Value investing and bitcoin might seem antithetical at first glance, but to Bill Miller IV, that certainly isn’t the case.
The chief investment officer and portfolio manager at Miller Value Partners sees massive untapped potential in bitcoin that most investors are overlooking. Put simply, in Miller’s opinion, the cryptocurrency is trading far below its intrinsic value.
Just how valuable is bitcoin exactly? “I personally think it’s the new denominator for capital globally and will be increasingly viewed as a standard over the next few decades,” Miller said.
In Miller’s view, bitcoin is on track to replace fiat capital and completely revolutionize monetary systems across the world. “People compare it to digital gold. I think that’s an easy eventual target that it definitely hits in the next decade or so,” Miller told Business Insider in an interview.
Bitcoin to the moon?
At the core of Miller’s belief in bitcoin is its finite supply. The same can’t be said for fiat currencies.
“The bitcoin system is very, very clear in that there’s only 21 million. There’s a governed supply over time,” Miller said.
Satoshi Nakamoto, the unidentified creator of bitcoin, developed the cryptocurrency with a supply cap to prevent inflation. On the other hand, no such protocol exists for the US dollar or other traditional currencies.
“What happens with the current system is regulators and politicians jockey for control in an effort to shift the ledger through the printing of more dollars,” Miller said. A prime example of this is the US Treasury Department’s pandemic-era printing spree, which injected trillions of dollars of stimulus into the economy.
On the contrary, bitcoin’s energy-intensive mining process creates a strong value proposition for the cryptocurrency.
“If money is an accountability system, why do we create more units every year?” Miller added.
Additionally, bitcoin has a massive total addressable market, which makes it a compelling value play in Miller’s eyes. With the world’s fiat systems approaching a quadrillion dollars in capital and bitcoin’s market capitalization sitting at a modest $1.5 trillion, Miller sees this as an opportunity for the cryptocurrency to skyrocket in coming years. Bitcoin is massively under-owned in general among investors, in Miller’s opinion. He points out that there are only 10.5 million wallets with over $1,000 in bitcoin holdings globally.
It’s not just individual investors investing in bitcoin, either. Corporations are increasingly investing in bitcoin by adding it as an asset to their balance sheet, further solidifying bitcoin’s value proposition. Miller highlights the medical technology company Semler Scientific, which has been reinvesting its cash flow into the cryptocurrency. Semler Scientific currently holds 828 bitcoins in total. Other companies such as Microstrategy, Metaplanet, Tesla, and Square all hold bitcoin on their balance sheets.
To Miller, bitcoin is a reliable form of currency in a global economy where fiat money supply is consistently growing.
“We’ve never had a technology before that enabled us to account for value in an automated way or in automated units until now,” Miller said.
Miller’s arguments in favor of bitcoin are common among its supporters. However, they depend on widespread adoption, and it remains unclear how realistic that outcome is. Many other cryptocurrencies — including Ethereum, which does not have a finite supply — vie for investors’ attention.
The crypto space also faces potential future regulation. China, for example, has banned the use of cryptocurrencies.
How to invest in bitcoin
Investing in bitcoin has proven to be an extremely risky endeavor in recent years, with its price prone to frequent volatility. From December 2017 to December 2018 the digital currency’s price dropped 83%. From May 2021 to July 2021 it fell 46%. From November 2021 to November 2022 it plunged 74%. Since then, it has risen 236%, though it’s down 19% since July 29.
Due to their volatile nature, many financial advisors recommend allocating only a very small part of one’s portfolio to cryptocurrencies like bitcoin.
For those keen to put money into the digital asset, Miller believes the best way to invest in bitcoin is just to buy the cryptocurrency outright.
“I recommend just holding it directly, understanding the mechanics of self-custody, so that you are the only one that controls your bitcoin,” Miller said.
Although there’s been a rise in bitcoin ETFs, Miller cautions against gaining exposure to the cryptocurrency through an ETF vehicle and recommends buying it directly if possible. To Miller, the core value proposition of bitcoin is its decentralized and autonomous nature.
“If you own it in a centralized entity, you force someone else to buy it on your behalf, but you don’t actually hold the bitcoin,” Miller said.
Not all cryptocurrencies are made equally, either. In Miller’s opinion, many other cryptocurrencies are plagued by the same governance issues that face fiat currency and can’t replicate the value of bitcoin, which is why bitcoin is the only one he’s personally invested in.
Bitcoin is still a nascent asset class, but Miller is confident the technology has a clear path to revolutionizing the global monetary system — and delivering handsome returns to those who buy in now.
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