Legendary Value Investor Says Only Cryptoasset Without Any Competition Is Bitcoin

On Thursday (May 12), legendary American value investor William H. Miller III shared his thoughts about the crypto market during an interview on CNBC.

Miller is the Founder, Chairman, and Chief Investment Officer of investment firm Miller Value Partners, as well as the portfolio manager of firm’s mutual funds “Opportunity Equity” and “Income Strategy”.

Before starting Miller Value Partners, Bill Miller and Ernie Kiehne founded Legg Mason Capital Management, and they worked as portfolio managers of the Legg Mason Capital Management Value Trust from its inception in 1982.

It is important to point out that Miller is not your average fund manager. As CNBC noted back in June 2018, Miller’s 15-year streak (through 2005) of beating the is S&P 500 is still a benchmark no active manager can touch.”

In his “4Q 2020 Market Letter” (published on January 5), Miller had this to say about Bitcoin:

At this writing, it is trading at over $31,000, up more than 50% since the middle of December. It has outperformed all major asset classes over the past 1, 3, 5, and 10 years. Its market capitalization is greater than JP Morgan and greater than Berkshire Hathaway and yet it is still very early in its adoption cycle.

The Fed is pursuing a policy whose objective is to have investments in cash lose money in real terms for the foreseeable future. Companies such as Square, MassMutual, and MicroStrategy have moved cash into bitcoin rather than have guaranteed losses on cash held on their balance sheet. Paypal and Square alone are estimated to be buying on behalf of their customers all of the 900 new bitcoins mined each day.

Bitcoin at this stage is best thought of as digital gold yet has many advantages over the yellow metal. If inflation picks up, or even if it doesn’t, and more companies decide to diversify some small portion of their cash balances into bitcoin instead of cash, then the current relative trickle into bitcoin would become a torrent. Warren Buffett famously called bitcoin ‘rat poison’. He may well be right. Bitcoin could be rat poison, and the rat could be cash.

Miller’s latest comments about crypto were made yesterday during an interview with Kelly Evans, the host/anchor of CNBC’s The Exchange.

When asked to comment on Bitcoin’s current price action, Miller said:

The correlation right now is with risk-on, risk-off. So when the market’s doing well, then Bitcoin’s been up, and when the market’s doing poorly, Bitcoin’s been down, and I think those correlations can continue to bounce around. So, again, I don’t have a particular view. If Bitcoin was in half from here, would I be surprised? No, I would be chagrined because I own a lot of it, but I wouldn’t be surprised.

Evans then asked if Miller was considering selling some of his $BTC holdings at this point.

He replied:

No… I have sold stuff to meet margin calls because I’m always on margin, and the stuff that you sell is the stuff that is very very liquid…

Next, Evans asked Miller to predict what would happen in the crypto market during the next couple of months.

Miller said:

A couple of months, I don’t have a clue. My view is that people have lost a lot of money in crypto. They’ve been speculating in stuff that they probably don’t know anything about, especially if they’re surprised to have lost money because most of us of the ICOs that came around in 2017 have gone to zero.

And I’d say you’ve got probably 10,000 coins right now, and all except for Bitcoin, in my opinion — including Ethereum — have competition, and some of those things… might work out, but I don’t have the expertise to evaluate them, and I think you have to think of them as venture investments, which means that they’re going to be driven by power laws instead of typical Gaussian distributions, which means that most of them aren’t going to work, and the few that do work will do very well, but I don’t know which those are.

https://youtube.com/watch?v=yaexYWn3vtI%3Ffeature%3Doembed

On February 8, during another interview with Kelly Evans, Miller was asked if it was true that half of his net worth was in Bitcoin as recently reported.

Miller replied:

It was reported maybe misleadingly because it was reported I put half of my net worth in it, and that certainly did not happen. What happened was I put a few percent of my net worth in it a long time ago, and it grew to be half of my net worth. Now it’s less than that because it’s down in half since since November, but no it’s still a very big position. It’s very early days in that in that entire space.

The KPMG… announcing that they’re putting Bitcoin and Ether on their balance sheet the other day was, I thought very very big because obviously they’re plugged into all kinds of companies and KPMG over here is as well. And so that validates to a certain extent in ways that MicroStrategy’s balance sheet stuff does not… I think also you’re going to see a lot of adoption among foundations and endowments and institutions this year, and that’s going to continue…

Bitcoin in one sense has no intrinsic value. That’s correct. Where it has a moderate intrinsic value — because it is a giant database and databases have value — but the value of it is … not in the materials, in the construction. It’s in if people think it should be part of their portfolio.

And that’s in one side of it. It’s like an insurance policy. Your insurance policies have no intrinsic value. In fact, you want them to have no intrinsic value. You don’t want to have your house burned down, or, you know, get in a terrible accident, but you pay for insurance every year in case that happens. And Bitcoin is insurance against financial catastrophe, as we see in Lebanon or in Afghanistan or in many of these other countries or as we saw around the time of the pandemic.

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Disclaimer

The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading cryptoassets comes with a risk of financial loss.

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