After Charlie Munger said Bitcoin (CRYPTO:BTC) is, “disgusting and contrary to the interests of civilization,” at the recent Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) annual meeting, some may get the idea that all value investors must hate the world’s largest cryptocurrency. Well, as in everything related to the market, the Bitcoin debate is not so cut and dried, even among famous value investors.
For instance, Bill Miller, a very successful value investor and Buffett acolyte, is a Bitcoin bull. Miller invested in Bitcoin in his fund years ago, before being forced to spin out his Bitcoin holdings into a separate account for investors. Miller also invested his personal money in Bitcoin and is now a Bitcoin billionaire after having purchased the cryptocurrency back in 2014-2015 at an average price around $350 per share, which he continues to hold.
While not as famous as Buffett and Munger, Miller became famous in the ’90s and early 2000s after beating the market for 15 consecutive years when he ran the Legg Mason Value Trust. He did go on to make a big mistake during the Great Financial Crisis of 2008, losing 55% that year. Yet a recent profile in Barron’s showed Miller is back, with his current fund, the Miller Opportunity Trust, in the top 1% of its peers over the past one-, three-, five-, and 10-year periods.
For those interested in Bitcoin but unsure if it’s right for them, you can probably find the best arguments on both sides of the Bitcoin debate from Buffett and Miller, who share two of the greatest investing track records of all time.
Here are their takes on Bitcoin’s intrinsic value, which is predicated on its utility as a store of value, medium of exchange, and hedge against inflation.
Buffett v. Miller: On Bitcoin’s uses and intrinsic value
Buffett has commented on Bitcoin’s value, or lack thereof, on numerous occasions. In 2019, he said:
[I]t’s ingenious and blockchain is important, but Bitcoin has no unique value at all. It doesn’t produce anything. You can stare at it all day and no little Bitcoins come our or anything like that. It’s a delusion, basically.
Followers of Buffett know he values all financial assets based on the wealth they produce. For Bitcoin and other types of commodities without high industrial value, Buffett can’t escape the fact that these assets don’t actually “produce” anything. In 1,000 years, there will still only be 21 million Bitcoins.
Meanwhile, Miller believes Bitcoin is closest in function and value to digital gold, in that it is a store of value and possible hedge against inflation, and that Bitcoin is superior as a better medium of exchange. So why shouldn’t Bitcoin be at least as valuable as gold, which is still 10 times the value of Bitcoin? Here’s what he said:
Many of the larger owners of Bitcoin say the best way to think about it is as digital gold. Gold is analog; Bitcoin is digital. It’s far superior to gold as a…