A popular strategy among the investment community is to follow the words of prominent investors to find clues as to what to do with their portfolios. For example, Warren Buffett, probably the greatest investor ever, publishes a yearly Berkshire Hathaway shareholder letter that both professional and individual investors scrutinize. Any moves Buffett makes could lead to strong returns if implemented. 

Another billionaire investor is Bill Miller, who just wrapped up a very successful career as a mutual fund manager. He stands out because of how incredibly bullish he has been on Bitcoin (BTC 4.33%), the world's oldest and most valuable cryptocurrency. Here's why it's one of his top personal holdings. 

A legendary track record 

Miller rose to fame when he headed the Legg Mason Value Trust, a value-focused portfolio he managed that beat the S&P 500 for 15 straight years from 1991 to 2005. At one point, he oversaw a whopping $70 billion of client assets. 

However, the Great Recession hurt Miller's returns, and he left the firm in 2016. He remained an active investor at his own firm, Miller Value Partners, until he decided to retire at the end of last year after a long career in the investment management industry that spanned over 40 years. 

Lately, Miller hasn't shied away from voicing his strong support of Bitcoin, which has produced a monster return of almost 17,000% since April 2013 (earliest available data from CoinMarketCap). Based on his track record, knowledge of financial markets, and his valuable perspective, it might be a good idea to pay attention to Miller's words. 

A simple thesis 

Miller's Bitcoin thesis centers on it being a legitimate store of value, akin to a "digital gold." This makes sense, and it's how a lot of investors have viewed Bitcoin in its 14-year history. 

Physical gold has been used for thousands of years as a store-of-value asset, and it still is today. But it doesn't even come close to Bitcoin in terms of growing one's purchasing power. Over the past 10 years, the price of an ounce of gold has climbed only 16%, whereas Bitcoin's gain is astronomically higher. Bitcoin's rise comes even though it is notoriously volatile. 

Additionally, it's worth mentioning Bitcoin's most important trait, which is that there will only be 21 million coins mined. This is set in the protocol's code, something that is unlikely to change in the future. To the contrary, if demand for gold suddenly skyrocketed tomorrow for whatever reason, it would immediately become economically feasible for businesses to find new ways to extract it from the ground, putting downward pressure on the price as new supply comes to market.

One of the best comments I think Miller provides about Bitcoin is that it is not even close to being in the same category as all the other more than 22,000 digital assets out there. Bitcoin isn't controlled by anyone, while other cryptos are backed by venture capitalists with their own sets of incentives. Moreover, as Bitcoin continues striving to become a completely new form of money, it's questionable whether there is even a need for other digital assets, including Ethereum. 

A potential catalyst

In order to curb soaring inflation that it incorrectly initially assumed to be transitory, the Federal Reserve has had no choice but to rapidly push up interest rates. And this is a negative for risky assets, like growth tech stocks and cryptocurrencies. Miller believes that when the Fed pivots -- if that's late in 2023 or in 2024 is anyone's guess at this point -- then Bitcoin is set to continue its march higher. 

According to Miller, everyone should have at least 1% of their net worth in Bitcoin. The upside is massive should more individuals, institutions, and even governments start to store some of their wealth in it. On the other hand, if things go south and Bitcoin becomes worthless, losing 1% of your holdings isn't going to wipe you out.