Bitcoin, the most popular cryptocurrency, makes a strong case.
To gain insight into what actions to take with one’s own portfolio, many investors listen to and read the writings of other successful investors. For instance, Warren Buffett, widely regarded as the best investor in history, regularly distributes a shareholder letter to the owners of Berkshire Hathaway, which is read with interest by both institutional and private investors. If you take Buffett’s advice, you could see substantial gains.
Bill Miller is yet another millionaire investor who recently retired from managing mutual funds. His extreme optimism for Bitcoin (BTC 3.18%), the oldest and most valuable cryptocurrency, makes him stand out. This is why it ranks so highly among his personal assets:
A record that will live in infamy
Miller became well-known for leading the value-oriented Legg Mason Value Trust, which he managed to outperform the S&P 500 for 15 consecutive years, from 1991 to 2005. A staggering $70 billion in client assets were once under his watchful eye.
Miller’s profits were negatively affected by the Great Recession, and he eventually departed the company in 2016. After almost 40 years in the investment management sector, he chose to retire at the end of last year but not before remaining an active investor at his own firm, Miller Value Partners.
Miller has not been shy about expressing his unwavering support for Bitcoin recently. Bitcoin has returned an astounding approximately 17,000% since April 2013. (earliest available data from CoinMarketCap). Miller is worth listening to because of his proven track record, extensive knowledge of financial markets, and unique perspective.
An easy argument
Miller argues that Bitcoin is similar to “digital gold” in that it can be used as a reliable means of exchange and savings. In fact, this is how many financiers have thought about Bitcoin throughout its 14-year existence.
Gold in its physical form has been and continues to be a reliable means of storing wealth over the course of many centuries. However, in terms of increasing one’s purchasing power, it is vastly inferior to Bitcoin. Bitcoin’s value has skyrocketed over the past decade, while the price of an ounce of gold has risen by only 16%. Despite Bitcoin’s legendary volatility, it has continued its ascent in popularity.
Also, the fact that only 21 million Bitcoins will ever be mined is arguably the cryptocurrency’s defining characteristic. This is hard-coded into the protocol and won’t be changed anytime soon. Contrarily, if demand for gold were to suddenly spike tomorrow for any reason, corporations would quickly become able to find new ways to extract it from the ground, exerting downward pressure on the price as new supply comes to market.
Miller’s observation that Bitcoin can’t be compared to the other over 22,000 cryptocurrencies out there is, in my opinion, one of the nicest things he says about Bitcoin. Bitcoin is decentralized, while other cryptocurrencies are backed by investors with conflicting goals. Furthermore, as Bitcoin strives to become an entirely new form of money, the necessity of other digital assets, such as Ethereum, becomes increasingly dubious.
Somewhat of a catalyst
The Federal Reserve has been forced to aggressively increase interest rates in an attempt to stem the tide of inflation, which it mistakenly believed at first to be temporary. This is bad news for high-risk investments like high-growth technology companies and cryptocurrency. Miller predicts that Bitcoin’s price will rise even more once the Fed makes a U-turn, which may happen as late as 2023 or as early as 2024.
Miller suggests putting away at least one percent of one’s wealth in Bitcoin. The potential gain is enormous if more people, businesses, and governments start putting money there. But if things turn bad and Bitcoin loses all value, even losing 1% of your holdings won’t ruin you.
