Current 'Trickle Into Bitcoin' Could Become 'A Torrent' - Bill Miller
As bitcoin (BTC)'s latest surge continues to convert ranks of legacy finance institutions into crypto-enthusiasts, legendary investor Bill Miller predicts that "the current relative trickle into bitcoin" could become "a torrent."
"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," Founder of major investment management firm Miller Value Partners and Co-Founder of Legg Mason Capital Management, wrote in his Q4 Market Letter.
Observing that bitcoin was the best-performing major asset category of 2020, Miller said that "it has outperformed all major asset classes over the past 1, 3, 5, and 10 years" and "its market capitalization is greater than JPMorgan and greater than Berkshire Hathaway and yet it is still very early in its adoption cycle.”
But besides exceeding the leading US investment bank and the holding controlled by iconic investor Warren Buffett, who has remained skeptical of cryptocurrencies, bitcoin could become a much sought safe haven for companies worried by the Federal Reserve’s (Fed) increasingly loose monetary policy, according to Miller.
“Companies such as Square, MassMutual, and MicroStrategy have moved cash into bitcoin rather than have guaranteed losses on cash held on their balance sheet,” the investor said in the letter.
According to him, BTC at this stage is best thought of as digital gold yet has many advantages over the yellow metal.
Miller concluded his forecast with a quip at the Oracle of Omaha who famously called bitcoin “rat poison.”
"[Buffett] may well be right. Bitcoin could be rat poison, and the rat could be cash,” Miller said.
At the time of writing (16:02 UTC), BTC trades at USD 34,668 after it reached USD 36,000 earlier today. The price is still up by 8% in a day and 23% in a week. It rallied by 79% in a month and 339% in a year.
Other key points from Miller's letter:
- Miller characterized the current state of the stock market as one of optimism that a solid recovery is underway;
- That corporate profits will be higher in the next year;
- That inflation will stay low;
- That the Federal Reserve will continue to provide significant liquidity to the economy and will keep short-term rates at zero;
- That long-term rates may rise but not sufficiently to derail the recovery;
- That no adverse Fed policy changes will occur until the economy has achieved full employment which is not likely to happen for at least a few more years;
- That stock market valuations "look high and are high, but are not as high as they look given the aforementioned economic conditions."
- However, he warned that the market is likely underestimating the risks of inflation because lots of liquidity and increasing money velocity could quickly put upward pressure on inflation.
- Gold and silver have done well this year and that looks to continue in 2021.
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