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1 Top Cryptocurrency to Buy Before It Surges Another $1 Trillion in Market Cap, According to Value Investor Bill Miller IV
When it comes to investing in cryptocurrencies, the conventional wisdom is that they are highly risky and highly speculative investments. Popular cryptocurrencies like Bitcoin (CRYPTO: BTC) reach stratospheric valuations mainly due to investors’ perception of their enormous future growth potential. This means that they can be compared best growth stocksnot value stocks.
But what if you’re willing to think outside the box? According to Bill Miller IV, chief investment officer of Miller Value Partners, Bitcoin can also be analyzed as a value stock. And based on the intrinsic value Miller sees in Bitcoin, he thinks it could be worth many times more than its current market value, $1.3 trillion. Is he right?
Bitcoin for value investors?
There’s obviously a lot to unpack here. First, there are no real fundamentals against which to value Bitcoin, and therefore no real benchmarks or metrics, such as the price-to-earnings (P/E) ratio, to use for comparison. And Bitcoin hardly seems like a cheap, undervalued investment. It has a high price of $65,000 and is currently trading near an all-time high. In other words, Bitcoin looks much more like a growth stock than a value stock.
But that’s not how Miller sees things. In a recent research note, he outlined the reasons why he continues to buy Bitcoin. From his perspective, Bitcoin is a value investment. And it appears to be significantly undervalued relative to its future potential.
As Miller points out, Bitcoin is a superior monetary technology. Thanks to an algorithm that carefully controls the rate of creation of new Bitcoin (as well as its total supply over its lifetime), Bitcoin is resistant to inflation. Thanks to the decentralized nature of Bitcoin, no monetary authority or government will ever be able to control it. And thanks to the peer-to-peer nature of Bitcoin’s monetary technology, overall transaction costs should be lower than those of monetary systems that require a financial intermediary.
Image source: Getty Images.
And lest you think Miller is late to the Bitcoin game, he’s been making similar arguments since 2015. At that time, he and his father Bill Miller (best known as the value investor who beat the S&P 500 Index for 15 consecutive years) wrote a piece titled “The Value Investor Case for Bitcoin.”
At the time, Bitcoin’s total market capitalization was just $3.4 billion, and the Millers claimed that Bitcoin had a 97.25% chance of total failure. But on the off chance that it succeeded, they said, Bitcoin could be worth much more. It turns out that Bitcoin was not a failure and is now worth more than $1 trillion.
The story continues
“It is still early”
For Bitcoin to increase in value by another $1 trillion or more, a number of things need to happen. Bill Miller IV suggests that Bitcoin will need to be used more for payments. Nowadays most people simply hold their Bitcoin, but as the world’s first cryptocurrency, it was designed to facilitate peer-to-peer payments. At the moment, Miller says, Bitcoin represents less than 1% of the global capital market.
Bitcoin will also have to prove its worth as an alternative to gold. Right now, when investors are looking for a hedge against inflation or geopolitical uncertainty, they typically turn to gold. But Bitcoin’s share of the store of value market is growing and should not be taken lightly. In 2022, for example, Goldman Sachs Group (NYSE: GS) has suggested that Bitcoin could eventually account for 50% of this market.
The good news, Miller says, is that “it’s still early.” The reason it is so difficult for many people to understand the intrinsic value of Bitcoin is that it requires a fundamental rethink of what money is, what capital is, and what role governments should play. Investing in Bitcoin requires not only a leap of faith, but also a complete change in mindset, and that takes time.
How much is Bitcoin really worth?
According to Miller, the best monetary technology usually wins and there is no denying that Bitcoin represents an impressive technological breakthrough. Just as plastic money replaced paper money, digital money could replace analog money. If this were the case, the value of Bitcoin could easily double, triple or even quadruple. Miller did not provide an exact target for Bitcoin, only suggesting that it would be “many multiples” of its current value.
While I agree with Miller that Bitcoin is undervalued, I am still not convinced that it is a value investment. There are enormous risks involved when investing in cryptocurrencies, and much of Bitcoin’s growth could take years, if not decades, to fully realize. To me, it still seems like Bitcoin is a growth investment. Whatever you want to call it, though, I’m still backtracking and loading up on Bitcoin.
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Domenico Basulto has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin and Goldman Sachs Group. The Motley Fool has a disclosure policy.
1 Top Cryptocurrency to Buy Before It Surges Another $1 Trillion in Market Cap, According to Value Investor Bill Miller IV was originally published by The Motley Fool