Veteran investor Bill Miller, whose mutual fund outperformed the S%P 500 in 2020 for the second year in a row, has weighed in on bitcoin\u2019s recent price rise and said he believes the flagship cryptocurrency could be seen as \u201cpoison\u201d for cash.<\/p>\n
Referring to Warren Buffett\u2019s famous words on BTC, saying the cryptocurrency is \u201cprobably rat poison squared,\u201d Miller said in his Q4 market newsletter that the legendary investor may be right. Per his words, \u201cBitcoin could be rat poison, and the rat could be cash.\u201d<\/p>\n
Several public companies have diversified their cash holdings into bitcoin in the second half of 2020, inducing MicroStrategy and Square, buying up billions worth of the flagship cryptocurrency. PayPal, in October of last year, surprised the crypto space by launching a service letting users buy BTC, BCH, ETH, and LTC on its platform.<\/p>\n
Per the newsletter, PayPal and Square are \u201cestimated to be buying on behalf of their customers all of the 900 new coins mined each day,\u201d which would mean demand is now far superior to supply. Other firms including MassMutual, One River, Ruffer Investment, and more have also added exposure to BTC.<\/p>\n
Miller wrote:<\/p>\n
Bitcoin at this stage is best thought of as digital gold yet has many advantages over the yellow metal. If inflation picks up, or even if it doesn\u2019t, 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.<\/p>\n
The veteran investor wrote he believes that while so far the cost of living in the United States has remained below the Federal Reserve\u2019s 2% inflation target, despite the central bank\u2019s stimulus measures launched to counter the economic fallout caused by the COVID-19 pandemic, the market is likely \u201cunderestimating the risks of inflation.\u201d<\/p>\n
He added that savings rates are \u201cunusually high\u201d and as the economy starts going back to normal in the second half of the year it\u2019s likely consumption will accelerate and, with it, money velocity. Miller concluded:<\/p>\n
Lots of liquidity and increasing money velocity could quickly put upward pressure on inflation.<\/p>\n
Last month, a team of J.P. Morgan global market strategists led by\u00a0Nikolaos Panigirtzoglou\u00a0reportedly wrote in a note to clients that over the long term Bitcoin\u2019s price could get to $146,000 and higher. The report noted Bitcoin being seen as an alternative to gold implied \u201cbig upside\u201d for it, although a rally to $146,000 is \u201cunsustainable\u201d for this year and is instead a long-term target.<\/p>\n
Featured image via Pixabay.<\/p>\n