Why investor Bill Miller believes bitcoin’s potential is still massive

The crypto world continues to generate curiosity and speculation about its future, especially in relation to traditional financial systems. Scott Melker, Host of The Wolf of All Streets Podcast, and Bill Miller, Chief Investment Officer and Portfolio Manager at Miller Value Partners, delve into this topic, discussing the potential of bitcoin and the evolving economic landscape.

Scott Melker opened the conversation by emphasizing the fascination with hyperbolic price predictions, suggesting that bitcoin’s trajectory could be in line with gold’s market cap. He questions Bill Miller on this potential, and Miller shares his perspective, noting that this potential is already “baked in the cake.” Miller explains that the long-term growth rate of the US dollar, driven by the policies of the Federal Reserve, coincidentally aligns with the nominal growth rate of GDP, highlighting the systemic power dynamics that bitcoin challenges.

Miller explains in detail Bitcoin’s first-mover advantage and unique proof-of-work system, comparing it to fiat currencies. He notes that Bitcoin’s fixed supply of 21 million units represents a significant shift from traditional, centrally controlled financial systems. He argues that this shift toward decentralization provides greater stability and accountability due to fewer potential points of failure.

Melker acknowledges that most people in the United States lack a basic understanding of how money is created. However, he observes a growing awareness that inflation and economic anomalies are driving this. Miller agrees, emphasizing the role of the Federal Reserve in trying to stabilize the economy through monetary policy. He envisions a shift from outcome-oriented management to process-oriented management of capital, and highlights the early stages of this paradigm shift.

The talk also touches on the broader trend toward decentralization. Miller argues that decentralized systems are inherently more stable than centralized systems, which tend to be controlled by a few organizations with minimal accountability. He believes this stability is a key advantage of bitcoin and similar technologies.

As a noted value investor, Miller addresses the common criticism that bitcoin lacks intrinsic value. He describes his early investment in bitcoin and suggests that existing investors will continue to benefit from its growth. Despite the introduction of ETFs and the mainstream recognition of bitcoin, Miller argues that the cryptocurrency’s potential remains significant.

Scott Melker explores the effects of reduced volatility on the bitcoin market. He notes that historical cycles have included significant declines, but recent trends have shown less dramatic declines, likely indicating a maturing market. Miller agrees, noting that as volatility decreases, the potential for returns will also decrease, but it will remain attractive compared to other assets.