Why Bitcoin Is One of This Billionaire Investor’s Top Holdings in 2023

A popular strategy among the investment community is to follow the words of prominent investors for clues about what to do with their portfolios. For example, Warren Buffett, probably the greatest investor ever, publishes an annual Berkshire Hathaway shareholder letters that both professional and individual investors scrutinize. Any moves Buffett makes could lead to strong returns if implemented.

Another billionaire investor is Bill Miller, who just finished a very successful career as a mutual fund manager. He stands out because of how incredibly bullish he has been Bitcoin (BTC -1.13%)the world’s oldest and most valuable cryptocurrency. Here’s why it’s one of his greatest personal assets.

A legendary track record

Miller became famous when he managed the Legg Mason Value Trust, a value-focused portfolio he managed that beat S&P 500 for 15 years straight from 1991 to 2005. At one point he oversaw as much as $70 billion in client assets.

However Great recession hurt Miller’s returns, and he left the firm in 2016. He remained an active investor in his own firm, Miller Value Partners, until he decided to retire late last year after a long career in the investment management industry that spanned 40 years.

Lately, Miller has not shied away from voicing his strong support for Bitcoin, which has posted a monster return of nearly 17,000% since April 2013 (earliest data available from CoinMarketCap). Based on his track record, knowledge of the financial markets and his valuable perspective, it might be a good idea to heed Miller’s words.

A simple task

Miller’s Bitcoin thesis centers on it being a legitimate store of value, akin to a “digital gold”. This makes sense, and that’s how much investors have been looking at Bitcoin in its 14-year history.

Physical gold has been used for thousands of years as a store of value and continues to be so today. But it doesn’t even come close to Bitcoin when it comes to increasing purchasing power. Over the past 10 years, the price of an ounce of gold has risen only 16%, while Bitcoin’s gains are astronomically higher. Bitcoin’s rise comes despite being notoriously volatile.

In addition, it is worth mentioning Bitcoin’s most important feature, which is that only 21 million coins will be mined. This is set in the protocol’s code, which is unlikely to change in the future. On the contrary, if demand for gold suddenly skyrocketed tomorrow for whatever reason, it would immediately become economically feasible for companies to find new ways to get it out of the ground, putting downward pressure on the price as new supply hits the market.

One of the best comments I think Miller makes about Bitcoin is that it’s not even close to being in the same category as all the other more than 22,000 digital assets out there. Bitcoin is not controlled by anyone, while other cryptos are backed by venture capitalists with their own sets of incentives. Moreover, as Bitcoin continues to strive to become an entirely new form of money, it is questionable whether there is even a need for other digital assets, including Ethereum.

A potential catalyst

To curb rising inflation that it mistakenly initially believed to be transitory, the Federal Reserve has had no choice but to quickly push up interest rates. And this is negative for risky assets, such as growth technology stocks and cryptocurrencies. Miller believes that when the Fed swings — if it’s late 2023 or 2024 is anyone’s guess at this point — then Bitcoin is set to continue its march higher.

According to Miller, everyone should have at least 1% of their net worth in Bitcoin. The upside is massive if more individuals, institutions and even governments start storing some of their wealth in it. On the other hand, if things go south and Bitcoin becomes worthless, losing 1% of your holdings won’t wipe you out.