostin, inflation surprises to the upside would require the U.S. Federal Reserve to tighten the economy more aggressively, negatively impacting valuations.

Meanwhile, extended lockdowns supposedly aimed at containing the spread of COVID-19 in China and property debt problems caused the PBOC led the central bank to reduce its five-year loan prime rate to 4.30% from 4.45% on Aug. 21. Curiously, the movement happened a week after the Chinese central bank lowered the interest rates in a surprise move.

Crypto investor sentiment is at the edge of ‘neutral-to-bearish’

The risk-off attitude brought by surging inflation led investors to expect additional interest rate hikes, which will, in turn, diminish investors' appetite for growth stocks, commodities and cryptocurrencies. As a result, traders will likely seek shelter in the U.S. dollar and inflation-protected bonds during periods of uncertainty.

After the rising wedge formation was broken on Aug. 17, the total crypto market capitalization quickly dropped to $1 trillion and the bulls' dream of recouping the $1.2 trillion support, last seen on June 10, became even more distant. 

The worsening conditions are not exclusive to crypto markets. The price of WTI oil ceded 3.6% on Aug. 22, down 28% from the $122 peak seen on June 8. The United StatesTreasuries 5-year yield, which bottomed on Aug. 1 at 2.61%, reverted the trend and is now trading at 3.16%. These are all signs that investors are feeling less confident about the central bank's policies of requesting more money to hold those debt instruments.

Recently, Goldman Sachs chief U.S. equity strategist David Kostin stated that the risk-reward for the S&P 500 is skewed to the downside after a 17% rally since mid-June. According to a client note written by Kostin, inflation surprises to the upside would require the U.S. Federal Reserve to tighten the economy more aggressively, negatively impacting valuations.

Meanwhile, extended lockdowns supposedly aimed at containing the spread of COVID-19 in China and property debt problems caused the PBOC led the central bank to reduce its five-year loan prime rate to 4.30% from 4.45% on Aug. 21. Curiously, the movement happened a week after the Chinese central bank lowered the interest rates in a surprise move.

Crypto investor sentiment is at the edge of ‘neutral-to-bearish’

The risk-off attitude brought by surging inflation led investors to expect additional interest rate hikes, which will, in turn, diminish investors' appetite for growth stocks, commodities and cryptocurrencies. As a result, traders will likely seek shelter in the U.S. dollar and inflation-protected bonds during periods of uncertainty.