Big Bitcoin Investor Believes Bitcoin Might Still Go to “Zero,” Just Riding the Momentum, by Wolf Richter

Yesterday we got Doug Casey’s take on cryptocurrencies.  Today it’s fund manager Bill Miller’s turn. From Wolf Richter at wolfstreet.com:

Our risk-free forever-surging stocks are too tame? Chase “blockchain” and cryptocurrencies, even if it’s just a name.

The thinly traded shares of On-line Plc [LON:ONL] spiked 528% Friday morning in London, after it announced on Thursday that it plans to change its name to On-line Blockchain Plc, explainingthat “blockchain technology and cryptocurrencies are a new and exciting area we have been working on for some time.”

As its shares were exploding higher on Friday, the company came out with a statement cautioning that its blockchain product is just at an early stage, upon which shares collapsed two-thirds of the spike, then re-spiked before tapering off and closing up 165% for the day.

This is how hot the money is around “blockchain” and cryptocurrencies. The temptation to make huge amounts of money in hours on nothing – even if it ends in tears – is just too big.

Why bother making 10-30% per year in our risk-free stock market these days, when you can make that much or more in a day or a week with the blockchain hype and cryptocurrencies?

That’s what Bill Miller, who runs the $2.3-billion investment firm, Miller Value Partners LLC, must have been thinking. Among the funds at his firm is MVP1, a hedge fund with $154 million in assets. According to Miller’s latest letter to the hedge fund’s investors, cited by the Wall Street Journal, the fund has a stunning 30% of its assets in bitcoin.

He paid an average price of about $350 for the bitcoin, he said in the letter. Currently, bitcoin is at around $5,800. The fund is up 72.5% so far this year, he told the Wall Street Journal in an interview. But he isn’t buying more bitcoin at these prices, he said.

In the letter, Mr. Miller pointed out that a “Murderers’ Row” of revered investors have been declaring that bitcoin is overpriced or a “bubble,” including Berkshire Hathaway Inc.’s Warren Buffett, James Dimon of J.P. Morgan Chase & Co. and Laurence Fink of BlackRock Inc., Bridgewater Associates’ Ray Dalio​ and Howard Marks of Oaktree Capital Management.

But his hedge fund just rode the momentum. It’s about making a quick buck, not about some philosophical or technical theme on changing the world or destroying fiat currencies or whatever. He doesn’t appear to fall for all the hype surrounding bitcoin. In fact, he’s brutally realistic about it in his letter:

“My view on bitcoin is that it is a technological experiment that may or may not prove to have any long lasting value.”

 

To continue reading: Big Bitcoin Investor Believes Bitcoin Might Still Go to “Zero,” Just Riding the Momentum

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