During its ascendance to an all-time high late last year, bitcoin was often tagged as an inflation hedge. Legendary investor Bill Miller has a different take: The leading cryptocurrency is insurance against a financial catastrophe.
The leading cryptocurrency did drop below $45,000 after reaching an all-time high of $69,000 back in November, but prices are starting to show signs of recovery. Miller himself told CNBC, according to a Forbes article, that he holds a large position in bitcoin.
“It’s like an insurance policy,” said Miller, who is the chairman and chief investment officer of Miller Value Partners.
“Bitcoin is insurance against financial catastrophe as we see in Lebanon, or in Afghanistan, or many of these other countries where we saw (that) around the time of the pandemic,” Miller said.
As one of the examples cited, Lebanon will be dealing with its own financial crisis with a plan that would essentially devalue its currency by 93%. That plan involves converting the hard currency deposits of the Lebanese pound into the local currency.
As global inflation surges, bitcoin is unaffected by rate hikes or other monetary policy strategies to help keep the local fiat currency afloat. As such, it can serve as its own version of an insurance policy, giving consumers ways to still hold purchasing power without watching their fiat currency drop in value.
“Insurance policies have no intrinsic value,” said Miller. “In fact, you want them to have no intrinsic value. You don’t want to have your house burned down, or get in a terrible accident, but you pay for insurance every year in case that happens.”
An Alternative to Bitcoin Investing
As bitcoin tries to claw its way back above the $45,000 mark, that price is still out of reach for many investors who want to purchase a whole coin. However, there are other ways to obtain exposure to the leading cryptocurrency for portfolio diversification, including via bitcoin futures using the ProShares Bitcoin ETF (BITO ).
BITO certainly played a large role in catapulting bitcoin to its November all-time high last year with it becoming the first U.S. ETF to focus on the leading cryptocurrency. While crypto purists may be skeptical about a futures ETF, it can work for investors looking for alternate exposure.
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